Corporation Tax Rates 2026: What Every Business Owner Should Know

Corporation Tax rates in 2026 follow the tiered system that started in April 2023: a lower rate for small profits, a higher main rate for larger ones, and a sliding scale in between. For the financial year starting 1 April 2026 the rates have not changed, but the way they apply to your company depends on your profits, the length of your accounting period and whether you have associated companies. This guide explains the Corporation Tax rates for 2026, how Marginal Relief is worked out, and what that means for the tax you actually pay.

Corporation Tax rates 2026 at a glance

• Small profits rate: 19% on taxable profits of £50,000 or less.
• Main rate: 25% on taxable profits over £250,000.
• Marginal Relief for profits between £50,000 and £250,000, which brings the effective rate somewhere between 19% and 25%.

These Corporation Tax rates for 2026 apply to UK resident companies and to the UK profits of non-resident companies trading here through a permanent establishment. Close investment-holding companies pay the main rate whatever their profits. Ring-fence oil and gas profits have their own rules.

How the financial year works

Corporation Tax rates are set for financial years running from 1 April to 31 March, not for your company's own year. If your accounting period straddles 1 April, your profits are split between the two financial years on a time basis. Because the rates for the 2025 and 2026 financial years are the same, most companies will not see a difference, but it matters when rates do change.

Marginal Relief explained

If your profits fall between the lower limit of £50,000 and the upper limit of £250,000, you first calculate tax at the main rate of 25%, then deduct Marginal Relief. The formula is:

Marginal Relief = (upper limit minus your augmented profits) × (taxable profits ÷ augmented profits) × 3/200

For most small companies with no dividends received from outside the group, taxable profits and augmented profits are the same, so the middle part of the formula is simply 1.

A worked example

A company with taxable profits of £100,000 and no associated companies:

1. Tax at the main rate: £100,000 × 25% = £25,000.
2. Marginal Relief: (£250,000 minus £100,000) × 3/200 = £2,250.
3. Corporation Tax due: £25,000 minus £2,250 = £22,750.

That is an effective rate of 22.75%. The higher your profits within the band, the closer the effective rate gets to 25%.

The hidden 26.5% band

Because Marginal Relief shrinks as profits rise, each extra pound of profit between £50,000 and £250,000 is effectively taxed at 26.5%. This is worth knowing when you plan pension contributions, salaries or equipment purchases, because a deduction in this band saves more tax than the same deduction above £250,000.

Corporation Tax rates 2026 in practice: three companies

Here is how the same Corporation Tax rates for 2026 play out for three single companies with 12-month accounting periods and no associated companies.

Company A: £40,000 profit

Profits are below the £50,000 lower limit, so the small profits rate applies to all of it: £40,000 × 19% = £7,600. Effective rate: 19%.

Company B: £150,000 profit

Profits fall inside the Marginal Relief band. Tax at 25% is £37,500. Marginal Relief is (£250,000 minus £150,000) × 3/200 = £1,500. Tax due: £36,000. Effective rate: 24%.

Company C: £300,000 profit

Profits are above the £250,000 upper limit, so the main rate applies to everything: £300,000 × 25% = £75,000. Effective rate: 25%. There is no Marginal Relief once you pass the upper limit.

Notice that Company B's extra £110,000 of profit compared with Company A costs £28,400 in extra tax, which is roughly 25.8% of the difference. That is the Marginal Relief band at work.

Planning around the rates

The Corporation Tax rates for 2026 do not change what is allowed, but they change how much each decision is worth. A few points owner-managers often look at:

• Timing of spending. Buying equipment just before your year end brings the allowance into the current year. In the Marginal Relief band, each £1,000 of allowable spending saves up to £265 of tax.
• Employer pension contributions. These are usually deductible for the company and are not taxed as income on the director when paid in, within the annual allowance.
• Salary versus dividends. Salary is deductible for Corporation Tax but brings National Insurance; dividends are not deductible but have no National Insurance. The best mix changes as rates change.
• Splitting businesses. Setting up extra companies does not multiply the lower limit, because associated companies share it.

Every company is different, so model the numbers before acting on any of these.

Associated companies and short periods

The £50,000 and £250,000 limits are not fixed for every company. They are divided by the number of associated companies plus one. Two companies are associated if one controls the other, or both are controlled by the same person or group.

For example, if you own two trading companies, each one has a lower limit of £25,000 and an upper limit of £125,000. A company that would have paid 19% on £40,000 of profit on its own could pay more once an associated company is counted. Dormant companies and some passive holding companies are left out of the count.

The limits are also reduced for accounting periods shorter than 12 months. A six-month period has limits of £25,000 and £125,000.

When Corporation Tax is due

Paying and filing are two separate deadlines:

• Payment: nine months and one day after the end of your accounting period, for most companies.
• Company Tax Return (CT600): 12 months after the end of your accounting period.

So the tax is due before the return. Many companies file early so they know exactly what to pay. Companies with profits over £1.5 million pay in quarterly instalments instead, and those with profits over £20 million pay even earlier.

Penalties for late filing

A late Company Tax Return brings a £100 penalty, rising to £200 at three months late, with further tax-geared penalties at six and 12 months. Repeated late filing increases the fixed penalties. Late payment attracts interest from the day after the due date.

What counts as taxable profit?

Corporation Tax is charged on taxable profits, which are not the same as the profit in your accounts. To get from one to the other, you:

• add back costs that are not allowed for tax, such as client entertainment and accounting depreciation
• deduct capital allowances on equipment, vans and other plant and machinery
• deduct any losses brought forward and other reliefs

Capital allowances changed from April 2026: the main pool writing-down allowance fell from 18% to 14% a year, while a new 40% first-year allowance applies to main rate spending from 1 January 2026, alongside the existing Annual Investment Allowance of up to £1 million a year and full expensing for companies. Our guide on reducing your Corporation Tax liability legally explains how these reliefs fit together.

Taking money out: dividend tax from April 2026

Corporation Tax is only part of the picture for owner-managers. Profits paid out as dividends are taxed again in the shareholder's hands. From 6 April 2026 the dividend tax rates are:

• 10.75% for basic rate taxpayers (up from 8.75%)
• 35.75% for higher rate taxpayers (up from 33.75%)
• 39.35% for additional rate taxpayers (unchanged)

The first £500 of dividends each year is covered by the dividend allowance. Because dividend tax went up while Corporation Tax rates for 2026 stayed the same, it is worth reviewing your mix of salary, dividends and pension contributions this year.

Registering and keeping on top of it

A new company must tell HMRC it is liable for Corporation Tax within three months of starting to do business, such as buying, selling, employing someone or advertising. HMRC then sets your accounting periods and sends a notice to file. Every company must also file annual accounts at Companies House, which has its own deadline, usually nine months after the year end for private companies.

Do these rates apply to sole traders?

No. Corporation Tax is paid only by limited companies and some other organisations, such as clubs and co-operatives. Sole traders and partners pay Income Tax and National Insurance on their profits through Self Assessment instead. Comparing the two is one of the main reasons people ask whether to incorporate. If a company suits you better, our company formation service can set one up.

Corporation Tax rates 2026: quick summary

• 19% on profits up to £50,000; 25% on profits over £250,000.
• Marginal Relief between those limits, with an effective marginal rate of 26.5%.
• Limits divided by associated companies plus one, and cut for short periods.
• Pay nine months and a day after your year end; file the CT600 within 12 months.
• Dividend tax rose from April 2026, so review how you pay yourself.

HMRC's current figures are on GOV.UK: Corporation Tax rates and reliefs and Marginal Relief for Corporation Tax.

Let us handle your Corporation Tax

We prepare your accounts, work out your taxable profits and Marginal Relief, check every allowance and file your CT600 on time, so you know exactly what to pay and when. See our Corporation Tax service for plans and prices.