Corporation Tax Rates UK (2025/26): What Rate Does Your Company Pay?
Short version. Current UK corporation tax rates for 2025/26. Covers the 19% small profits rate, 25% main rate, marginal relief band, and how associated companies affect your rate.
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Corporation tax rates in the UK changed significantly in April 2023. Understanding which rate applies to your company — and how marginal relief works — can make a real difference to your tax planning.
Current Corporation Tax Rates
From 1 April 2023 onwards (including the 2025/26 financial year):
| Profit Level | Tax Rate | Description |
|---|---|---|
| Up to £50,000 | 19% | Small profits rate |
| £50,001 - £250,000 | 19% - 25% | Marginal relief band |
| Over £250,000 | 25% | Main rate |
Which Rate Applies to You?
It depends on your augmented profits: your taxable total profits (trading profits, rental income, interest and chargeable gains) plus exempt distributions, which in practice means dividends your company received from other companies.
That last part catches people out. Dividends received are exempt from corporation tax, so they are never taxed. But they still count towards the profits used to pick your rate, so a company with £40,000 of trading profit and a £30,000 dividend is a marginal relief company, not a 19% one. Dividends from a company in the same group are excluded.
If augmented profits are £50,000 or less: You pay the small profits rate of 19%.
If augmented profits are over £250,000: You pay the main rate of 25%.
If augmented profits are between £50,001 and £250,000: You pay 25% minus marginal relief, resulting in an effective rate between 19% and 25%.
Historical Corporation Tax Rates
| Financial Year | Rate |
|---|---|
| 2025/26 | 19% / 25% (two-rate system) |
| 2024/25 | 19% / 25% (two-rate system) |
| 2023/24 | 19% / 25% (two-rate system) |
| 2022/23 | 19% (flat rate) |
| 2021/22 | 19% (flat rate) |
| 2020/21 | 19% (flat rate) |
| 2019/20 | 19% (flat rate) |
| 2018/19 | 19% (flat rate) |
| 2017/18 | 19% (flat rate) |
From 2017 to 2023, all companies paid a flat 19% regardless of profit. The two-rate system returned in April 2023, reintroducing the concept of marginal relief for the first time since 2014.
How Marginal Relief Works
For companies with profits between £50,000 and £250,000, tax is calculated at the main rate (25%) and then reduced by marginal relief.
Formula: Marginal Relief = 3/200 x (£250,000 - Augmented Profits) x (Taxable Profits / Augmented Profits)
For most companies augmented and taxable profits are the same, so that last fraction is 1 and the formula is just 3/200 x (£250,000 - profit). It only differs when the company has exempt income such as dividends received.
Effective Rates Through the Band
| Taxable Profit | Tax Due | Effective Rate |
|---|---|---|
| £50,000 | £9,500 | 19.00% |
| £75,000 | £16,125 | 21.50% |
| £100,000 | £22,750 | 22.75% |
| £150,000 | £36,000 | 24.00% |
| £200,000 | £49,250 | 24.63% |
| £250,000 | £62,500 | 25.00% |
Each additional pound of profit within this band is taxed at an effective marginal rate of 26.5%.
How Associated Companies Affect Your Rate
If your company has associated companies, the £50,000 and £250,000 thresholds are divided by the total number of associated companies (including yours).
Example with 2 associated companies:
- Small profits threshold: £50,000 / 2 = £25,000
- Upper threshold: £250,000 / 2 = £125,000
This means a company with just £30,000 in profits would be in the marginal band if it has one associated company — paying an effective rate higher than 19%.
What Counts as Associated?
Companies are associated if one controls the other, or both are under common control (typically through majority shareholding). Dormant companies with no trading activity may be excluded.
Accounting Periods Spanning 1 April
If your accounting period straddles 1 April (the date financial year rates change), profits are time-apportioned between the two financial years.
In practice, this mainly mattered for the transition year (accounting periods spanning 1 April 2023). For ongoing periods, as long as the rates remain unchanged, the apportionment makes no difference.
Corporation Tax vs Other Business Taxes
| Tax | Who Pays | Rate |
|---|---|---|
| Corporation tax | Limited companies | 19-25% |
| Income tax | Sole traders, individuals | 20-45% |
| Capital gains tax | Individuals | 10-24% |
| VAT | VAT-registered businesses | 20% (standard) |
| Dividend tax | Shareholders | 8.75-39.35% |
Corporation tax is only paid by limited companies. Sole traders pay income tax instead. The combined corporation tax + dividend tax burden on a limited company director is typically lower than the income tax + NICs paid by a sole trader at the same profit level.
Tax Planning Considerations
Profit Splitting
If you're close to the £50,000 threshold, timing expenses (e.g., making capital purchases before year-end) can keep you in the lower band.
Salary vs Dividends
Your director's salary reduces the company's taxable profit. Setting salary at an optimal level can keep corporation tax lower while minimising personal NICs.
Pension Contributions
Employer pension contributions reduce taxable profits and don't attract NICs — one of the most tax-efficient ways to reduce your corporation tax bill.
Capital Allowances
Claiming the Annual Investment Allowance (AIA) on qualifying equipment can significantly reduce taxable profits in the year of purchase.
Summary
The UK currently operates a two-rate corporation tax system: 19% for profits up to £50,000, 25% for profits over £250,000, and a marginal relief band in between. Most micro-entities will pay at or near the 19% rate.