Last reviewed: May 2026 | Source: HMRC Corporation Tax rates and Finance Act 2021
Key finding: The UK corporation tax main rate is 25% on profits above £250,000 from April 2023 under Finance Act 2021, with a small profits rate of 19% on profits below £50,000 and marginal relief tapering between the thresholds.- 25% main rate on profits above £250,000 from April 2023 (Finance Act 2021)
- 19% small profits rate on profits below £50,000 (Finance Act 2021)
- Marginal relief tapering between £50,000 and £250,000 (HMRC Corporation Tax rates)
Corporation tax rates UK have operated on a two-rate basis since April 2023, with a 25% main rate on profits above £250,000, a 19% small profits rate on profits below £50,000, and marginal relief tapering the effective rate between the thresholds. The structure was introduced by Finance Act 2021 and reverses the move to a single 19% rate that had operated since April 2017. HMRC Corporation Tax statistics show the change has materially increased receipts, with the OBR Corporation Tax forecasts identifying the rate change as a substantial revenue raiser across the forecast horizon.
- 25% main rate on profits above £250,000 (HMRC Corporation Tax rates)
- 19% small profits rate on profits below £50,000 (HMRC Corporation Tax rates)
- 26.5% marginal effective rate on profits in the £50,000 to £250,000 band (HMRC marginal relief)
- April 2023 effective date for the rate restructure (Finance Act 2021)
- £50,000 lower threshold divided among associated companies (Finance Act 2021)
The main rate of 25% applies to profits above £250,000 from April 2023
The corporation tax main rate is 25% on taxable profits above £250,000 for accounting periods starting on or after 1 April 2023, under Finance Act 2021. The rate represents a 6 percentage point increase on the 19% single rate that had applied since April 2017. The change was announced in the March 2021 Budget alongside the personal allowance freeze as part of a fiscal consolidation package responding to elevated public debt following the COVID-19 fiscal response. HMRC Corporation Tax statistics show receipts have risen materially since the rate change, with the OBR forecasting continued growth across the forecast horizon.
The 25% rate is the headline figure but does not apply to all companies. Companies with profits between £50,000 and £250,000 face an effective marginal rate of 26.5% on profits in the band, while companies with profits below £50,000 pay 19%. The structure mirrors the pre-2015 corporation tax framework, which also used a small profits rate alongside the main rate.
The small profits rate of 19% applies to profits below £50,000
The small profits rate of 19% applies to taxable profits below £50,000 for accounting periods starting on or after 1 April 2023, providing continuity with the previous single rate for small companies. The £50,000 lower threshold is divided pro-rata where the accounting period is shorter or longer than 12 months, and divided among associated companies under the associated companies rule. A standalone trading company with profits below £50,000 continues to pay 19% on the full profit, the same effective rate as before the rate restructure.
The small profits rate is intended to preserve the broadly competitive corporation tax position for UK small businesses. ONS business demography data shows the vast majority of UK companies have profits below £50,000, meaning they continue to pay at the 19% rate post-restructure. The structural impact of the 25% main rate is therefore concentrated on the smaller population of medium and large companies.
Marginal relief tapers the effective rate between £50,000 and £250,000
Marginal relief reduces the main rate liability for companies with profits between £50,000 and £250,000, producing an effective marginal rate of 26.5% on profits in the £50,000 to £250,000 band. The relief is calculated under section 18A of the Corporation Tax Act 2010, using the standard fraction (3/200 for the 2023/24 and later years). The mechanism delivers a smooth transition between the 19% small profits rate and the 25% main rate, avoiding the cliff edge that would otherwise apply at the £250,000 boundary.
For a company with profits of £150,000, the marginal relief calculation reduces the corporation tax liability from £37,500 (25% of £150,000) to approximately £35,000, an effective rate of 23.3%. The £250,000 upper threshold is also divided pro-rata for short accounting periods and among associated companies, with the marginal relief calculation operating across the divided bands.
The associated companies rule divides the thresholds among related entities
The associated companies rule under Finance Act 2021 divides the £50,000 and £250,000 thresholds among companies controlled by the same person or group, preventing fragmentation of profits across multiple small entities to access the small profits rate. The rule replaces the previous "51% group" definition used for the 2015 main rate framework with a broader "associated company" definition based on common control under section 18E of the Corporation Tax Act 2010. The change increases the number of related companies counted for threshold purposes.
The operational impact is most acute for groups with multiple trading subsidiaries, family-owned company structures, and investment company structures with related trading companies. The threshold division can pull individual companies into the marginal relief or main rate bands earlier than the standalone profit figures would suggest. HMRC has published guidance on the associated companies rule under its CTM (Corporation Tax Manual) series.
Effective rates paid by UK companies vary by sector and size
HMRC Corporation Tax statistics show that effective corporation tax rates paid by UK companies vary materially by sector and size, with the largest companies typically paying close to the 25% main rate and smaller companies paying the small profits rate or marginal effective rates. The OBR Corporation Tax forecasts incorporate the sectoral distribution of profits in projecting receipts, with the financial services, oil and gas, and professional services sectors contributing disproportionately to corporation tax revenue. Manufacturing and retail sectors typically generate lower effective rates due to greater use of capital allowances and R&D relief.
The Energy (Oil and Gas) Profits Levy, introduced in 2022 and continuing through the forecast period, adds a supplementary charge to the corporation tax payable by ring-fence oil and gas companies, taking the effective combined rate substantially above 25% for that sector. The bank surcharge framework, reformed by Finance Act 2022, applies a separate supplementary charge on UK banking profits, currently at 3% above the underlying corporation tax rate.
Capital allowances and reliefs continue to be material to effective rates
The Annual Investment Allowance (£1m permanent from April 2023) and the full expensing regime (permanent from April 2024) allow most UK companies to write down qualifying plant and machinery expenditure in the year of acquisition, materially reducing taxable profits. Full expensing applies a 100% first-year allowance on qualifying main rate pool expenditure and a 50% first-year allowance on special rate pool expenditure. The mechanism was originally introduced as a three-year measure by Finance Act 2023 (replacing the 130% super-deduction) and made permanent by Finance Act 2024.
The R&D tax relief framework continues to deliver a 20% above-the-line credit under the merged scheme from April 2024, reducing the effective corporation tax liability for companies undertaking qualifying R&D. The Patent Box regime provides a 10% effective rate on profits attributable to qualifying patents. These reliefs collectively explain a significant share of the divergence between headline and effective corporation tax rates across the UK company population.
HMRC operates corporation tax through the CT600 return and quarterly instalments
HMRC operates corporation tax through the CT600 return, with most companies paying their liability nine months and one day after the end of the accounting period, and large companies paying in quarterly instalments under the Quarterly Instalment Payment (QIP) regime. The QIP regime applies to companies with augmented profits above £1.5m (divided pro-rata for short accounting periods and among associated companies). Very large companies (augmented profits above £20m) pay in four instalments within the accounting period itself, accelerating the cash flow to HMRC.
The corporation tax computation is filed electronically alongside the company's annual accounts in iXBRL format. The Companies House filing of accounts and the HMRC filing of the corporation tax return are operationally separate but typically use the same underlying iXBRL accounts. Late filing of the CT600 attracts penalties under Schedule 18 of Finance Act 1998.
| Profit band | Rate / mechanism | Effective marginal rate on additional profit in band |
|---|---|---|
| Up to £50,000 | Small profits rate | 19% |
| £50,000 to £250,000 | Marginal relief | 26.5% |
| Above £250,000 | Main rate | 25% |
What are the corporation tax rates UK 2025?
The corporation tax main rate is 25% on profits above £250,000, the small profits rate is 19% on profits below £50,000, and marginal relief delivers an effective 26.5% rate on profits in the £50,000 to £250,000 band. The structure has applied since April 2023 under Finance Act 2021.
When did the UK corporation tax 2026 framework change?
The two-rate framework took effect from 1 April 2023 for accounting periods starting on or after that date, under Finance Act 2021. The 2026/27 tax year continues to operate on the same framework with no rate changes legislated for that year.
What is the company taxation rate for a small UK company?
A standalone trading company with taxable profits below £50,000 pays the small profits rate of 19% on the full profit. The £50,000 threshold is divided pro-rata for short accounting periods and among associated companies under the rules in section 18E of the Corporation Tax Act 2010.
How does marginal relief work in the UK corporation tax rate structure?
Marginal relief reduces the main rate liability for companies with profits between £50,000 and £250,000, producing an effective marginal rate of 26.5% on profits in the band. The relief is calculated under section 18A of the Corporation Tax Act 2010 using the 3/200 standard fraction.
Are there sector-specific corporation tax additions?
Yes. The Energy (Oil and Gas) Profits Levy applies a supplementary charge on ring-fence oil and gas profits, taking the effective combined rate substantially above 25%. The bank surcharge adds 3% above the underlying corporation tax rate on UK banking profits, following the Finance Act 2022 reform.
Does the small profits rate apply to investment companies?
The small profits rate is available to close investment-holding companies but the rules require careful application. The associated companies rule applies in full, and the marginal relief calculation depends on the specific income mix. HMRC CTM guidance sets out the operational rules for investment companies under the small profits regime.
How we verified this
This article draws on the following primary UK sources:
- HMRC Corporation Tax rates and operational guidance (CTM manual)
- Finance Act 2021 (legislation.gov.uk) for the rate structure and associated companies rule
- Corporation Tax Act 2010 (legislation.gov.uk) sections 18A and 18E
- HMRC Corporation Tax statistics
- Companies Act 2006 (legislation.gov.uk) for the framework of company filings
- OBR Corporation Tax forecasts in the Economic and Fiscal Outlook
- HMRC capital allowances and full expensing guidance
No secondary aggregators, no press releases from commercial providers, and no statistics without a named government or regulatory source were used.
