Corporation Tax rates and marginal relief explained
Corporation Tax is not one rate — it is 19%, 25%, or an effective rate in between. How marginal relief works, and the planning points most directors miss.
Since April 2023, the rate of Corporation Tax your company pays depends on its profits. Understanding the bands matters, because a pound of extra profit in the wrong place can be taxed at an effective rate far above 25%.
The rates
The catch: in the marginal band, each extra £1 of profit is effectively taxed at 26.5% — more than the headline main rate. And if you have associated companies, the £50,000 and £250,000 limits are divided between them.
- Profits up to £50,000 — 19% (small profits rate)
- Profits over £250,000 — 25% (main rate)
- Profits between £50,000 and £250,000 — marginal relief applies, creating an effective rate that rises smoothly between the two
Deadlines that matter
- Payment — 9 months and 1 day after your accounting period ends
- CT600 return — 12 months after the accounting period ends
- Large companies pay by quarterly instalments instead
Planning points we review with every client
A short annual planning review typically saves far more than it costs. Book a free consultation and we will run through your numbers.
- Timing of capital purchases to maximise full expensing and Annual Investment Allowance relief
- Employer pension contributions — usually fully deductible and tax-efficient extraction
- Director salary level vs dividends within the bands
- Group structures and the associated companies rules
Sources and further reading
- GOV.UK — Corporation Tax rates and reliefs
- GOV.UK — Marginal relief for Corporation Tax guidance
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