Calculate your corporation tax rate thresholds adjusted for associated companies, marginal relief, and short accounting periods.
Calculate CT Rate with Associated Companies
Divisor (1 + associates)
Adjusted small profits threshold
Adjusted large profits threshold
Company's position
CT rate applicable
Marginal relief deduction
CT liability
Effective rate on profits
Based on CT rates from April 2023. Profits figure is taxable profits (before group relief and other adjustments). Seek professional advice for complex group structures.
Associated Companies Divide the Thresholds
Since April 2023, the CT thresholds (£50,000 and £250,000) must be divided by the total number of companies in your associated group. This means group structures pay significantly more CT at the 25% rate than single companies with the same total profits.
How Associated Companies Work
A company is associated with another if one controls the other, or both are controlled by the same person(s). Control is typically assessed by shareholding (more than 50%). The association rules are applied at the start of each accounting period, though changes mid-period are time-apportioned.
The divisor is 1 (for the company itself) plus the number of associated companies. With 2 associates: divisor = 3; small threshold = £50,000 ÷ 3 = £16,667; large threshold = £250,000 ÷ 3 = £83,333.
The 26.5% Marginal Rate Trap
Within the marginal relief band, the effective marginal rate on each additional £1 of profit is 26.5% — higher than the 25% main rate. This is because as profits rise, the marginal relief deduction falls, so the CT bill increases faster than at 25%.
The formula is: CT = profits × 25% − (upper limit − profits) × 3/200. The "3/200" is the marginal relief fraction (0.015). Each £1 of extra profit in the band removes £0.015 of relief and adds £0.25 of CT — net additional CT of £0.265.
Short Accounting Periods
If a company has an accounting period of less than 12 months, the thresholds are pro-rated: multiply by (months / 12). This matters for newly incorporated companies, companies changing their year end, or companies being wound down. The pro-ration is applied after the associated company division.
Frequently Asked Questions
What are associated companies for corporation tax purposes? +
From April 2023, a company is associated with another if one controls the other, or both are under common control. Control is generally determined by shareholding, voting power, or rights to assets. Dormant companies and non-trading holding companies with limited activity may be excluded in some circumstances.
How do associated companies affect the CT rate thresholds? +
The £50,000 small profits threshold and £250,000 large profits threshold are divided equally by (1 + number of associated companies). With 1 associate: thresholds halved to £25,000 and £125,000. With 2 associates: divided by 3 to £16,667 and £83,333. This means more of a group's profits are taxed at the 25% main rate.
What is marginal relief for corporation tax? +
Marginal relief applies when profits fall between the small profits threshold and the main rate threshold. It tapers the effective CT rate between 19% and 25%. The formula is: CT = profits × 25% − (upper limit − profits) × 3/200. The 3/200 fraction is the marginal relief fraction.
What are the CT rates for 2025/26? +
For 2025/26, the small profits rate is 19% for profits up to the lower threshold; the main rate is 25% for profits at or above the upper threshold; and marginal relief applies in between. These rates have been in place since April 2023.
Does a short accounting period affect the thresholds? +
Yes. If the accounting period is less than 12 months, the thresholds are reduced proportionally. For example, a 9-month period reduces the thresholds to 9/12 of their adjusted values. This is particularly relevant for new companies or companies changing their year end.
Which companies count as associated? +
A company is associated with any company it controls or that controls it, as well as any company under common control of the same person or persons. Indirect control through intermediate companies counts. Dormant companies can sometimes be excluded, but only where they have no assets and no income.
Can I exclude any associated companies from the threshold calculation? +
HMRC allows certain non-trading or dormant companies to be excluded if they have not carried on a trade, have no assets other than shares in subsidiary companies, and have no income. However, the rules are strict and professional advice should be sought before excluding any associated company.
What happens if a company becomes associated mid-year? +
If the number of associated companies changes during the accounting period, the threshold adjustments are calculated on a time-apportioned basis. Each portion of the year uses the threshold relevant to the number of associates at that time.
Does the associated company rule apply to overseas companies? +
Yes. Overseas companies count as associated companies if they meet the control test. This means a UK company with overseas subsidiaries or sister companies controlled by the same shareholders must count those overseas entities when dividing the CT thresholds.
What is the effective CT rate in the marginal relief band? +
In the marginal relief band, the effective marginal rate on additional profits is 26.5%. This means that while the headline rates are 19% and 25%, profits in the marginal band are taxed at a higher marginal rate of 26.5% as the CT bill rises steeply through the taper.
How do I calculate the marginal relief amount? +
Marginal relief = (upper limit − profits) × 3/200. For example, with adjusted upper limit of £250,000 and profits of £150,000: marginal relief = (£250,000 − £150,000) × 3/200 = £100,000 × 0.015 = £1,500. CT = profits × 25% − marginal relief = £37,500 − £1,500 = £36,000.
Do dividends received from associated companies affect the profits for threshold comparison? +
Dividends received from associated companies are generally exempt from corporation tax under the dividend exemption rules. They do not form part of taxable profits for CT purposes and are not included in the profits compared against the small profits and large profits thresholds.