Corporation Tax Marginal Relief Calculator UK 2025/26

Corporation tax marginal relief UK 2025/26 — 19% small (≤£50k), 25% main (≥£250k), 26.5% effective marginal rate £50k-£2

Quick answer: UK Corporation Tax 2025/26: 19% Small Profits (≤£50k), 25% Main Rate (≥£250k), 26.5% effective marginal rate on profit between £50,001 and £250,000 (Marginal Relief).
Mustafa Bilgic
Reviewed by Mustafa Bilgic · UK Calculator Editor ·

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UK corporation tax has 3 effective rates. Most SMEs pay 19% Small Profits rate. Companies with £250k+ profits pay 25% Main Rate. Between £50,001-£250,000, Marginal Relief creates a 26.5% effective rate on the slice — a "tax cliff" SMEs need to plan for.

How corporation tax marginal relief calculator works in 2025/26

Corporation Tax structure 2025/26:

Profit rangeRate appliedNotes
£0 - £50,00019% Small ProfitsLower limit
£50,001 - £250,00026.5% effective marginalMarginal Relief slice
£250,001+25% Main RateUpper limit

Why 26.5% effective? Marginal Relief gradually phases out the small profits rate. Mathematical formula: (Upper - Profit) × (Profit ÷ Augmented profit) × 3/200. Net effect = 26.5% on the £50k-£250k slice.

Associated companies: 50k/250k thresholds DIVIDE between associated companies (common control). Group of 5 companies = £10k/£50k thresholds each. Plan structures carefully.

Timing impact: Companies with year-end before April 2023 still on flat 19%. Year-ends straddling April 2023 use proportional split. From 2024 onwards: full new regime applies.

Worked example: £40,000 profit

Below £50k Small Profits limit. Corp tax = £40,000 × 19% = £7,600. Effective rate 19%.

Gross: £40,000 → Take-home: £32,400.00/year (£2,700.00/month)

Worked example: £100,000 profit

£50,000 at 19% (£9,500) + £50,000 at 26.5% effective (£13,250) = £22,750 corp tax. Effective rate 22.75%.

Gross: £100,000 → Take-home: £77,250.00/year (£6,437.50/month)

Worked example: £500,000 profit

Above £250k. Full Main Rate 25%. Corp tax = £125,000. Effective rate 25%. (Marginal Relief no longer applies — straight 25% on entire profit when above upper limit).

Gross: £500,000 → Take-home: £375,000.00/year (£31,250.00/month)

Frequently asked questions

What changed about corporation tax in April 2023?
Single 19% rate replaced by 3-tier system: 19% (≤£50k), 25% (≥£250k), Marginal Relief between. Designed to maintain SME-friendly low rate while raising revenue from larger profits.
How does Marginal Relief work?
On profits £50,001-£250,000: tax calculated as (profit × 25%) - Marginal Relief deduction. Net effective rate 26.5% on the slice between thresholds. Online calculator simplifies the math.
What are "associated companies" and why do they matter?
Companies under common control (>50% shareholding by same person/group). Thresholds DIVIDED between them. 5 associated co's = £10k/£50k thresholds each. Aggressive structuring (multiple companies for same business) is anti-avoidance scrutinised by HMRC.
Can I avoid the 26.5% marginal band?
Three legal strategies: (1) defer profits below £50k via timing (capex acceleration, R&D claims, pension contributions), (2) split business into genuine separate companies (NOT artificially), (3) salary increase to take profits below £50k (tax-deductible, employee NI 8% saved, employer NI 13.8% paid).
Are profit shares to LLP partners affected?
No — LLP profits flow through to partners as self-employed income (taxed at personal income tax rates, not corp tax). Only Ltd Co profits are within corp tax.
What about R&D tax credits at marginal rate?
RDEC scheme: 20% above-the-line credit, taxable. At 26.5% marginal effective, net benefit ≈ 14.7%. At 25% Main Rate, 15% net. At 19% Small Profits, 16.2% net. Higher rates make R&D cheaper — silver lining.
Do dividends paid affect corp tax?
No — dividends are paid from POST-corp-tax profit (not deductible). Corporation tax is calculated on profit BEFORE dividends. Salary IS deductible from profit (saves corp tax). This is why salary+dividend splits matter.

Official UK Sources

Last reviewed: May 2026 against HMRC 2025/26 rates.

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