Corporation Tax UK 2026/27 — Small Business Guide

Corporation tax rates 2026/27

UK corporation tax rates for 2026/27 are unchanged from 2025/26. The rate your company pays depends on its taxable profit level.

Profit level	Rate name	Rate
Up to £50,000	Small profits rate	19%
£50,001 to £250,000	Main rate with marginal relief	19%–25% (gradual)
Above £250,000	Main rate	25%

How marginal relief works

Between £50,000 and £250,000 profit, companies pay the main rate of 25% but receive marginal relief — a reduction that gradually phases out as profits increase. This prevents a cliff edge where crossing £50,000 suddenly triggers the full 25% rate on all profits.

The marginal relief formula is:

Corporation tax = (Profit × 25%) − Marginal relief

Where marginal relief = (3 ÷ 200) × (£250,000 − Profit) × (Profit ÷ £250,000)

Worked example — £100,000 profit:

Profit	£100,000
Tax at main rate (25%)	£25,000
Marginal relief	£900
Corporation tax due	£24,100
Effective rate	24.1%

Associated companies — a hidden complication

If your company is associated with one or more other companies — typically where the same person controls multiple companies — the £50,000 and £250,000 thresholds are divided by the number of associated companies.

Example — two associated companies:

• Small profits threshold per company: £50,000 ÷ 2 = £25,000
• Main rate threshold per company: £250,000 ÷ 2 = £125,000

A company with £40,000 profit that would normally pay 19% could instead pay marginal relief rates if it is associated with another company. Always tell your accountant if you control more than one limited company.

What is corporation tax charged on?

Corporation tax is charged on the total profits of the company for its accounting period. This includes:

• Trading profits — income from your main business activity minus allowable expenses
• Investment income — bank interest, rental income from property owned by the company
• Chargeable gains — profits from selling assets such as property or shares held by the company

All three are combined into a single taxable profit figure on which corporation tax is calculated.

Allowable deductions

Most legitimate business costs reduce your company's taxable profit. Common allowable deductions for small businesses and contractors include:

• Director's salary — fully deductible; also reduces profit available for dividends
• Employer National Insurance — deductible on salaries above the secondary threshold (£5,000 for 2026/27)
• Employer pension contributions — fully deductible with no NI liability on the contribution
• Office costs — rent, utilities, phone and internet used for business
• Professional fees — accountant, legal and consultancy fees
• Travel — business mileage, train fares and accommodation for work trips (not commuting)
• Training — courses and qualifications directly related to your trade

Capital allowances

When your company buys equipment, vehicles or other capital assets, you cannot deduct the full cost in the year of purchase as a trading expense. Instead, you claim capital allowances.

• Annual Investment Allowance (AIA) — £1,000,000 per year, allowing full deduction of qualifying plant and machinery in the year of purchase
• Main pool writing down allowance — 18% per year on a reducing balance for assets not covered by AIA

Most small companies never exceed the £1,000,000 AIA limit, meaning equipment purchases are fully deductible in the year they are bought.

Corporation tax deadlines

Obligation	Deadline
Corporation tax payment	9 months and 1 day after your company year end
CT600 return filing	12 months after your company year end

How to reduce your corporation tax bill

Employer pension contributions

Employer pension contributions are one of the most tax-efficient ways to extract value from a company. They are fully deductible for corporation tax and attract no employer or employee NI.

A £10,000 employer pension contribution saves £1,900 in corporation tax (at 19%) plus £1,500 in employer NI that would apply if the same amount were paid as salary above the secondary threshold.

Timing income and expenditure

If your company year end is approaching and you have spare cash, bringing forward allowable expenditure — equipment purchases, training, professional fees — reduces taxable profit for the current period. Similarly, deferring invoices until after your year end can shift income to the next accounting period.

Research and Development tax credits

Companies undertaking qualifying R&D activity can claim R&D tax relief, reducing corporation tax or generating a payable tax credit. Software development, engineering and scientific research often qualify. Speak to a specialist R&D adviser if you think your work may be eligible.

Director's salary

Paying yourself a salary reduces company profit pound for pound. A £5,000 director's salary saves £950 in corporation tax at the 19% small profits rate — while also preserving a National Insurance record for State Pension purposes.

Do you need an accountant?

You are not legally required to use an accountant for corporation tax, but most limited company directors do. Annual accounts, CT600 filing and payroll compliance involve technical requirements that are difficult to get right without professional help.

A good accountant for a small limited company typically costs £800–£2,000 per year — and usually saves more than their fee through legitimate tax planning, correct expense claims and avoiding penalties for late or incorrect filing.

Frequently asked questions

What is the corporation tax rate for small companies in 2026/27?

Companies with profits up to £50,000 pay 19% (small profits rate). Above £250,000 the main rate of 25% applies. Marginal relief provides a gradual increase between these levels.

When do I pay corporation tax?

Corporation tax is due 9 months and 1 day after your company year end. The CT600 return is due within 12 months of your year end.

Can I deduct my own salary from corporation tax?

Yes. Your director's salary is a deductible company expense. Paying yourself £5,000 reduces taxable profit by £5,000 and saves £950 in corporation tax at 19%.

Are pension contributions deductible for corporation tax?

Yes. Employer pension contributions are fully deductible and not subject to NI. A £10,000 employer contribution saves £1,900 in corporation tax plus £1,500 in employer NI.

What happens if my company makes a loss?

Trading losses can be carried back against prior year profits for a tax refund, or carried forward against future profits indefinitely.