How UK Corporation Tax Is Calculated

Looking for a quick number rather than an explanation? Use our corporation tax calculator to estimate what your company owes, including marginal relief. This article explains how that figure is actually worked out, so you can sanity-check it or do it by hand.

The two headline rates

Since 1 April 2023, UK Corporation Tax has run on two rates rather than one:

• A small profits rate of 19%, for companies with taxable profits of £50,000 or less.
• A main rate of 25%, for companies with taxable profits above £250,000.

Between £50,000 and £250,000, companies pay tax at the main rate of 25% and then claim marginal relief, which tapers the effective rate down from 25% towards 19% as profits fall towards the £50,000 lower limit. These thresholds are reduced proportionally if a company has associated companies or an accounting period shorter than 12 months.

What counts as taxable profit

Corporation Tax is not charged on turnover. It is charged on taxable total profits — broadly, your turnover, less allowable business expenses, less capital allowances, plus any other taxable income such as chargeable gains. Getting from turnover to taxable profit correctly depends on your accounts being prepared properly in the first place; see our guide on how to prepare limited company accounts if you're not sure where to start.

Worked example: turnover to tax due

The figures below apply for the financial year beginning 1 April 2026. The 19% rate, the 25% rate and the £50,000/£250,000 thresholds have applied without change since 1 April 2023, but always check current HMRC guidance before relying on a figure.

Say a single-company limited business has:

• Turnover of £180,000
• Allowable expenses and capital allowances of £80,000

Taxable total profits are therefore £180,000 − £80,000 = £100,000. That sits between the £50,000 lower limit and the £250,000 upper limit, so marginal relief applies.

1. Tax at the main rate: £100,000 × 25% = £25,000.
2. Marginal relief: (£250,000 − £100,000) × 3/200 = £150,000 × 0.015 = £2,250.
3. Tax due: £25,000 − £2,250 = £22,750.

That works out at an effective rate of 22.75% — between the 19% and 25% headline rates, as marginal relief is designed to produce. The 3/200 fraction is set by HMRC specifically for the current £50,000-to-£250,000 band; it isn't a figure you choose.

Two quick reference points at the edges of the band: a company with exactly £50,000 of taxable profits pays tax at 19% throughout (£9,500), and a company with £250,000 or more pays the full 25% on every pound with no relief.

Getting the number right for your company

Associated companies, short accounting periods and non-group dividends all change the thresholds and the relief calculation, which is why our corporation tax calculator asks for those details rather than assuming a simple case. If you'd like an ACCA-regulated accountant to prepare your accounts and file the return, see our pricing.