UK tax guide · 2026/27
Corporation Tax UK 2026/27
Corporation tax (CT) is charged on company profits before dividends can be paid. The rate depends on profit size — and for directors structuring salary vs dividends, CT is the starting point of every extraction calculation.
2026/27 corporation tax rates
| Profits | Rate | Notes |
|---|
| Up to £50,000 | 19% | Small profits rate |
| £50,001 – £250,000 | 19%–25% | Marginal relief applies |
| Over £250,000 | 25% | Main rate |
Associated companies: If you have more than one company under common control, the £50k and £250k thresholds are divided between them. Two associated companies each get a £25k small profits threshold, not £50k.
Marginal relief — how it works
For profits between £50,000 and £250,000, HMRC applies a marginal relief fraction. The formula is:
CT = (profits × 25%) − [(£250,000 − profits) × 3/200]
This tapers the effective rate smoothly between 19% and 25%. At exactly £150,000 profit, the effective CT rate is approximately 22%. The marginal rate on income within the taper zone is 26.5% — higher than either headline rate.
| Annual profit | CT bill | Effective rate | Post-tax profit |
|---|
| £30,000 | £5,700 | 19.0% | £24,300 |
| £50,000 | £9,500 | 19.0% | £40,500 |
| £100,000 | £21,750 | 21.75% | £78,250 |
| £150,000 | £34,000 | 22.7% | £116,000 |
| £200,000 | £46,250 | 23.1% | £153,750 |
| £250,000+ | 25%×profit | 25.0% | 75%×profit |
CT and director extraction planning
Directors drawing from a limited company face a two-layer tax: CT on company profits, then personal tax on what they extract. Salary is a deductible expense — it reduces profits before CT. Dividends come from post-CT profits.
The practical implication: paying a salary of £12,570 (the personal allowance) costs the company nothing in CT — it's fully offset against profits at 19–25% depending on your CT band. Employer NI above that threshold changes the comparison.
Frequently asked questions
When does the small profits rate apply?
The 19% small profits rate applies to companies with taxable profits of £50,000 or less in a 12-month accounting period. If you have associated companies, the threshold is divided. Profits above £50,000 enter the marginal relief band, and above £250,000 the full 25% main rate applies.
Is the 26.5% marginal rate a mistake?
No — the marginal relief taper creates a marginal rate of 26.5% on profits within the £50k–£250k band. This is because as profits rise, the relief fraction falls, costing more than the headline 25% on that incremental profit. It's a genuine quirk of the formula.
Do I pay CT on dividends I receive?
Dividends received by a UK company from another UK company are generally exempt from corporation tax under the dividend exemption rules. You pay CT on trading profits, interest, and other income — then dividend tax personally when you extract dividends as a director.
When is corporation tax due?
For small companies (profits under £1.5m), CT is due 9 months and 1 day after the end of the accounting period. Larger companies pay in quarterly instalments. The company must also file a Corporation Tax return (CT600) within 12 months of the accounting period end.