UK Corporation Tax Rates 2026 Explained: Thresholds, Relief and What Businesses Need to Know
Excerpt:
Discover the UK Corporation Corporation Tax rates for 2026, including the 19% small profits rate, 25% main rate, and marginal relief between £50,000 and £250,000. This guide breaks down thresholds, calculations, and tips to optimise your tax position for limited companies.[1][2][5]
Introduction: Why Corporation Tax Rates Matter for Your Business in 2026
As a UK limited company director, understanding Corporation Tax rates for 2026 is essential for accurate financial planning and compliance with HMRC. For financial years starting on or after 1 April 2026, the rates remain stable: 19% for profits up to £50,000, 25% for profits over £250,000, and marginal relief for profits in between.[1][2][4][5]
No increases have been announced, providing continuity after the Autumn Budget 2025 changes to other allowances, such as writing-down allowances dropping to 14%.[1] This stability helps businesses forecast liabilities, but pitfalls like associated company rules can reduce thresholds and push you into higher bands unexpectedly.[3]
For a deeper dive, explore our comprehensive Corporation Tax Guide 2026 for UK Limited Companies.
UK Corporation Tax Rates 2026: The Key Thresholds
The structure is straightforward, with three main bands based on taxable profits (augmented profits for associated companies).[2][5]
| Profit Level | Corporation Tax Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) [1][2][4] |
| £50,001 to £250,000 | Main rate (25%) reduced by marginal relief [1][2][3] |
| Over £250,000 | 25% (main rate) [1][2][4][5] |
These apply to most limited companies, excluding special cases like ring fence profits (e.g., oil and gas at 30%) or investment companies.[2] Thresholds are fixed for 2026/27 and beyond, per government rates.[2][4]
How Marginal Relief Works: Avoiding the Tax Cliff
Marginal relief ensures a smooth transition between rates, preventing a sudden jump from 19% to 25%. Companies pay the 25% main rate minus relief, calculated as:
Marginal Relief = (Upper Limit − Profits) × (Profits − Lower Limit) × 3/200 ÷ Profits
The standard fraction is 3/200, with upper (£250,000) and lower (£50,000) limits.[2][3] Effective rates taper from just over 19% at £50,001 to around 26.5% near £250,000.[1][4][7]
Example: A company with £100,000 profits pays approximately 20-21% effective rate after relief, not a flat 25%.[3] Use HMRC's Marginal Relief calculator for precision.[2]
Associated Companies: A Hidden Threshold Reducer
If your business has associated companies (e.g., under common control worldwide), thresholds divide by the number of active groups. One associate halves limits to £25,000 (small) and £125,000 (upper).[3][5] This can trigger the 25% rate sooner—review your structure annually.[3]
Other Key Changes and Considerations for 2026
- Writing-down allowances: Drop to 14% from April 2026, impacting capital expenditure relief.[1]
- Ring fence profits: Small rate 19% (under £50,000), main 30% (over £250,000).[2]
- Accounting periods: Rates apply based on your year-end; straddling periods may blend rates.[3]
- Reliefs and deductions: R&D credits, loss carrybacks, and pension contributions can lower effective rates—consult experts for optimisation.[1]
Practical Tips to Minimise Your Corporation Tax Bill
- Profit planning: Time income/expenses to stay under £50,000 or maximise relief.[1]
- Pension contributions: Boost to reduce taxable profits.[1]
- Seek advice: Miscalculations are common; professional support ensures compliance and savings.[1][3]
- HMRC filing: Use iXBRL for CT600 returns, due 12 months post-year-end.[2]
At Cheshire Business Accountants, we specialise in tailoring strategies for 2026 rates.
FAQs: UK Corporation Tax Rates 2026
What are the main UK Corporation Tax rates for 2026?
19% up to £50,000, 25% over £250,000, with marginal relief in between.[1][2][5]
Do small businesses pay lower Corporation Tax in 2026?
Yes, profits up to £50,000 qualify for the 19% small profits rate.[1][6]
Will Corporation Tax rates change in 2026?
No hikes announced; rates hold steady from prior years.[1][4][5]
How do I calculate marginal relief?
Apply the 3/200 fraction to the gap between profits and £250,000 upper limit.[2][3]
Tags: Corporation Tax 2026, UK tax rates, marginal relief, small profits rate, limited companies, HMRC thresholds, business tax planning
Category: Tax Advice
Sources
- https://myiva.co/blog/uk-corporation-tax-rates/
- https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax/rates-and-allowances-corporation-tax
- https://www.youtube.com/watch?v=jWoBiHlWTts
- https://comcar.co.uk/taxpages/corporationtax/
- https://taxsummaries.pwc.com/united-kingdom/corporate/taxes-on-corporate-income
- https://apexaccountants.tax/key-considerations-for-corporation-tax-for-business-services-providers-in-2026/
- https://www.in-accountancy.co.uk/resources/tax-rates/2025-2026/
- https://taxscape.deloitte.com/taxtables/deloitte-uk-tax-rates-2026-27.pdf
- https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax
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