Corporation tax small profits rate 2025/26: 19% and marginal relief explained
Summary
Updated November 2025 — Sources: GOV.UK corporation tax rates, HMRC CTM03505.
UK corporation tax uses a two-tier system from April 2023. Small companies pay 19% on profits up to £50,000. Larger profits face 25%, with marginal relief smoothing the transition between £50,000 and £250,000.
1. The two rates
| Profit range | Effective rate |
|---|---|
| £0 – £50,000 | 19% (small profits rate) |
| £50,001 – £250,000 | 19% to 25% (marginal relief) |
| Above £250,000 | 25% (main rate) |
2. Marginal relief formula
Marginal relief = (3/200) × (£250,000 − profits) × (profits ÷ £250,000). Corporation tax = (profits × 25%) − marginal relief. This produces an effective rate that rises smoothly.
3. Example — £75,000 taxable profit
Tax at 25% = £18,750. Marginal relief = (3/200) × £175,000 × 0.3 = £787.50. Corporation tax due = £17,962.50 (effective rate 23.95%).
4. Example — £40,000 taxable profit
Below £50,000 threshold: £40,000 × 19% = £7,600. No marginal relief applies.
5. Planning notes
Director salary and employer NIC reduce taxable profit before corporation tax. Pension contributions, R&D relief, and capital allowances also reduce the charge. Associated company rules can halve thresholds — review group structures with your accountant.
6. Sources
FAQ
What is the small profits rate for 2025/26?
19% on profits up to £50,000 for companies with no associated companies. This is the lower tier of the two-rate corporation tax system introduced in April 2023.
How does marginal relief work?
Between £50,000 and £250,000 profits, tax is calculated at 25% then reduced by marginal relief. The effective rate gradually increases from 19% toward 25%.
Do associated companies affect the thresholds?
Yes. If you control multiple companies, the £50,000 and £250,000 thresholds are divided by the number of associated companies plus one.