How Corporation Tax is calculated in the UK
All UK-resident limited companies must pay Corporation Tax on their annual taxable trading profits, investment income, and chargeable capital gains. Under the Corporation Tax Act 2010 (CTA 2010), profits up to the lower threshold (£50,000) are taxed at the Small Profits Rate of 19%. Profits exceeding the upper threshold (£250,000) are taxed at the Main Rate of 25%.
Companies with taxable profits falling between £50,000 and £250,000 qualify for statutory Marginal Relief. Marginal relief gradually bridges the gap between the 19% small profits rate and the 25% main rate, resulting in an effective tax rate between 19% and 25%.
Worked example of UK Corporation Tax
Consider a standalone limited company with annual trading profits of £100,000.00 and no associated companies. The lower threshold is £50,000.00 and the upper threshold is £250,000.00. Because taxable profits lie between the two limits, Marginal Relief applies.
Under the statutory HMRC formula, Corporation Tax at the 25% main rate is £25,000.00. The distance between the £250,000.00 upper threshold and the company profits is £150,000.00. Applying the statutory marginal relief fraction of 3/200 (0.015) yields a tax saving of £2,250.00. Subtracting marginal relief produces a final Corporation Tax liability of £22,750.00, an effective tax rate of 22.75%, and £77,250.00 in net profit retained by the business.
Marginal Relief formula and associated companies
Marginal Relief is computed using the statutory formula: Marginal Relief = (Upper Limit - Augmented Profits) × (Taxable Profits / Augmented Profits) × (3 / 200). Within the marginal relief band, the effective marginal tax rate on each additional pound of profit is 26.5% (25% main rate plus 1.5% relief clawback).
If a company has associated companies (defined as entities under common 51% control by the same person or group of persons), the statutory thresholds are divided equally by 1 plus the number of associated companies. For example, a business with one associated company faces a lower limit of £25,000 (£50,000 / 2) and an upper limit of £125,000 (£250,000 / 2).
Capital allowances and HMRC filing deadlines
Companies can reduce their taxable profit by claiming capital allowances on qualifying business equipment, computer hardware, machinery, and commercial vehicles. Under full expensing and the Annual Investment Allowance (AIA), qualifying capital investments can often be deducted 100% against trading profits in the year of purchase.
Corporation Tax must be paid electronically to HMRC 9 months and 1 day after the end of your accounting period. Your official Company Tax Return (form CT600) must be filed online within 12 months of your accounting period end.
For personal tax due on post-tax company dividends, visit our UK dividend tax calculator.
To compare limited company tax with sole trader Class 4 NI, see our UK self-employed tax calculator.
To review director salary tax and National Insurance, visit the UK income tax calculator.
Inputs for the corporation tax calculator
Tax year
The financial year for Corporation Tax filing. Rates and thresholds are set by Parliament.
Annual trading profit
Net trading profits before tax, following deductions for business running costs and salaries.
Capital allowances and deductions
Tax relief claims on equipment, Annual Investment Allowance (AIA), or full expensing deductions.
Number of associated companies
Other companies under common 51% control, which divide your lower and upper profit thresholds.
CALCULATOR QUESTIONS
UK corporation tax calculator questions
What is the UK Corporation Tax rate?
The Small Profits Rate is 19% on taxable profits up to £50,000. The Main Rate is 25% on taxable profits over £250,000. Profits between £50,000 and £250,000 qualify for Marginal Relief, creating an effective rate between 19% and 25%.
How does Corporation Tax Marginal Relief work?
Marginal Relief reduces your Corporation Tax liability from the 25% headline rate. HMRC calculates the relief by multiplying the difference between the £250,000 upper limit and your profits by the statutory fraction 3/200 (0.015).
What counts as an associated company for Corporation Tax?
A company is an associated company if one has control of the other, or both are under the common control of the same person or group of persons (usually owning more than 50% of voting shares). Associated companies divide your £50,000 and £250,000 thresholds equally.
When is Corporation Tax due to HMRC?
For companies with profits under £1.5 million, Corporation Tax is due electronically 9 months and 1 day after the end of your company accounting period.
Can capital allowances reduce my Corporation Tax bill?
Yes. Qualifying expenditures on equipment, tools, computers, and commercial vehicles can be deducted using the Annual Investment Allowance (up to £1 million) or full expensing, reducing your net taxable profits.