UK Corporation Tax rates in 2026: 19%, 25%, and the 26.5% marginal band
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The 2026 Corporation Tax rates are unchanged from the last three years, but the marginal relief band between them is where most small companies actually sit — and where the maths gets less obvious.
UK Corporation Tax for the 2026 financial year (1 April 2026 to 31 March 2027) stays at 19% on profits of £50,000 or less and 25% on profits over £250,000, exactly as it has been since April 2023. Between those two figures, marginal relief tapers the bill gradually rather than jumping straight from one rate to the other — and the effective rate on each extra pound of profit inside that band works out at 26.5%, a detail that catches a lot of small company directors by surprise the first time they calculate it themselves.
The confirmed rates for 2026
HMRC sets Corporation Tax by financial year, running 1 April to 31 March, and the rates for the year starting 1 April 2026 are unchanged from the previous three financial years:
| Band | Profit range | Rate |
|---|---|---|
| Small profits rate | Up to £50,000 | 19% |
| Marginal relief | £50,000 to £250,000 | Tapered, 19%–25% |
| Main rate | Over £250,000 | 25% |
These are the standard rates and thresholds, confirmed directly on GOV.UK's Corporation Tax rates page. The government held the rates unchanged at the Autumn Budget 2025, consistent with the commitment in its 2024 Corporate Tax Roadmap to keep the main rate capped at 25% for the length of the current Parliament.
Who actually pays which rate
The rate a company pays depends on its total taxable profits for the accounting period, not its turnover or the sector it operates in. A small trading company with £40,000 of annual profit pays the 19% small profits rate outright. A larger company with £400,000 of profit pays the full 25% main rate on the whole amount — there is no lower band applied to the first slice of a large company's profit, unlike how income tax bands work for individuals. It is specifically the middle group, companies with profits landing between £50,000 and £250,000, that need to calculate marginal relief rather than simply reading a rate off a table.
How marginal relief actually works
Marginal relief is not a separate rate band with its own fixed percentage — it is a deduction from the Corporation Tax bill that would otherwise apply at the full 25% main rate. HMRC's standard formula is:
| Step | Calculation |
|---|---|
| Tax before relief | Profit × 25% |
| Marginal relief | (£250,000 − Profit) × 3/200 |
| Tax due | Tax before relief − Marginal relief |
The 3/200 figure is the standard marginal relief fraction confirmed in HMRC's Corporation Tax marginal relief guidance, and it has applied to every financial year from 2023 onward. The formula is designed so it lines up exactly with both boundary rates: at exactly £50,000 of profit it produces the same £9,500 bill as the flat 19% small profits rate, and at exactly £250,000 the relief falls to zero and the bill matches the flat 25% main rate.
A worked example at £120,000 profit
Take a company with £120,000 of taxable profit for the year:
| Step | Amount |
|---|---|
| Tax at 25% main rate | £30,000 |
| Marginal relief: (£250,000 − £120,000) × 3/200 | £1,950 |
| Corporation Tax due | £28,050 |
£28,050 works out at an effective rate of 23.375% on the whole £120,000 profit — below the 25% main rate, because marginal relief has done its job, but well above the 19% small profits rate, because the company's profit sits well inside the tapered band rather than at its lower edge.
Why the rate on the next pound is 26.5%, not 25%
The average rate a company pays across all its profit is always between 19% and 25% inside the band. But the rate on each additional pound of profit within the band — the marginal rate that matters for a decision about, say, taking on one more contract before the year end — is a different, higher figure. Because marginal relief shrinks as profit rises, every extra pound of profit is taxed at the 25% main rate and also loses a small slice of relief, and those two effects combine to 26.5%:
| Profit | Tax due | Effective average rate |
|---|---|---|
| £50,000 | £9,500 | 19% |
| £100,000 | £22,750 | 22.75% |
| £150,000 | £36,000 | 24% |
| £200,000 | £49,250 | 24.625% |
| £250,000 | £62,500 | 25% |
The average rate climbs steadily from 19% to 25% across the band, but the rate on each incremental pound stays constant at 26.5% throughout — it is only the growing base of profit already taxed at lower average rates that pulls the overall average up more slowly. A company deciding whether extra year-end profit is worth taking, deferring, or extracting differently should use the 26.5% marginal figure, not the average rate for its current profit level.
How the two-tier system replaced a single flat rate
The current split between a 19% small profits rate and a 25% main rate is a relatively recent return to a structure the UK had previously abandoned. Corporation Tax ran as a single flat rate for every company, regardless of size, from April 2015 (20%) through to March 2023, dropping to a flat 19% from April 2017 and staying there for six years — the simplest the system has been in decades, with no small profits rate and no marginal relief calculation for anyone to work through. That changed from 1 April 2023, when the government reintroduced the two-tier structure and marginal relief band described above, raising the main rate to 25% for larger companies while holding smaller companies at 19%, roughly where the flat rate had sat for the previous six years. The 2026 financial year is now the fourth year running the current two-tier system has applied unchanged, following the Autumn Budget 2025 confirmation that it stays in place.
Associated companies and short periods
The £50,000 and £250,000 thresholds are not fixed for every company — both are divided by the number of "associated companies" a company has, broadly companies under common control, and both are reduced pro rata for an accounting period shorter than 12 months. A company with three associated companies, for example, sees its thresholds divided by four, so the small profits rate would apply only up to £12,500 rather than £50,000. This rule exists specifically to stop a single trade being split across several small companies purely to multiply the number of times the 19% rate applies, and it is confirmed in the same GOV.UK guidance covering the rates themselves.
Sources
This is general information, not tax advice. Corporation Tax treatment can depend on a company's specific structure, associated companies, and accounting period. For a decision about a specific company's tax position, consult an accountant or check the current guidance directly on GOV.UK.