Corporation Tax Calculator

The UK operates a two-rate corporation tax system for accounting periods from 1 April 2023 onwards. Companies with taxable profits of £50,000 or less pay tax at the small profits rate of 19%. Companies with profits of £250,000 or more pay at the main rate of 25%. Between these thresholds, a mechanism called marginal relief applies — blending the two rates so that the effective rate rises gradually from 19% to 25% as profits increase.

The marginal relief formula, set out in section 8 of the Corporation Tax Act 2010, reduces the 25% gross charge by the standard fraction — currently 3/200 — multiplied by the difference between the upper limit (£250,000) and the company's augmented profits. This produces an effective marginal rate of 26.5% on profits within the relief zone: a result many directors find counterintuitive. Once profits exceed £250,000, the relief is exhausted and the flat 25% rate applies.

A crucial adjustment applies when a company has associated companies — other companies under common control, including those owned by connected individuals. HMRC divides both thresholds by the number of associated companies plus one. A company with one associate therefore has a small profits threshold of just £25,000 and an upper limit of £125,000, meaning the main rate kicks in at a much lower level of profitability.

Corporation tax is payable nine months and one day after the end of the accounting period for smaller companies. Accurate forecasting of your liability is essential for cash flow planning, particularly if your profits sit in the marginal relief band.