UK Corporation Tax including marginal relief.
Corporation Tax due
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After-tax profit
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Your breakdown
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The 19 to 25 percent slide explained
Since April 2023, UK Corporation Tax has had two headline rates rather than one flat charge. Companies with profits up to £50,000 pay the small profits rate of 19 percent. Companies with profits above £250,000 pay the main rate of 25 percent on the whole figure. In between those two thresholds, the effective rate slides smoothly from 19 toward 25 through a mechanism called marginal relief, so there is no cliff edge where one extra pound of profit triggers a jump in the rate on everything below it. This tool applies all three cases and reports the effective rate it lands on.
The calculation HMRC uses takes the full 25 percent main rate, then subtracts a relief equal to the standard marginal relief fraction of three two-hundredths, multiplied by the amount your profit falls short of the upper limit. The result is a single tax figure and an effective rate that sits neatly between the two statutory rates.
Why marginal relief exists
Without it, a company on £50,001 of profit would suddenly face 25 percent rather than 19, an absurd outcome where earning one more pound costs you thousands. Marginal relief smooths the transition so the marginal rate of tax on profits inside the band is actually 26.5 percent, higher than either headline rate, while the average rate climbs gently. That detail surprises directors: the slice of profit between £50,000 and £250,000 is, at the margin, the most expensive profit your company will earn. It is a strong argument for managing the timing of income and allowable expenditure around year end.
£120,000 of profit for a single company
Take the tool's defaults: £120,000 of taxable profit and one company with no associates. That sits inside the marginal relief band.
The bill comes to £28,050, an effective rate of 23.38 percent, leaving £91,950 after tax. Notice the effective rate sits comfortably between 19 and 25, exactly where marginal relief is meant to place it.
How associated companies shrink your thresholds
The £50,000 and £250,000 limits are not per company in every case. They are divided by the number of associated companies, broadly companies under common control. Two associated companies share the band, so each gets a lower limit of £25,000 and an upper limit of £125,000. This stops a group from splitting a single trade across several shells purely to keep each one in the 19 percent band. The associates box does exactly this division, and getting the count right matters: claim too few associates and you understate the tax, claim too many and you overstate it. If you run more than one company, this is the input to double-check.
When is Corporation Tax actually due?
For most small and medium companies, Corporation Tax is payable nine months and one day after the end of the accounting period, and the company tax return itself is due twelve months after the period end. Large companies with profits over £1.5 million pay in quarterly instalments instead, with the timing pulled forward. The bill in this tool is the annual liability, not an instalment, so plan cash flow around that nine-month deadline.
Is Corporation Tax different in Scotland or Wales?
No. Unlike income tax, Corporation Tax is a reserved tax set by the UK government and applies at the same rates across England, Scotland, Wales, and Northern Ireland. A company registered in Edinburgh faces exactly the same 19 percent, 25 percent, and marginal relief rules as one in London. The devolved variations you may have read about apply to income tax on individuals, not company profits.