Corporation Tax Estimate 2026/27

For 2026/27, there are two main Corporation Tax rates in the UK. The small companies rate of 19% applies to profits up to £50,000. The main rate of 25% applies to profits of £250,000 or above. Companies with profits between these two thresholds benefit from marginal relief, which gradually increases the effective rate from 19% to 25% as profits rise through the band. This means a company with £100,000 of taxable profit will pay an effective rate somewhere between 19% and 25%, not a flat 25%. If your company has associated companies — for example, if you or your shareholders also own other companies — the thresholds are divided between them, which can push you into a higher rate band sooner than you might expect.

Marginal relief is a mechanism that prevents companies with profits just above the £50,000 small companies threshold from being hit with the full 25% main rate all at once. Instead, the effective tax rate increases gradually between £50,000 and £250,000 of profit. The relief is calculated using a specific HMRC formula: Corporation Tax at 25% minus a fraction calculated as (Upper Limit − Taxable Profit) × (3/200). For a company with £100,000 of profit, this results in an effective rate of around 21.5%, rather than the full 25% main rate. Marginal relief is applied automatically by HMRC when you file your Corporation Tax return, but it is worth understanding when planning your finances so you are not surprised by the effective rate.

An allowable expense is a cost that is incurred wholly and exclusively for the purposes of your trade and can therefore be deducted from revenue before your taxable profit is calculated. Common examples include staff salaries and employer National Insurance, subcontractor costs, rent and business rates, business insurance, professional fees such as accountancy and legal costs, software subscriptions, travel and subsistence for genuine business purposes, marketing and advertising costs, and equipment that qualifies for capital allowances. Personal expenses, entertainment of clients, and costs that have a dual private and business purpose are generally not allowable, or are only partly deductible. Getting your expense claims right can make a material difference to your Corporation Tax bill.

For most small companies, Corporation Tax must be paid within nine months and one day of the end of your accounting period. So if your company's year end is 31 March, your Corporation Tax payment is due by 1 January of the following year. Your Corporation Tax return (CT600) must be filed with HMRC within 12 months of the end of your accounting period. It is important not to confuse the payment deadline with the filing deadline — you can be fully up to date with your return and still incur a late payment surcharge if the tax itself is not paid on time. Large companies with profits above £1.5 million pay by quarterly instalments, but this does not apply to the majority of small businesses.

Yes — there are several entirely legitimate ways to reduce your Corporation Tax liability. Making pension contributions directly from the company is one of the most effective: employer pension contributions are a fully deductible business expense, reducing your taxable profit while also building your personal retirement pot. Ensuring all genuine business expenses are claimed correctly is another important area, as many companies inadvertently leave deductible costs out of their accounts. Capital allowances on equipment and vehicles can also significantly reduce your taxable profit in the year of purchase. If your company carries forward losses from a previous year, those can offset current year profits. Research and Development (R&D) tax relief is available for companies that carry out qualifying innovation work and can provide significant tax savings. Speak to us for a review of your specific situation.