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Corporation Tax is still one of the most important tax liabilities for limited companies in the UK. The headline rates are unchanged for the 2026/27 tax year, but there are some changes to the legislation and compliance, which will impact tax planning and reporting. These include new capital allowance rules, updated penalties, and filing updates.
CPA firms, accountants, and finance professionals who serve multiple corporate clients need to understand these changes. Through accurate Corporation Tax calculations, clients can ensure they minimise penalties, avail themselves of the maximum relief, and make well-informed financial decisions throughout the year.
This guide covers the latest changes to Corporation Tax Rates; the process of calculating Corporation Tax, including the impact of associated companies; key changes to legislation for 2026/27; Corporation Tax deadlines; and common errors that businesses may wish to avoid.
Quick Answer: UK Corporation Tax Rates 2026/27
The three-tiered structure of the Corporation Tax Rates from April 2023 remains in place for 2026/27.
| Taxable Profits | Corporation Tax Rate |
| Up to £50,000 | 19% (Small Profits Rate) |
| £50,001–£250,000 | Marginal Relief applies |
| Above £250,000 | 25% (Main Rate) |
Note: If there are associated companies, profit thresholds will be lowered.
At a Glance
- Small Profits Rate: 19%
- Main Corporation Tax Rate: 25%.
- The marginal relief is between £50,000 and £250,000.
- Thresholds lessen at associated companies.
- Corporation tax is usually due after 9 months and 1 day after the accounting period ends.
- The 12-month filing deadline for CT600 is after the end of the accounting period.
This is a tiered system that would ensure smaller businesses continue paying a lower rate, while larger businesses pay the full main rate.
What Is Corporation Tax?
“What is corporation tax?” is one of the most frequently asked questions of all businesses.
Limited companies and other organisations based in the UK can pay Corporation Tax on their (taxable) profits. Corporation Tax is levied on a corporate entity as opposed to Income Tax.
So, if you are confused about what UK corporation tax is, it is charged on the profits of UK limited companies and other incorporated organisations, rather than on individuals. Common sources of taxable profit include:
- Trading income
- Investment income
- The sales of business assets (where applicable, under certain conditions)
- Overseas income for UK resident companies
Businesses will need to complete a Corporation Tax Return (CT600) and pay the tax due to HMRC by the deadline. The taxable profit for each accounting period will need to be calculated.
While HMRC is no longer issuing Corporation Tax bills automatically, companies are still legally liable to pay and calculate the appropriate amount of Corporation Tax.
What Are the UK Corporation Tax Rate Bands for 2026/27?
Many business owners look for the term what is the corporation tax rate UK, probably assuming that there would be only one.
In fact, the UK has a graduated system of Corporation Tax.
Small Profits Rate (19%)
The rate of Corporation Tax for companies with taxable profits under £50,000 is 19%.
This lower rate is aimed at helping smaller companies maintain cash flow for growth and ease their tax burden.
Main Rate (25%)
Taxable profits of a company above £250,000 will be charged at 25% Corporation Tax.
This is the maximum rate of Corporation Tax (CT) that is currently applied to UK companies.
Marginal Relief
The 25% doesn’t leap from 19% in a heartbeat for companies with profits of £50,000 or more up to 250,000. Rather, they are eligible for Marginal Relief and will see their effective Corporation Tax rate rise as profits increase.
This helps smooth the step-up and step-down between the Small Profits Rate and the Main Rate.
| Marginal Relief Formula Marginal Relief = (Upper Limit − Augmented Profits) × (Taxable Profits ÷ Augmented Profits) × 3/200 |
Where:
- Upper Limit = £250,000
- Augmented Profits = Taxable Profits + Exempt Distributions (dividends received from other companies that aren’t part of a group)
- Taxable Profits = the company’s actual profit chargeable to Corporation Tax
- 3/200 = the marginal relief fraction
The relief amounts lower the overall amount of Corporation Tax paid, but do not alter the tax rate.
How Associated Companies Change Your Client’s Thresholds?
This is where a client’s standalone profit figure can be misleading. The thresholds of £50,000 and £250,000 are not absolute thresholds, but are split between ‘associated companies’, that is, companies under common control. Both thresholds are divided by the number of companies in the group in each associated company.
Worked Example: Two Associated Companies
Two companies are owned by a client, and there are no other businesses connected. Given that there are 2 companies, both thresholds are divided by 2:
- Small profits threshold: £50,000 ÷ 2 = £25,000
- Upper marginal relief threshold: £250,000 ÷ 2 = £125,000
Worked Example 1: £150,000 Profit
- Tax at main rate: £150,000 × 25% = £37,500
- Marginal relief: (£250,000 − £150,000) × 3/200 = £100,000 × 0.015 = £1,500
- Tax due: £37,500 − £1,500 = £36,000
- Effective rate: 24%
Worked Example 2: £120,000 Profit
- Tax at main rate: £120,000 × 25% = £30,000
- Marginal relief: (£250,000 − £120,000) × 3/200 = £130,000 × 0.015 = £1,950
- Tax due: £30,000 − £1,950 = £28,050
- Effective rate: 23.4%
So that company making £100,000 in profit is no longer in the comfortable part of the marginal relief band on a view worth £50,000–£250,000, but is very close to a much narrower band worth £25,000–£125,000, and is close to the main rate of 25%.
Hence, the advice that a client who states “My company doesn’t pay up to the top rate, it’s only £100k” may be incorrect. In some cases, they may have a second business or be running a holding structure; in other cases, the thresholds they believe they have are not the thresholds they actually have. When asking for a rate, always inquire about any related companies.
What’s Actually Changing for 2026/27?
The headline rates (19% / 25% / marginal relief) remain unchanged. However, a number of rules will be changing for 2026/27, and these rules are more important than the rate itself to many clients.
Writing-Down Allowance Cut From 18% to 14%
The write-down allowance (WDA) on the main pool of plant and machinery will decrease from 18% per year to 14% per year on a reducing balance basis from 1 April 2026 (for companies). This was announced in the Autumn Budget 2025. If the company’s accounting period overlaps 1 April 2026, then a hybrid rate applies, determined by the number of days before and after 1 April 2026.
This means that relief for qualifying capital expenditure that is not eligible for full expensing or the Annual Investment Allowance will now be phased out gradually and will be taxable in the short term.
New 40% First-Year Allowance
The new 40% first-year allowance (FYA) will apply to certain main-rate plant and machinery expenditure from 1 January 2026 to help compensate for the reduction in the WDA rate. This is a new allowance and is available to:
- Businesses purchasing assets to be leased or hired out (excluded from most FYAs)
- Unincorporated businesses like sole traders and partnerships
It does not contain cars & second-hand assets. The 40% FYA is not the big news for companies that already have full expensing (100% relief on new, owned plant and machinery). It’s most relevant to leasing businesses and unincorporated clients who were previously unable to claim full expenses.
Making Tax Digital for Corporation Tax: Officially Scrapped
This addresses a previous statement in older guidance: MTD for Corporation Tax is not being delayed or paused; it is cancelled. In its July 2025 Transformation Roadmap, HMRC confirmed that it will not implement MTD for Corporation Tax as previously intended. For CT, there is no software requirement specific to CT, nor is there a quarterly digital reporting requirement.
Annual CT600s are still being filed by companies as normal. This does not impact MTD for VAT (which is now compulsory) or MTD for Income Tax Self Assessment (which launches for sole traders and landlords with qualifying income over £50,000 from April 2026).
New £200 Immediate Penalty for Late CT600 Filing
HMRC has doubled its fixed penalties for late Corporation Tax returns from 1 April 2026 – the first increase in late penalties for Corporation Tax returns since the late 1990s. For CT600s where the filing date is on or after that date:
- Filed one day late – £200 fixed penalty (up from £100)
- Not filed for 3 months: an additional £200, making it £400.
- If a company files late in three consecutive years, the fixed penalty rises to £1,000 per return for each late filing (and to £2,000 for returns more than 3 months late).
All these penalties are fixed and do not depend on whether any tax is due: a dormant company or a loss-making company with a nil return will all be liable. If tax has not yet been paid, tax-geared penalties (10% of the unpaid tax for 6 months, 10% more for 12 months) will also be applied. This would also be a good time for companies that handle multiple client filings to review their reminder systems: the cost of a missed deadline doubles.
How and When to Pay Corporation Tax
There are two deadlines, and the most common client error is mixing them up.
- Payment deadline: The payment deadline is 9 months and 1 day after the end of the accounting period for businesses with profits of less than £1.5 million.
- Filing deadline: The filing deadline is 12 months after the end of the accounting period.
- Instalment payments: Instalment – “Large” companies (broadly, taxable profits over £1.5 million, reduced pro rata for associated companies and short periods) are required to make payments in instalments, payable quarterly before the end of the accounting period.
Since the deadline is three months before the filing deadline, some customers believe they have more time than they actually do to settle their bill. To access VAT, PAYE and Self Assessment deadlines and Corporation Tax deadlines, please view our UK Tax Deadlines 2026 guide.
Corporation Tax Errors That Cost Clients Money
Most of the corrections in corporations’ tax returns result from a few errors:
Marginal relief miscalculation. If a company has made extra profits from dividends received from other companies, for example, and it uses taxable profits instead of augmented profits, then it is out by hundreds or thousands of pounds with a bill.
Associated company oversight. If you miss a company, as outlined above, you will be applying thresholds that are too generous, underestimating your tax liability, and may be subject to an HMRC enquiry at a later stage.
Errors in split-period capital allowances. As the WDA rate has been changed during the year (from 18% to 14%), any accounting period that covers 1 April 2026 must be calculated using the correct hybrid rate, not a blend of the old and new rate. This will overstate or understate the relief for the year.
Having a straightforward list to review at the end of the year, which identifies related entities, earnings, and straddling periods, can trap the majority of these.
How Does Corporation Tax Relate to Other UK Compliance Obligations?
However, Corporation Tax is not a standalone tax and a couple of neighbouring obligations need to be separated out for clients:
Companies Act 2006: The filing requirements and audit exemptions for small companies fall under the Companies Act 2006, are separate from HMRC’s CT600 requirements. The accounts and the CT600 are separate filing regimes — a company could be compliant with the Companies Act and not compliant with the CT600.
FRS 105: The Financial Reporting Standard for micro-entities (FRS 105). Simplified accounts are used by companies reporting under FRS 105, particularly on the presentation of capital allowances and provisions, which may impact on the accounting treatment of a company and how this compares with their CT600 figures.
PAYE / National Insurance Contributions (NICs): National Insurance Contributions / PAYE: payroll taxes on employees and directors (not tax on company profits), known as Corporation Tax. Clients sometimes mix the two up; that a company has a nil CT600 return does not mean that it has no PAYE/NICs liabilities.
How Can Accountants Turn CT600 Compliance Into Advisory Revenue?
R&D tax relief can shift a client from the main rate into marginal relief, or from marginal relief into the small profits band, often worth six figures on a large claim. Corporation tax compliance doesn’t have to stop at filing the CT600. The same technical detail that determines a client’s tax band also opens up planning conversations.
For instance, R&D tax credits are applied to taxable profits before the corporation tax rate is calculated, which could cause a company to move from the main rate band into the marginal relief band, or from the marginal relief band into the small profits band.
Where businesses have clients engaged in real product development, the R&D payments claim could have a significant impact on the tax bill, typically in the 6-figure range for a large claim. That’s what makes an annual compliance task a continuous advisory engagement.
The same process is for capital allowances timing. Advising a leasing client to wait until 1 January 2026 to purchase so they can benefit from the new 40% FYA, or planning a large capital spend around the change to the WDA rate, would not be picked up by a compliance-only filing.
| Worked Example: R&D Relief Shifting the Tax Band A company has taxable profits of £270,000 before R&D relief, just above the £250,000 main rate threshold. Qualifying R&D expenditure: £80,000 Adjusted taxable profits after relief: £190,000 This moves the company from the 25% main rate into the marginal relief band (£50,001–£250,000) Marginal relief: (£250,000 − £190,000) × 3/200 = £900 Tax due: (£190,000 × 25%) − £900 = £46,600 Without the claim, the company would have paid £67,500 at the main rate. The R&D claim alone is responsible for both the lower taxable base and the shift into a lower effective rate band, a distinction worth flagging separately to clients, since the rate-band shift is easy to miss if you’re only looking at the relief amount. |
When It’s Worth Bringing in Specialist Support
Until a firm gets into the dozens of CT600s towards the end of a busy filing season or a client’s group structure becomes more complicated than it can be handled by a simple manual check.
Our Tax Return Services team is here to help accounting firms when they require additional capacity for CT600 preparation, related company reviews, or corporation tax computations during busy periods, allowing your staff to focus on the advisory discussions with clients.
Frequently Asked Questions
Q1: What is the corporation tax rate in the UK for 2026/27?
The tax rate is 19% on profits up to £50,000, 25% on profits exceeding £250,000, with marginal relief in between. The rates are the same as 2023/24.
Q2: How is corporation tax calculated?
Calculate your taxable profit (accounting profit minus disallowed expenses and capital allowances) and apply 19%, 25% or marginal relief based on the tax band in which you fit.
Q3: How do I calculate marginal relief?
If there are no associated companies, then use the formula 3/200 × (£250,000 – profits). The CT600 software typically does this.
Q4: What counts as an associated company?
Two companies are associated when one company controls the other, or when the same person or group controls both companies. The £50,000 and £250,000 thresholds are split equally amongst associated companies.
Q5: Has Making Tax Digital for Corporation Tax been cancelled or just delayed?
In July 2025, HMRC confirmed that it is not planning to implement MTD for Corporation Tax. Companies keep on filing their annual CT600 in the same manner.
Q6: What are the penalty charges for filing a CT600 late in 2026/27?
For any filing date on or after 1 April 2026, a late filing fee of £200 applies if filed within 1 day, and £400 if not filed within 3 months. For late filers, the penalty is up to £2,000 per late tax return.
Q7: When is corporation tax due?
For corporation tax due, the payment is due 9 months and 1 day after the accounting period is over. The return to the CT600 is due 12 months after the end of the accounting period.
