Company Taxable Trading Profit Details
📊 Corporation Tax Tier Breakdown
All UK limited companies (and foreign companies operating a UK permanent establishment) must pay Corporation Tax on their net taxable trading profits.
Understanding how Small Profits Rates (19%), Main Rates (25%), and Marginal Relief (26.5% effective taper) work ensures accurate corporate tax planning.
⚙️ Statutory UK Corporation Tax Rates & Tiers for 2026/27
1. Small Profits Rate (19%)
- Applies to UK limited companies with net taxable profits up to £50,000 per year.
- Corporation Tax is charged at a flat rate of 19%.
2. Main Rate (25%)
- Applies to UK limited companies with net taxable profits exceeding £250,000 per year.
- Corporation Tax is charged at a flat rate of 25% on total net profits.
3. Marginal Relief Taper (£50,000 to £250,000)
For companies earning profits between £50,000 and £250,000, Corporation Tax is calculated at 25% minus Marginal Relief:
- Marginal Relief Formula:
(25% × Net Profit) - [ 3/200 × (£250,000 - Net Profit) ]. - This creates a smooth sliding scale where profits between £50k and £250k face an effective marginal tax rate of 26.5%.
4. Associated Companies Division
If a business owner controls multiple associated limited companies, the £50,000 and £250,000 thresholds are divided equally by the number of associated companies.
📊 Practical Corporation Tax Worked Examples
Below are two worked calculation examples illustrating UK Corporation Tax liabilities:
- Net Taxable Profit: **£40,000.00** (Below £50,000 threshold)
- Corporation Tax Rate: **19.0%**
Calculation: £40,000.00 × 19.0% = £7,600.00 Corporation Tax due.
- Net Taxable Profit: **£120,000.00**
- Main Rate Charge (25%): £120,000 × 25% = **£30,000.00**
- Marginal Relief Discount: (3 ÷ 200) × (£250,000 - £120,000) = **-£1,950.00**
Calculation: Net tax payable = £30,000.00 - £1,950.00 = £28,050.00.
📑 Common Pitfalls & Corporation Tax Warnings
- Missing the Statutory Payment Deadline: Unlike personal tax returns due on 31 January, Corporation Tax must be paid to HMRC 9 months and 1 day after the end of your company accounting period. The company tax return (Form CT600) itself is due 12 months after year-end.
- Confusing Accounting Profit with Taxable Profit: Taxable profit is NOT identical to net profit shown in your annual P&L. Non-deductible client entertainment must be added back, and accounting depreciation must be replaced by statutory Capital Allowances.
- Quarterly Instalment Payments (QIPs) for Large Companies: Companies with taxable profits exceeding £1,500,000 are classified as large companies and must pay Corporation Tax in 4 quarterly instalments during the accounting year itself.
❓ Frequently Asked Questions (FAQ)
If your company makes a trading loss, you pay £0.00 Corporation Tax. You can carry the loss back against profits of the previous 12 months (generating a Corporation Tax refund from HMRC) or carry it forward to offset future profits.
Yes! Director salaries and employer pension contributions are allowable business expenses. Paying a director salary (e.g. £12,570) reduces taxable company profit, saving up to 25% Corporation Tax.
No. Dividends are paid to shareholders out of post-tax net profits. Dividends are NOT allowable business expenses and do NOT reduce company Corporation Tax liability.
A company is associated with another if one has control of the other, or both are under the control of the same person or group of persons (such as a parent company owning subsidiaries or a sole owner owning two active Ltd companies).