YF AccountingLast updated: 23 July 2026
6 min read
Corporation tax in 2026/27 works on a tiered system: your company pays 19% on profits up to £50,000, 25% on profits over £250,000, and an effective 26.5% on the slice in between thanks to marginal relief. The tax is due 9 months and 1 day after your year end — three months before the return itself. This guide explains the rates, the deadlines, the traps (associated companies, director’s loans) and the legitimate ways to keep the bill down.
What are the corporation tax rates in 2026/27?
| Profit band | Rate | How it applies |
|---|---|---|
| Up to £50,000 | 19% | Small profits rate on the whole profit |
| £50,001 – £250,000 | 25% less marginal relief | Works out at an effective 26.5% on profits in this band |
| Over £250,000 | 25% | Main rate on the whole profit |
These bands have been in place since April 2023 and are unchanged for 2026/27. The counter-intuitive part is that middle band: each extra pound of profit between £50,000 and £250,000 is effectively taxed at 26.5% — higher than the 25% main rate — which is how the average rate climbs smoothly from 19% to 25% as profits grow.
How much corporation tax will I pay on £60,000 profit?
Here is the sum for a company with £60,000 of taxable profit and no associated companies:
- First £50,000 × 19% = £9,500
- Next £10,000 × 26.5% = £2,650
- Total: £12,150 — an average rate of 20.25%
Notice what that means in practice: the £10,000 above the threshold cost £2,650 in tax. If that company made a £10,000 employer pension contribution before its year end, the contribution would get relief at 26.5%, not 19%. Profits sitting just above £50,000 are exactly where planning pays best. You can check your own figures with HMRC’s marginal relief calculator.
What are associated companies and why do they matter?
The £50,000 and £250,000 thresholds are divided by the number of associated companies — broadly, companies under common control. If you control two companies, each one’s small profits threshold drops to £25,000; with four, it is £12,500. The bands are also scaled down for accounting periods shorter than 12 months.
This catches people who set up a second company for a side project and discover both are now paying the 26.5% marginal rate far earlier than expected. A dormant company does not count, but do not assume — check before you incorporate company number two.
When is corporation tax due?
Two deadlines, and they run in the wrong order:
- Payment: 9 months and 1 day after the end of your accounting period (for companies below the instalment-payment thresholds, which is nearly all small companies). Year end 31 March → tax due 1 January.
- Filing: the CT600 company tax return is due 12 months after the end of the accounting period.
Yes — you have to pay three months before the return is technically due. In practice the sensible approach is to prepare the accounts early, know the liability well before the payment date, and set the cash aside monthly along the way. Late payment attracts interest from day one, and late filing attracts penalties that escalate the longer you leave it. Statutory accounts also go to Companies House, normally 9 months after year end — my limited company accounting guide sets out the full calendar.
What expenses reduce corporation tax?
You only pay corporation tax on profit, so every legitimate expense reduces the bill directly. The test is that costs are incurred “wholly and exclusively” for the business. The usual suspects:
- Staff salaries, employer’s National Insurance and pension contributions
- Rent, utilities and premises costs
- Software, equipment and office supplies
- Professional fees — your accountant, and most legal costs
- Business travel and mileage (not ordinary commuting)
- Marketing, advertising and website costs
- Bank charges and interest on business borrowing
The classic disallowable is client entertaining — lovely evening, no tax relief. For the full list of what does and does not count, see my guide to allowable expenses for limited companies in 2026/27.
How do capital allowances and full expensing work?
Bigger one-off purchases — equipment, machinery, vans, computers — are claimed through capital allowances rather than as day-to-day expenses, but for most small companies the outcome is the same: 100% relief in the year of purchase. The Annual Investment Allowance covers up to £1 million of qualifying plant and machinery a year, and companies also have full expensing — a permanent 100% first-year deduction for new main-rate plant and machinery. Cars have their own, less generous, rules.
Timing is the free win here: buying equipment just before your year end brings the relief forward a full year compared with buying it a week after. If a significant purchase is coming anyway, a five-minute conversation before year end is worth real money.
How can I legitimately reduce my corporation tax bill?
- Keep the bookkeeping current so no allowable cost slips through — tidy records are the cheapest tax planning there is.
- Employer pension contributions. Paid before year end, they are usually fully deductible — at up to 26.5% relief in the marginal band — and free of NI. The £60,000 annual allowance applies personally.
- Pay yourself deliberately. Salary is deductible for the company; dividends are not. The right mix changed with the April 2026 dividend rate rises — see my salary vs dividends guide.
- Time income and spending around your year end, especially if profits hover near £50,000.
- Claim R&D relief if you genuinely qualify — the rules tightened after years of dubious claims, but real development work still attracts enhanced deductions.
- Watch the director’s loan account. Money drawn that is not salary or dividend and still outstanding 9 months and 1 day after year end triggers a s455 charge — 35.75% for loans made on or after 6 April 2026, refundable only after the loan is repaid.
- Set the money aside monthly. Not a tax saving, but the difference between a routine payment and a January crisis.
Frequently asked questions
What is the corporation tax rate for small businesses in 2026/27?
Companies with taxable profits of £50,000 or less pay the small profits rate of 19%. Between £50,000 and £250,000, marginal relief applies, giving an effective 26.5% on profits in that band. Above £250,000 the main rate of 25% applies to everything. The thresholds are shared between associated companies.
When do I pay corporation tax?
For most small companies, 9 months and 1 day after the end of the accounting period — so a 31 March year end means payment by 1 January. The CT600 return is due 12 months after year end, three months later than the payment. Interest runs on late payment from the due date.
What is marginal relief on corporation tax?
Marginal relief tapers the jump between the 19% small profits rate and the 25% main rate. Instead of a cliff edge at £50,000, profits between £50,000 and £250,000 bear an effective 26.5% rate on that slice only, so the overall average rate rises gradually towards 25%. HMRC provides an online calculator for the exact figure.
Do I pay corporation tax on dividends I take out?
Not as such — dividends are paid out of profits that have already suffered corporation tax, and they are not a deductible expense. You then pay personal dividend tax on what you receive: 10.75%, 35.75% or 39.35% in 2026/27 after the £500 allowance. That two-layer structure is why salary vs dividend planning matters.
What happens if I control more than one company?
The £50,000 and £250,000 thresholds are split between all associated companies — companies under common control. Two companies means each hits the 26.5% marginal band at £25,000 of profit. Dormant companies are ignored, but a modestly trading second company can raise the overall tax rate on both, so take advice before incorporating another.
What is the s455 director’s loan charge?
If you borrow money from your company and it is still outstanding 9 months and 1 day after the year end, the company pays a temporary tax charge — 35.75% of the balance for loans made on or after 6 April 2026. HMRC refunds it after the loan is repaid, but the cash-flow hit is real, so clear or formalise loans before the deadline.
Need a hand with your company’s corporation tax?
Preparing accounts, filing the CT600 and — more importantly — planning around the £50,000 threshold before the year end is exactly what I do. I am a Manchester-based, fixed-fee accountant: limited companies from £50 a month, sole traders from £35, with one point of contact and no hourly billing. See the accounts and corporation tax service for what is included.
Book a free, no-obligation call or ring 0161 531 0959.
This article is general information, not personal tax advice. For advice on your own situation, please get in touch.
Founder of YF Accounting — a fixed-fee, fully digital accountancy practice in Manchester serving SMEs, sole traders and landlords across the UK. One point of contact, unlimited support, no surprise bills.
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