Corporation Tax for Small Companies: Complete 2025/26 Guide
By Sardar Muhammad, AAT • • 10 min read
📋 Key Points for 2025/26
- Small profits rate: 19% (profits up to £50,000)
- Main rate: 25% (profits over £250,000)
- Marginal relief: 19-25% (profits £50,000-£250,000)
- Payment deadline: 9 months + 1 day after year end
Understanding Corporation Tax Rates
Corporation tax is the tax your limited company pays on its profits. Since April 2023, there are two rates:
| Profit Level | Rate | Tax on £50k profit |
|---|---|---|
| £0 - £50,000 | 19% (small profits) | £9,500 |
| £50,001 - £250,000 | 19-25% (marginal) | Varies |
| £250,001+ | 25% (main rate) | N/A |
Marginal Relief Explained
If your profits fall between £50,000 and £250,000, you're in the "marginal" band. You don't suddenly pay 25% on all profits – instead, you get "marginal relief" that tapers the effective rate.
Marginal Relief Formula
Tax = (Profits × 25%) - ((Upper Limit - Profits) × Standard Fraction)
Standard Fraction = 3/200 = 0.015
Example at £100,000 profit:
Tax = (£100,000 × 25%) - ((£250,000 - £100,000) × 0.015)
= £25,000 - £2,250 = £22,750 (effective rate: 22.75%)
Effective Rates by Profit Level
| Profit | Effective Rate | Tax Due |
|---|---|---|
| £30,000 | 19% | £5,700 |
| £50,000 | 19% | £9,500 |
| £75,000 | 20.5% | £15,375 |
| £100,000 | 22.75% | £22,750 |
| £150,000 | 23.5% | £35,250 |
| £250,000 | 25% | £62,500 |
Associated Companies Rule
The £50,000 and £250,000 thresholds are divided by the number of "associated companies" you control. If you have 2 companies, each threshold is halved:
- Small profits rate: £25,000 each
- Main rate threshold: £125,000 each
This prevents splitting one business into multiple companies to avoid the 25% rate.
Corporation Tax Deadlines
📅 Payment Deadline
9 months and 1 day after the end of your accounting period. If your year ends 31 March, payment is due 1 January.
📄 CT600 Filing Deadline
12 months after the end of your accounting period. Your Company Tax Return (CT600) must be filed with HMRC.
📊 Accounts Filing (Companies House)
9 months after your year end for private limited companies.
Allowable Deductions
Reduce your taxable profit by claiming all legitimate business expenses:
✅ Fully Deductible
- Staff salaries and employer NI
- Pension contributions
- Rent and business rates
- Utilities (gas, electric, water)
- Office equipment and supplies
- Professional fees (accountant, solicitor)
- Insurance premiums
- Marketing and advertising
- Business travel
- Training and development
- Software subscriptions
- Bank charges and interest
❌ Not Deductible
- Client entertainment (meals, events)
- Fines and penalties
- Personal expenses
- Corporation tax payments
- Dividends (paid from post-tax profits)
Capital Allowances
For assets like equipment, vehicles, and machinery, claim capital allowances:
- Annual Investment Allowance (AIA): 100% deduction on first £1 million of equipment
- Full Expensing: 100% deduction on qualifying plant & machinery
- Writing Down Allowance: 18% or 6% per year (for assets not covered above)
R&D Tax Relief
If your company does research and development, you may qualify for R&D tax relief – a generous scheme that can reduce your tax bill significantly or even provide a cash refund.
Frequently Asked Questions
What is the corporation tax rate for small companies?
For companies with profits up to £50,000, the small profits rate is 19%. For profits over £250,000, the main rate is 25%. Profits between £50,000-£250,000 get marginal relief, resulting in an effective rate between 19-25%.
When is corporation tax due?
Corporation tax must be paid within 9 months and 1 day after the end of your accounting period. For example, if your year ends 31st March, tax is due by 1st January.
What can I deduct from corporation tax?
You can deduct all legitimate business expenses: staff costs, rent, utilities, equipment, professional fees, marketing, travel, and more. Some items like entertainment are not deductible.
Need Help With Your Company Accounts?
I prepare company accounts and corporation tax returns for small businesses across Glasgow. Let me handle your compliance while you focus on growing your business.
Sardar Muhammad, AAT Certified
Sardar is an AAT certified accountant and founder of LimeTree Accounting Solutions in Glasgow. He helps small limited companies with their accounts, corporation tax, and tax planning.