UK Corporation Tax Rates Guide (2026/27)

1. Overview: the two-rate structure

UK Corporation Tax is charged on the worldwide taxable profits of UK resident companies and on the UK-source profits of non-resident companies trading through a UK permanent establishment. The charge applies to trading profits, non-trading loan relationship credits, non-trading intangible fixed asset profits, property income, capital gains, and certain other categories aggregated as "total profits" in the CT600 computation. The headline rate structure for the financial year 2026 (the year beginning 1 April 2026) is the same as for FY 2023, FY 2024 and FY 2025 - the rates have not moved since the Spring Budget 2021 reform took effect on 1 April 2023.

Profits at or below £50,000 pay 19%. Profits above £250,000 pay 25%. Profits between the two thresholds pay the main rate reduced by marginal relief, which produces a smooth ramp from 19% at the lower limit to 25% at the upper limit. The slice rate - the effective rate on each pound of profit added inside the marginal band - is exactly 26.5%, which is higher than the main rate by design. The reform deliberately makes the marginal band the most expensive zone of the Corporation Tax curve, so that a company that just spills over the small profits rate threshold pays a high tax on the spilled portion until it reaches the upper limit and reverts to the main rate.

Two structural points reshape the curve for any particular company. First, the thresholds are divided equally between associated companies. A company that is one of three associates therefore has thresholds of £16,666.667 and £83,333.333 rather than the headline £50k / £250k. Second, short accounting periods pro-rate the thresholds by reference to the number of days. Both adjustments are made before the marginal relief calculation. Section 4 below covers the associated-company rules in detail and section 3 covers the formula.

2. Current rate schedule: 19%, marginal, 25%

The Corporation Tax rate structure in force from 1 April 2023 onward, and unchanged for FY 2026, is set out in Part 3 CTA 2010 as amended by Finance Act 2021 schedule 1. The three rates are:

• Small profits rate: 19% on taxable profits at or below £50,000.
• Marginal band: profits between £50,000 and £250,000 are taxed at the main rate less marginal relief, producing an effective slice rate of 26.5% on each pound earned in the band.
• Main rate: 25% on taxable profits above £250,000.

Ring-fenced North Sea oil and gas profits are taxed separately under the long-standing 30% / 19% ring-fenced regime and are outside the scope of this guide. The bank surcharge of 3% applies on top of the main rate to bank profits above £100 million from 1 April 2023 (it was previously 8% above £25 million; both rate and threshold changed at the same time as the main reform). Close investment-holding companies (CICs) are excluded from the small profits rate and the marginal band and pay the full 25% on every pound of taxable profit regardless of size.

The pre-reform rate history. The single Corporation Tax rate of 19% applied from 1 April 2017 to 31 March 2023, having descended from 30% in the mid-2000s through a sequence of incremental cuts (28%, 26%, 24%, 23%, 21%, 20%, 19%). The Spring Budget 2021 reform reversed direction by restoring a higher main rate of 25% from FY 2023, but retained a small profits rate of 19% and reintroduced the marginal band - mechanically the same architecture that existed before April 2015, when the last small profits rate was abolished as part of the move to a single 20% rate. The rate increase from 19% to 25% raised the Exchequer roughly £17 billion a year by FY 2026 according to OBR scoring at the time of the Spring Budget 2021.

Why the marginal band exists. Without marginal relief, a company earning £50,001 of profit would pay 25% on the lot - a £12,500 tax bill on barely a pound more of profit than the £9,500 paid at exactly £50,000. The cliff edge would create perverse incentives to delay invoicing or accelerate deductions to keep profits under the lower limit. Marginal relief produces a smooth gradient instead, raising the effective rate continuously from 19% at the lower limit to 25% at the upper limit and ensuring that an extra pound of profit always leaves the company more after-tax cash than the previous pound did. The 26.5% slice rate is the necessary price of removing the cliff edge.

Diverted Profits Tax and other separate charges. Sitting alongside Corporation Tax, DPT charges at 31% (six percentage points above the main rate) on profits diverted from the UK through arrangements lacking economic substance or that avoid creating a UK permanent establishment. The Energy Profits Levy on oil and gas extraction profits adds 35% on top of the ring-fenced regime, taking the headline rate on qualifying profits to 75% (it is scheduled to remain in force until 31 March 2030). The Electricity Generator Levy added 45% on electricity-generation receipts above a benchmark price for 2023 to 2028. These are separate from the main Corporation Tax charge but interact with it in the group computation.

3. Marginal relief mechanics and the 3/200 fraction

The marginal relief calculation is set out in section 19 CTA 2010 (as amended). The full statutory formula runs:

MR = F * (U - A) * (N / A)

where MR is the marginal relief amount deducted from main-rate Corporation Tax, F is the marginal relief standard fraction (currently 3/200 or 0.015), U is the upper limit (£250,000 headline, divided by associated company count and pro-rated for short periods), A is augmented profits (taxable total profits plus franked investment income, essentially UK dividends received from non-group companies), and N is the taxable total profits actually chargeable.

For the standard small company with no franked investment income, A equals N and the N/A ratio is 1. The formula then simplifies to the version most practitioners use day-to-day:

CT = (Profit * 25%) - ((£250,000 - Profit) * 0.015)

This is the single-line calculation that drives every example below. The marginal relief amount is the product of the width of the unused portion of the marginal band (Upper minus Profit) and the standard fraction. As profit rises towards £250,000, the relief shrinks linearly until it reaches zero at exactly the upper limit. Below £50,000 the small profits rate applies instead and the marginal relief formula is not used.

Why the fraction is 3/200. The legislation backs into the fraction from the desired curve. At the lower limit (profit £50,000) the formula must produce the same tax as the small profits rate: £9,500. At the upper limit (profit £250,000) the formula must produce the same tax as the main rate: £62,500. Solving (£250,000 * 0.25) - (X * (£250,000 - £50,000)) = £9,500 for X gives X = (£62,500 - £9,500) / £200,000 = £53,000 / £200,000 = 0.265, then dividing by the £200,000 band width yields the marginal relief fraction of 0.015 or 3/200. The fraction is the mathematical consequence of choosing the rates and thresholds; it is not a separate policy lever.

Why the slice rate is 26.5%. Differentiating the marginal relief formula with respect to profit shows that each extra pound of profit in the band increases CT by (25% + 0.015) = 26.5% rather than the main 25%. The relief shrinks by 1.5p for each extra pound, so the relief loss adds to the main-rate charge rather than cancelling against it. The 1.5p withdrawal rate is the "claw-back" tax embedded in the marginal band - the same structural feature that creates the 60% effective band in personal Income Tax at £100k to £125,140 where Personal Allowance is withdrawn at 50p in the pound on top of the 40% higher rate.

Franked investment income (FII). Where a company receives dividends from non-group UK companies, those dividends are not themselves chargeable to Corporation Tax (the dividend exemption regime catches most categories), but they do count as franked investment income for the purposes of fixing A in the marginal relief formula. A higher A reduces the N/A ratio below 1, which reduces the relief and pushes the effective rate upwards. FII therefore narrows or eliminates marginal relief for companies whose investment income is large relative to their trading profit. Group dividends and certain other categories are excluded from FII.

Short accounting periods. The lower and upper limits are pro-rated by reference to the number of days in the period. A six-month accounting period (183 days) has thresholds of £25,068 and £125,342 respectively (after rounding). This stops a company from creating multiple short periods to multiply the benefit of the lower threshold. A company changing its accounting reference date should model the threshold impact before filing the abbreviated period.

4. Associated companies and threshold dilution

The £50,000 lower limit and £250,000 upper limit are divided equally between all companies that are associated with the company being assessed in the relevant accounting period. Two companies are associated if one controls the other, or if both are under the control of the same person or persons, at any point in the period. "Control" follows the section 450 CTA 2010 definition - more than 50% of share capital, voting power, distributable income, or assets on winding-up. The test is at any point in the period, so a brief overlap (eg a same-day group reorganisation) creates an associated company for the whole period.

The arithmetic. A company with N associates (counting itself as one) has thresholds of £50,000 divided by N and £250,000 divided by N. A group of three associates therefore has thresholds of £16,666.667 and £83,333.333, applied separately to each company's own taxable profit. A company in a group of ten faces thresholds of £5,000 and £25,000. Once N is high enough, the small profits rate effectively disappears for the group because few individual companies have small enough profits to qualify.

The 51% group / consortium overlap. The associated-companies test for Corporation Tax rate thresholds is distinct from the 75% group test for group relief (section 10) and the 51% group test for transfer pricing and other regimes. A company can be a 51% subsidiary without being a 75% subsidiary - for example, where the parent holds exactly 60% - and the associated-companies test catches anything over 50%. A consortium-owned company is treated as associated with each of its consortium members only if any single member has more than 50% control, which is rare by design (a consortium typically has five or more members each holding at most 50%).

Excluded companies. Several categories of company are excluded from the associated-companies count under section 18E CTA 2010 (as inserted by Finance Act 2021 schedule 1). Dormant companies (those without any business activity in the relevant period) are excluded. Passive holding companies - companies whose only activity is holding shares in 51% subsidiaries and receiving dividends from them - are excluded. Companies that are partners in a partnership are treated as one with the other partners' companies on a joint-venture basis. These carve-outs reduce the practical impact of the associated-companies test for large group structures that include intermediate holding entities.

Common pitfalls. The most expensive mistakes in practice involve forgetting non-trading associates owned by the same individual. A director who owns a trading company and personally owns a separate property investment company will typically have both associated because they are both under the control of the same person. The trading company's thresholds halve from £50k / £250k to £25k / £125k even though the property company has no Corporation Tax computation in issue. Similarly, family-owned companies controlled jointly by parents and children, or by trustees and beneficiaries, can be associated depending on the precise share-class structure. The attribution rules in section 451 CTA 2010 catch rights held by associates such as spouses, civil partners, and minor children.

Practical impact on owner-managed companies. The most common owner-managed structure is one trading company per individual. Where the same individual controls two or more such companies, the associated-rules bite hard. A director who operated through two trading companies generating £50k each would, pre-reform, have paid £19,000 of Corporation Tax (£9,500 each at the old 19% small profits rate or the post-reform small profits rate). Under the associated-companies rules in FY 2026 each company has a lower limit of £25k and an upper limit of £125k. The £50k profit now falls in the marginal band for each company, attracting CT of (£50k * 25%) - ((£125k - £50k) * 0.015) = £12,500 - £1,125 = £11,375 per company, a total of £22,750 for the group. The penalty for running two associated companies in this configuration is £3,750 a year compared with collapsing them into a single company. Tax planning around the structure is one of the highest-value moves for multi-entity owner-managers.

5. Worked examples

The four scenarios below use the FY 2026 rates and thresholds for a standalone, non-associated company with no franked investment income, in a 12-month accounting period. The formula is CT = (Profit * 25%) - ((£250,000 - Profit) * 0.015), applicable only in the marginal band; the small profits rate or main rate applies outside the band.

5.1 £40,000 profit - entire amount at 19%

A small consultancy company with taxable profit of £40,000 for the 12 months to 31 March 2027. No associated companies, no franked investment income, no Patent Box or R&D claims.

• Profit: £40,000
• Below lower limit of £50,000 - small profits rate of 19% applies
• Corporation Tax: £40,000 times 19% = £7,600
• Effective rate: 19.00%

The £40,000 profit sits comfortably under the lower limit so the small profits rate does the whole job. Cash CT is due 1 January 2028 (9 months and 1 day after 31 March 2027) and the CT600 is due 31 March 2028. No quarterly instalments apply because the company is far below the £1.5m large-company threshold. The director then has to plan the extraction route - dividends, salary or a combination - on what is left after Corporation Tax.

5.2 £80,000 profit - marginal relief band

A trading company with taxable profit of £80,000 for the 12 months to 31 March 2027. No associated companies. The profit sits inside the marginal band (£50k to £250k).

• Profit: £80,000
• Main-rate tax: £80,000 times 25% = £20,000
• Marginal relief: (£250,000 - £80,000) times 0.015 = £170,000 times 0.015 = £2,550
• Corporation Tax: £20,000 - £2,550 = £17,450
• Effective rate: 21.81%

The company is taxed at an average effective rate of around 21.81% on the £80,000 profit. The marginal slice rate, however, is the higher 26.5% - so if the company's profit rose to £81,000 the extra £1,000 would attract an extra £265 of Corporation Tax (rather than the £250 a naive 25% calculation would predict). The high marginal slice rate is the reason that pension contributions and other deductible expenses are particularly valuable for companies in this band - a £1 pension contribution saves a full 26.5p of Corporation Tax compared with 25p for a company above the upper limit and 19p below the lower limit.

5.3 £200,000 profit - upper marginal band

A profitable trading company with taxable profit of £200,000 for the 12 months to 31 March 2027. No associated companies. The profit sits near the top of the marginal band, close to the upper limit.

• Profit: £200,000
• Main-rate tax: £200,000 times 25% = £50,000
• Marginal relief: (£250,000 - £200,000) times 0.015 = £50,000 times 0.015 = £750
• Corporation Tax: £50,000 - £750 = £49,250
• Effective rate: 24.63%

As profit approaches the £250,000 upper limit, marginal relief shrinks to almost nothing and the effective rate approaches the main rate. At £200,000 the marginal relief is only £750, knocking the effective rate down from a flat 25% to 24.63%. A company in this position is essentially paying the main rate on most of its profit. Quarterly instalments still do not apply because profit is below the £1.5m large-company threshold, but the company should monitor that threshold ahead of any growth that might push it across.

5.4 £300,000 profit - full main rate

A profitable trading company with taxable profit of £300,000 for the 12 months to 31 March 2027. No associated companies. Profit is above the upper limit so the main rate applies in full and no marginal relief is available.

• Profit: £300,000
• Above upper limit of £250,000 - main rate of 25% applies in full
• Corporation Tax: £300,000 times 25% = £75,000
• Effective rate: 25.00%

No marginal relief is available because the company is above the upper limit. Each extra pound of profit attracts an extra 25p of Corporation Tax, which is lower than the 26.5% slice rate inside the marginal band. The company is still below the £1.5m quarterly-instalments threshold so payment remains due 9 months and 1 day after the end of the accounting period. Companies clustered around this profit level should consider whether Patent Box election (section 6), R&D claims (section 7) and pension contributions can bring the effective rate back below the headline 25%.

6. Patent Box and the 10% effective IP rate

Patent Box is an elective UK regime introduced by Finance Act 2012 that taxes qualifying profits from patented inventions at an effective rate of 10%. The relief is delivered by an additional trading deduction in the Corporation Tax computation, calibrated so that after applying the main 25% rate the net effective tax on qualifying profits is 10%. The election is irrevocable for the elected period and is made in writing to HMRC within two years of the end of the accounting period in question.

Qualifying IP. The relief covers profits from patents granted by the UK Intellectual Property Office, the European Patent Office, or the patent offices of certain specified EEA states (Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia and Sweden). Supplementary Protection Certificates, plant breeders' rights, plant variety rights and certain regulatory data protection rights are also qualifying IP. Trade marks, copyrights and registered designs do not qualify and remain taxed at the main rate.

Qualifying development. The company claiming Patent Box must have created the patented invention or undertaken qualifying development on it. Qualifying development means significant contribution to the creation of the patented item or to the development of a product that incorporates the patented item. A holding company that merely licenses in an already-developed patent cannot itself claim Patent Box unless it satisfies a separate active ownership condition by managing the patent portfolio actively.

The modified nexus regime. From 1 July 2021 Patent Box operates under the OECD "modified nexus" rules. The relief is tied to the R&D expenditure the claimant company itself has incurred on the qualifying patent, with an uplift of 30% for subcontracted R&D and acquisition costs. Where the company has outsourced most of its R&D, the modified nexus calculation reduces the relief proportionately. The objective is to ensure that countries giving IP-related tax relief do so only to the extent the underlying R&D activity took place inside their jurisdiction or under the claimant's direct economic substance.

Computing the relevant IP profits. The Patent Box calculation is multi-step. Start with the company's total trading profit. Strip out finance profits and routine return (a deemed 10% of certain allocable expenses, reflecting normal trading margin that does not relate to the patent). Apply a marketing assets return adjustment if the brand contributes materially to profits. The result is the qualifying residual profit, to which the IP-attribution ratio applies. Multiply by the nexus fraction (qualifying R&D expenditure divided by total R&D expenditure plus acquisition costs, with a 30% uplift). The output is the relevant IP profit eligible for the Patent Box deduction.

Worked Patent Box example. A medical device company has £1 million of trading profit. After stripping out finance income (£20k), routine return (£100k) and marketing assets return (£80k), the qualifying residual profit is £800k. The IP-attribution ratio puts £600k as patent-derived. The nexus fraction is 0.9 (most R&D in-house). Relevant IP profit: £600k * 0.9 = £540k. The Patent Box additional deduction is £540k * (25% - 10%) / 25% = £324k. Corporation Tax saving: £324k * 25% = £81k - the equivalent of taxing £540k at 10% instead of 25%.

Practical eligibility. Patent Box is most valuable for companies with substantial IP-derived profit streams - pharmaceuticals, medical devices, engineering, semiconductors, specialised manufacturing, and certain software businesses where a patented hardware element drives the product. Pure software companies typically cannot claim because patent protection for software is more restrictive in the UK / EPO regime than in the US. The election should be considered jointly with R&D relief (section 7) - the two regimes interact via the nexus fraction.

7. R&D relief: SME enhancement and RDEC

UK R&D tax relief was significantly reformed by Finance Act 2024. For accounting periods beginning on or after 1 April 2024 the previous separate SME relief and RDEC regimes were merged into a single Research and Development Expenditure Credit at a headline rate of 20%. A separate enhanced regime for R&D-intensive loss-making SMEs continues to operate alongside the merged regime. The pre-merger regimes still apply to accounting periods beginning before 1 April 2024 - so historical claims through the pre-merger SME or RDEC schemes follow the old rules.

The merged scheme (RDEC) from 1 April 2024. The credit is 20% of qualifying R&D expenditure, treated as taxable income above the line and then offset against the Corporation Tax liability. For a company at the 25% main rate, the net benefit after tax on the credit itself is approximately 15% of qualifying expenditure. The credit is payable in cash where it exceeds the company's tax liability, subject to a PAYE / NIC cap (broadly £20,000 plus 300% of relevant PAYE and NIC liabilities).

The R&D-intensive SME regime. A separate enhanced regime applies to SMEs (under the EU micro and SME definition) that are loss-making and R&D-intensive. R&D-intensive means qualifying R&D expenditure is at least 30% of total expenditure for accounting periods beginning on or after 1 April 2024 (40% for periods straddling that date or beginning on or after 1 April 2023). Qualifying companies get an additional 86% deduction on top of the base 100% (so 186% total deduction) and can surrender losses for a payable credit at 14.5% of the surrendered loss. The combination is worth up to £27 per £100 of qualifying R&D expenditure for the most intensive loss-making SMEs.

What counts as R&D. The statutory definition cross-references the BIS / DSIT Guidelines on the Meaning of Research and Development for Tax Purposes. R&D for tax purposes is a project that seeks to achieve an advance in science or technology through the resolution of scientific or technological uncertainty - uncertainty that competent professionals working in the field could not readily resolve from published knowledge. The work must be systematic and directed at scientific or technological advance, not merely commercial novelty. Routine improvement, market research, and adaptation of existing technology to a new customer environment do not qualify.

Qualifying costs. The main categories are staff costs (gross pay, employer NIC, employer pension), subcontracted R&D (subject to restrictions on connected-party subcontractors and on overseas subcontracting from 1 April 2024), externally provided workers (agency staff), consumables (utilities, materials transformed in the R&D process), software licences directly used in R&D, and certain cloud computing costs and data licences (from 1 April 2023). Capital expenditure on R&D is dealt with separately through R&D Capital Allowances (RDA) at 100% rather than through the main R&D credit.

Restrictions on overseas R&D. Since 1 April 2024, R&D claims have been restricted in respect of subcontracted activities performed outside the UK and overseas externally-provided workers, with narrow carve-outs where the work could not reasonably have been undertaken in the UK because of geography, environment, population or regulatory factors (eg deep sea trials, polar research, certain clinical trials). The change is intended to localise the R&D tax incentive to UK-based activity, mirroring the OECD modified nexus pressure on Patent Box.

Compliance. R&D claims now require pre-notification within six months of the accounting period end for first-time claimants, an additional information form filed before or with the CT600, and named senior officer sign-off. HMRC enforcement has tightened significantly since 2022 with a dedicated compliance team rejecting claims that lack a clear identification of the technological uncertainty and the competent professional analysis. Companies should maintain contemporaneous documentation of the R&D project rather than reverse-engineering a claim at year-end.

8. Quarterly instalments for £1.5m+ companies

Companies with taxable profits above £1.5m in an accounting period are "large" and must pay Corporation Tax in four quarterly instalments under the Quarterly Instalment Payments (QIPs) regime in regulation 4 of the Corporation Tax (Instalment Payments) Regulations 1998. The £1.5m threshold is reduced by the number of associated companies (using the same definition as for the rate thresholds in section 4) and pro-rated for short accounting periods.

Instalment dates. For a 12-month accounting period, instalments are due on the 14th day of months 7, 10, 13 and 16 measured from the start of the period. For a period to 31 December 2026, the instalments fall on 14 July 2026, 14 October 2026, 14 January 2027 and 14 April 2027. Each instalment is one-quarter of the estimated total Corporation Tax liability for the period. Underpayments accrue late-payment interest from the relevant instalment date; overpayments accrue repayment interest.

Very large companies. Companies with profits above £20m (divided by associated companies) are "very large" and pay instalments on a brought-forward schedule - the 14th day of months 3, 6, 9 and 12 measured from the start of the period. The very-large regime was introduced in 2019 to accelerate the cash collection from the largest UK companies; in practice the instalments fall before the company's accounting period has ended, requiring forward estimation.

Transitional carve-out. A company that becomes large for the first time gets a transitional one-year exemption from QIPs where its profits in the prior accounting period were below the threshold and its current-period profits do not exceed £10m (the "stepping-up" threshold). The carve-out lets a first-time large company file and pay on the standard 9 months and 1 day basis for one year before joining the QIPs regime in the second year of being large.

9. Filing deadlines and payment dates

Two distinct deadlines apply to every Corporation Tax accounting period. Payment is due 9 months and 1 day after the end of the accounting period (for non-large companies; QIPs override this for large companies). The CT600 return, with full iXBRL-tagged accounts and computations, is due 12 months after the end of the period. Tax falls due before the return is filed - companies effectively self-assess and pay the estimated liability first, then file the return three months later with any corrections.

Filing mechanics. The CT600 and accompanying iXBRL-tagged statutory accounts and tax computations must be filed online through HMRC's Corporation Tax Online service or through approved commercial software. The accounts iXBRL tagging follows the UK GAAP or IFRS taxonomy as applicable. Late filing attracts an automatic £100 penalty rising to £200 after three months. Tax-geared penalties of 10% (more than 18 months late) or 20% (more than two years late) of the unpaid tax then layer on top, and HMRC can take determinations under section 100 TMA 1970 if no return is filed.

Payment mechanics. Corporation Tax is paid by Faster Payment, BACS, CHAPS or direct debit to HMRC's Cumbernauld or Shipley collection account using the company's 17-digit Corporation Tax payslip reference (UTR plus accounting-period identifier). Payment posted on or before the due date counts as timely; cleared funds must reach HMRC's account by the due date. Late-payment interest accrues from the day after the due date at HMRC's official rate (currently around 8% per annum for periods of high Bank Rate).

Amendments. A company can amend its CT600 within 12 months of the original filing deadline (so 24 months from the end of the accounting period). After that the only routes to revise the figures are an HMRC enquiry, an overpayment relief claim under paragraph 51 schedule 18 FA 1998 (subject to a four-year limit and exclusions), or a discovery assessment by HMRC. Companies should review the CT600 and accompanying iXBRL files carefully before submission because late corrections are procedurally cumbersome.

10. Loss relief and group relief

UK Corporation Tax has an extensive loss-relief regime that allows trading losses to be carried back, carried forward, or surrendered to group members. The regime was reformed substantially from 1 April 2017 to modernise the carry-forward rules and add a deductions allowance restriction; further temporary extensions applied during COVID-19. For FY 2026 the current rules are:

Carry-back of trading losses. Section 37 CTA 2010 allows a current-period trading loss to be set against the total profits (not just trading profits) of the previous 12-month accounting period. The carry-back is the standard rule and requires no special election beyond the section 37 claim itself. The temporary 3-year extended carry-back under Finance Act 2021, capped at £2m per group per year for the excess beyond one year, applied only to losses arising in accounting periods ending between 1 April 2020 and 31 March 2022 in response to the pandemic and is no longer available.

Carry-forward of trading losses. Trading losses arising on or after 1 April 2017 are carried forward indefinitely under the post-2017 rules and can be set against the company's total profits in future periods (not only trading profits, in contrast to the pre-2017 streaming rules). Losses arising before 1 April 2017 remain locked to trading profits of the same trade under the pre-2017 streaming rules. The post-2017 carry-forward is subject to the deductions allowance restriction: only £5m per group per year of brought-forward losses can be deducted in full, with any excess restricted to 50% of profits over £5m.

Capital losses. Capital losses are a separate computational stream and can only be set against capital gains (not against trading or other income). Capital losses cannot be carried back. They carry forward indefinitely against future capital gains, subject to the same £5m deductions allowance restriction for losses arising on or after 1 April 2020 (a pre-2020 capital loss carries forward without the restriction). Non-trading loan relationship deficits and intangible fixed asset losses follow their own stream-specific rules.

Group relief. Two UK resident companies in a 75% group can surrender losses between themselves under Part 5 CTA 2010 for set-off against the recipient's profits of a corresponding accounting period. The 75% test (more than 75% of ordinary share capital, distributable profits and assets on winding-up) is stricter than the 51% associated-companies test for rate thresholds. The post-2017 regime extended group relief to brought-forward losses, subject to the same deductions allowance restriction; this was a significant easement for groups that historically had to use surplus brought-forward losses inside the single subsidiary that incurred them.

Consortium relief. Where a consortium-owned company (one with multiple corporate shareholders each holding at least 5% and at least 75% in aggregate) makes a trading loss, each consortium member can claim consortium relief proportionate to its shareholding. The rules are restrictive - the consortium-owned company must be a trading company, the consortium structure cannot exist for tax-avoidance purposes, and the consortium member must hold its interest at the time the loss arises and through to claim. Consortium relief is less common in practice than ordinary group relief.

Anti-avoidance. Loss-relief transactions can be challenged under several anti-avoidance rules: the loss-buying restrictions in Part 14 CTA 2010 (Change in Company Ownership), the targeted anti-avoidance rule (TAAR) on tax-motivated transactions, the unallowable purpose rule on loan relationships, and the general anti-abuse rule (GAAR). Purchasing a company purely to acquire its tax losses is generally blocked by the major-change-in-trade tests in section 673 CTA 2010, which deny carry-forward where there is a major change in the nature or conduct of the trade within five years of the change of ownership.

11. Capital allowances: AIA and Full Expensing

Capital expenditure on plant and machinery and certain other assets attracts capital allowances rather than a deduction against trading profit. The main UK regimes for FY 2026 are the Annual Investment Allowance (AIA), Full Expensing, the special-rate pool 50% first-year allowance, structures and buildings allowance, and the various enhanced allowances for specific categories (eg electric vehicle charge points, plant in freeports, R&D capital expenditure).

Annual Investment Allowance. The AIA gives a 100% first-year allowance on qualifying plant and machinery up to a limit of £1m per group per year. The £1m limit was made permanent from 1 April 2023 (it had previously been temporarily set at £1m or various lower amounts since 2008). The AIA is available to both incorporated and unincorporated businesses and can be claimed on most main-pool and special-rate-pool plant and machinery, but not on cars or on assets bought for leasing.

Full Expensing. From 1 April 2023, and made permanent by Autumn Statement 2023, companies (but not unincorporated businesses) within the charge to Corporation Tax can claim a 100% first-year allowance on qualifying new and unused main-pool plant and machinery without an upper limit. Full Expensing replaced the previous Super-Deduction (130% allowance) that ran from 1 April 2021 to 31 March 2023. A separate 50% first-year allowance applies to qualifying new special-rate pool expenditure (long-life assets, integral features, thermal insulation). Full Expensing does not cover cars, second-hand assets or leased assets.

Interaction. The AIA and Full Expensing overlap on main-pool expenditure but Full Expensing has no cap, so companies typically claim Full Expensing on new main-pool plant first and reserve the AIA for special-rate-pool expenditure (where the 50% FYA is less generous than the AIA's 100%). Unincorporated businesses cannot use Full Expensing and rely on the AIA alone. The deductions reduce taxable profits by 100% of the expenditure in the year of acquisition, with the disposal generating a balancing charge on subsequent sale.

Structures and Buildings Allowance. Capital expenditure on the construction or renovation of qualifying non-residential structures and buildings after 29 October 2018 qualifies for SBA at 3% per year straight-line over 33⅓ years. Historic Business Premises Renovation Allowance (BPRA) - a former 100% first-year allowance on renovation in designated disadvantaged areas - was abolished for expenditure after 31 March 2017 and no longer applies. SBA is narrower than BPRA but covers a wider geographic area and longer time horizon.

12. Frequently asked questions

What is the UK Corporation Tax rate for 2026/27?

The main Corporation Tax rate is 25% for companies with taxable profits above £250,000 in the financial year 2026 (the year beginning 1 April 2026). The small profits rate of 19% applies to profits at or below £50,000. Profits between the two thresholds are taxed at the main 25% rate but reduced by marginal relief, producing an effective rate of about 0.265 or 26.5% on each pound of profit in the £50k to £250k slice. These rates and thresholds have been in force since 1 April 2023 and were unchanged in the Autumn Budget 2025 and Spring Statement 2026.

What is the small profits rate of Corporation Tax?

The small profits rate is 19% and applies to UK resident companies (other than ring-fenced North Sea oil and gas profits) whose taxable profits are at or below £50,000 in the accounting period, with the threshold reduced proportionately for short accounting periods and for the number of associated companies. The small profits rate replaced the previous single 19% Corporation Tax rate from 1 April 2023 as part of the reform announced in Spring Budget 2021 and legislated in Finance Act 2021 schedule 1. Close investment-holding companies cannot claim the small profits rate and pay the full 25% main rate on all profits.

How does marginal relief work between £50,000 and £250,000?

For profits in the marginal band, Corporation Tax is calculated at the main 25% rate and then reduced by marginal relief equal to (Upper Limit minus Augmented Profits) multiplied by the marginal relief fraction of 3/200 (0.015), then multiplied by the ratio of taxable total profits to augmented profits. With no franked investment income, the ratio is 1 and the calculation simplifies to CT equals (Profit times 25%) minus ((£250,000 minus Profit) times 0.015). This formula produces a smooth gradient between the 19% and 25% endpoints, with each pound earned in the band attracting an effective marginal rate of 26.5%.

What is the marginal relief fraction for Corporation Tax?

The marginal relief fraction is 3/200 or 0.015 for the financial year 2023 onward, set in Finance Act 2021 schedule 1 and unchanged at the Autumn Budget 2025. The fraction is the slope of the marginal relief withdrawal. Multiplied by the £200,000 width of the marginal band, it produces £3,000 of total relief - the gap between £62,500 of main-rate tax on £250k profit and £9,500 of small-profits-rate tax on £50k. The fraction is set in legislation so that the slice rate works out to exactly 26.5%.

What is an associated company for Corporation Tax purposes?

A company is associated with another if one controls the other, or both are under common control, at any point in the relevant accounting period. Control follows the section 450 CTA 2010 test - holding more than 50% of share capital, voting rights, distributable income or assets on winding-up. The number of associated companies divides the £50,000 lower limit and £250,000 upper limit equally between all companies in the group (the company being assessed counts as one of the associated companies). Dormant companies and passive holding companies that hold only group shareholdings can be excluded from the count under specific carve-outs.

What is the Patent Box and how does the 10% effective rate work?

Patent Box is an elective UK regime that taxes qualifying profits from patented inventions at an effective rate of 10% rather than the main 25% Corporation Tax rate. The relief is delivered by an additional trading deduction calibrated to produce the 10% effective rate after applying the main rate. To qualify, the company must hold or have an exclusive licence over a qualifying patent (granted by the UK IPO, EPO or specified EEA states), must have undertaken qualifying development in respect of the patent, and must elect into the regime in writing within two years of the end of the relevant accounting period. The new "modified nexus" rules introduced from 1 July 2021 link the relief to R&D expenditure incurred by the claimant company itself.

What R&D tax relief is available to UK companies?

From 1 April 2024, R&D tax relief is delivered through a single merged Research and Development Expenditure Credit (RDEC) regime at a headline rate of 20% (worth about 15% net after Corporation Tax on the credit). A separate enhanced regime for R&D-intensive loss-making SMEs allows an 86% additional deduction (so 186% total deduction) and a payable credit at 14.5% on surrendered losses, where qualifying R&D expenditure is at least 30% of total expenditure (40% before 1 April 2024). Both regimes require the work to meet the BIS / DSIT definition of R&D - a project that seeks an advance in science or technology through the resolution of scientific or technological uncertainty.

When do quarterly Corporation Tax instalments apply?

Companies are "large" and must pay Corporation Tax in four quarterly instalments if their taxable profits exceed £1.5 million for the accounting period (reduced by associated companies and pro-rated for short periods). Instalments are due on the 14th day of months 7, 10, 13 and 16 measured from the start of the accounting period - so for a 12-month period to 31 December, payments fall on 14 July, 14 October, 14 January and 14 April. "Very large" companies (profits over £20 million) pay on a brought-forward schedule four months earlier. A company that becomes large for the first time gets a transitional one-year carve-out from the quarterly regime where prior-year profits were below the threshold.

When is Corporation Tax due and when is the CT600 filed?

For companies that are not large, Corporation Tax is due 9 months and 1 day after the end of the accounting period - so for an accounting period ending 31 March 2026, payment is due 1 January 2027. The CT600 return itself, together with iXBRL-tagged accounts and computations, is due 12 months after the end of the accounting period - so 31 March 2027 for the same period. Filing must be done online via HMRC's Corporation Tax service or via approved commercial software. Late filing attracts a £100 penalty rising to £200 after three months, plus tax-geared penalties of 10% or 20% if filing is more than 18 months late.

Can a company carry losses back to earlier accounting periods?

Yes. Trading losses can be carried back 1 year to set against the total profits of the previous 12-month accounting period under section 37 CTA 2010. A temporary 3-year extended carry-back applied to losses arising in accounting periods ending between 1 April 2020 and 31 March 2022 under the Finance Act 2021 COVID-19 measures, capped at £2 million per group per year for losses going back more than one year. Trading losses unrelieved by carry-back can be carried forward indefinitely under the post-April 2017 reform regime, subject to a £5 million per group annual deductions allowance plus 50% of profits above that. Capital losses follow a separate carry-forward-only regime.

How does group relief for Corporation Tax work?

Group relief allows a UK resident company to surrender its current-period trading losses (and certain other reliefs) to another UK resident group company that has taxable profits, so the recipient effectively offsets the surrendered loss against its own profits. The two companies must be in a 75% group (one is a 75% subsidiary of the other, or both are 75% subsidiaries of a common parent, measured by ordinary share capital, profits available for distribution and assets on a winding-up). A modified consortium relief regime applies between consortium-owned trading companies and their corporate members where the holdings are at least 5% and the consortium members between them own at least 75%. From April 2017, group relief is also available for carried-forward losses subject to the post-2017 restriction rules.

What is Full Expensing for Corporation Tax?

Full Expensing gives companies a 100% first-year allowance on qualifying new and unused main-pool plant and machinery, with effect from 1 April 2023 and made permanent by Autumn Statement 2023 (legislated in Finance Act 2024). A separate 50% first-year allowance applies to qualifying special-rate pool expenditure. Full Expensing is restricted to companies within the charge to Corporation Tax (unincorporated businesses use the Annual Investment Allowance instead). It cannot be claimed on cars, on assets bought for leasing, or on second-hand assets. The Annual Investment Allowance of £1m remains available alongside Full Expensing and is generally claimed first on special-rate expenditure where the 50% FYA is less generous.

Does Northern Ireland have a separate Corporation Tax rate?

No. The Corporation Tax (Northern Ireland) Act 2015 envisaged a devolved NI rate matching the Republic of Ireland's 12.5% rate, but the regime has never been commenced because the Treasury and Northern Ireland Executive have not agreed the fiscal terms. Northern Ireland resident companies therefore pay Corporation Tax at the standard UK rates set out in this guide. The legislation remains on the statute book and could be commenced by a future Treasury order if the fiscal framework is settled. The Windsor Framework on Northern Ireland's post-Brexit trading position does not change the Corporation Tax position.

What is the Diverted Profits Tax?

Diverted Profits Tax (DPT) is a separate tax charge introduced by Finance Act 2015 at a punitive rate of 31% (set 6 percentage points above the main Corporation Tax rate) on profits that are artificially diverted from the UK through transactions lacking economic substance or through arrangements that avoid creating a UK permanent establishment. DPT is administered separately from Corporation Tax and HMRC can issue a charging notice before any Corporation Tax position is settled. Other UK anti-avoidance powers include the General Anti-Abuse Rule (GAAR), the Targeted Anti-Avoidance Rule (TAAR) on transactions in securities, the unallowable purpose rule in loan relationships, and Disclosure of Tax Avoidance Schemes (DOTAS).

13. Related calculators and guides

• Corporation Tax calculator - model the FY 2026 main rate, small profits rate and marginal relief on any profit level.
• Capital allowances calculator - estimate AIA and Full Expensing relief on qualifying plant and machinery.
• Dividend tax calculator - the personal tax cost of extracting post-tax company profit as dividends.
• Business Asset Disposal Relief (BADR) guide - the parallel CGT regime for selling the company at exit.
• Sole Trader vs Limited Company - the structure decision that triggers Corporation Tax in the first place.
• Director's Loan Account guide - clearing balances and section 455 charges on overdrawn loans.
• Tax deadlines 2026/27 - the calendar of Corporation Tax, Self Assessment and PAYE deadlines.
• HMRC penalties guide - the penalty regime for late filing and late payment of Corporation Tax.
• Autumn Budget 2026 summary - the latest fiscal event and any further Corporation Tax announcements.
• SalaryTax methodology - how every figure on this guide is sourced and verified.