Corporation Tax Calculator: Small Profits Rate, Main Rate and Marginal Relief

If you run a limited company, corporation tax is usually the biggest tax the business pays. Since April 2023 there have been two rates, with a band of marginal relief between them, which makes working out the bill a little more involved than simply applying one percentage. The good news is that once you understand the steps, it's straightforward.

Our Corporation Tax Calculator works out the tax on your company's taxable profits, including marginal relief. This guide explains the rates, shows how marginal relief is calculated and covers the deadlines you need to know.

Corporation tax rates

These limits are for a single company with a 12-month accounting period. If your company has associated companies, such as others controlled by the same person, the limits are divided between them. They're also reduced proportionally for accounting periods shorter than 12 months.

How marginal relief works

Companies with profits between £50,000 and £250,000 first work out tax at the main rate of 25%. They then deduct marginal relief using this formula:

Marginal relief = (£250,000 − taxable profits) × 3/200

The 3/200 is known as the standard fraction. The relief is largest just above £50,000 and shrinks to nothing at £250,000. The effect is a smooth climb from an effective rate of 19% to 25%.

One thing to be aware of: within the marginal relief band, each extra pound of profit is taxed at an effective 26.5%. That's because you pay 25% on it and lose 1.5p of relief. It matters when you're deciding whether to make a pension contribution or another deductible payment before the year end.

How to use the calculator (Corporation Tax Calculator)

1. Enter your company's taxable profits for a 12-month accounting period.

Taxable profits are your accounting profit adjusted for tax purposes. Add back things that aren't deductible, like client entertaining and accounting depreciation, then deduct capital allowances. The calculator shows the corporation tax, your effective rate and the profit left after tax.

A worked example on £100,000

With the calculator's default figure of £100,000 of taxable profits:

1. Tax at the main rate: 25% × £100,000 = £25,000
2. Marginal relief: (£250,000 − £100,000) × 3/200 = £2,250
3. Corporation tax: £25,000 − £2,250 = £22,750

That's an effective rate of 22.75%, leaving £77,250 of profit after tax.

Here's how the bill looks at other levels:

Deadlines

• Payment: corporation tax is normally due 9 months and 1 day after the end of your accounting period. Large companies with profits over £1.5 million pay in instalments.
• Company Tax Return (CT600): due 12 months after the end of the accounting period.
• Accounts: filed with Companies House, normally 9 months after the year end for private companies.

Note that the payment is due before the return. Many companies file both at the same time to avoid confusion.

Reducing your corporation tax legally

Common ways companies reduce their taxable profits include:

• Capital allowances, such as the Annual Investment Allowance, on equipment, machinery and vans.
• Employer pension contributions for directors and staff, which are usually deductible.
• Research and development relief, if you're working on qualifying innovation projects.
• Claiming all allowable business expenses, from software to professional fees.

Timing matters too. Spending on genuine business needs before the year end can bring the deduction forward, but don't spend money just to save tax.

Taking money out of the company

Corporation tax is paid on the company's profits. When you take money out as a director, you may pay more tax personally. Salaries are deductible for the company but attract income tax and National Insurance. Dividends are paid from profits after corporation tax and are taxed at dividend rates. Our Dividend Tax Calculator shows the personal side, and the Self-Employed Tax Calculator helps if you're comparing a company with working as a sole trader.