Corporation tax explained

Corporation tax is the tax a limited company pays on its profits — and it’s where the business’s money first gets taxed, before you take anything out personally. Getting the rate right matters because, unlike income tax bands, the UK corporation tax rate varies with profit level.

The rates for 2026/27

• Up to £50,000 profit — 19%
• £50,000 to £250,000 — a tapered rate via marginal relief
• Over £250,000 — 25%

Example. A company with £30,000 profit pays 19% — about £5,700. One with £500,000 pays 25% — £125,000. A company at £120,000 profit falls in the middle band, where marginal relief lifts the effective rate above 19% but below 25%.

The limits scale with associated companies

The £50,000 lower limit and £250,000 upper limit are divided between associated companies — companies under common control. Two associated companies get £25,000 and £125,000 each. Group structures often mean the 19% rate is only available to genuinely small businesses.

The full picture: profit → company tax → personal tax

Corporation tax is only the first tax. When you take money out of the company — as salary or dividends — it’s taxed again on your personal return. The classic trade-off:

• Salary — a business expense (reduces company profit), but taxed at income tax + NI personally
• Dividends — paid out of after-tax profits, but taxed at the lower dividend rates

That’s why the corporation tax calculator and the dividend tax calculator belong side by side.

See the maths

Use the corporation tax calculator for your exact bill including marginal relief, and the dividend tax calculator for what you keep when taking the money out.