What is UK Corporation Tax Calculator?
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UK Corporation Tax is the tax paid by limited companies on their taxable profits. From April 2023, the UK operates a dual-rate system: a small profits rate of 19% applies to companies with profits up to £50,000, while the main rate of 25% applies to companies with profits above £250,000. Between £50,000 and £250,000 there is a marginal relief calculation that gradually increases the effective rate from 19% to 25%. Companies with associated companies must divide the £50,000 and £250,000 thresholds equally between all associated entities, which significantly reduces the limits for groups. The Annual Investment Allowance (AIA) allows up to £1 million of qualifying plant and machinery expenditure to be deducted fully in the year of purchase. The Research and Development (R&D) expenditure credit scheme for large companies (RDEC) provides an above-line credit of 20% on qualifying R&D costs. The merged SME and RDEC scheme took effect from April 2024. The Patent Box regime taxes profits from patented inventions at a special rate of 10%. Corporation tax returns are filed nine months after the accounting period end, with payment due nine months and one day after the year end (for non-large companies).
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Formula
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Marginal relief: Tax = Main rate × profits - Marginal Relief Fraction × (Upper limit - profits) × profits / total profits; MRF = 3/200Variable Legend
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| Symbol | Name | Unit | Description |
|---|---|---|---|
| MRF | Marginal Relief Fraction | ratio | 3/200 — fixed by HMRC for the marginal relief calculation |
How to UK Corporation Tax Calculator
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- 1Determine the company's taxable profits for the accounting period (after allowable expenses, capital allowances, and any loss reliefs)
- 2Check whether the company has associated companies — if so, divide the £50,000 and £250,000 thresholds by the number of associated companies plus one
- 3If profits are £50,000 or below: tax = profits × 19%
- 4If profits exceed £250,000: tax = profits × 25%
- 5If profits are between £50,000 and £250,000: apply the marginal relief formula: tax = (profits × 25%) - ((250,000 - profits) × profits / total profits × 3/200)
- 6Deduct any R&D tax credits, Patent Box relief, or other reliefs from the corporation tax liability
- 7File the CT600 return and pay the tax nine months and one day after the end of the accounting period (for small and medium companies)
Worked Examples
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Profit ≤ £50,000 small profits rate applies. £40,000 × 19% = £7,600.
A solo company with £40,000 profit falls within the small profits rate band and pays 19% corporation tax with no marginal relief calculation required.
Marginal relief: (£150,000 × 25%) - (3/200 × (£250,000 - £150,000) × 1) = £37,500 - £1,500 = £36,000. Effective rate = 24%.
Profits in the marginal relief band attract a blended rate between 19% and 25%. The marginal relief fraction reduces the headline 25% tax by a declining amount as profits approach £250,000.
Profit exceeds £250,000 upper limit. Flat 25% applies.
Once profits exceed £250,000 (or the divided threshold for groups), the flat 25% main rate applies with no marginal relief reduction.
With 3 associated companies, thresholds are divided by 4. The £80,000 profit now exceeds the adjusted upper limit of £62,500, so the full 25% main rate applies instead of the beneficial rates.
Real-World Applications
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Limited company owners calculating their annual corporation tax liability, representing an important application area for the Uk Corporation Tax in professional and analytical contexts where accurate uk corporation tax calculations directly support informed decision-making, strategic planning, and performance optimization
Accountants preparing CT600 returns and tax computations for clients, representing an important application area for the Uk Corporation Tax in professional and analytical contexts where accurate uk corporation tax calculations directly support informed decision-making, strategic planning, and performance optimization
Business owners deciding whether to accelerate capital expenditure to use AIA in the current year, representing an important application area for the Uk Corporation Tax in professional and analytical contexts where accurate uk corporation tax calculations directly support informed decision-making, strategic planning, and performance optimization
R&D-intensive businesses calculating their RDEC credit to reduce the effective tax rate, representing an important application area for the Uk Corporation Tax in professional and analytical contexts where accurate uk corporation tax calculations directly support informed decision-making, strategic planning, and performance optimization
Group companies planning loss surrender between members to minimise group-wide tax, representing an important application area for the Uk Corporation Tax in professional and analytical contexts where accurate uk corporation tax calculations directly support informed decision-making, strategic planning, and performance optimization
Special Cases
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Close Company Loans to Participators
{'title': 'Close Company Loans to Participators', 'body': 'If a close company (broadly, a company controlled by 5 or fewer shareholders) makes a loan to a participator (shareholder) that is outstanding 9 months after year end, the company pays a temporary corporation tax charge of 33.75% on the loan amount. This is repaid when the loan is repaid.'}
Dormant Companies
In the Uk Corporation Tax, this scenario requires additional caution when interpreting uk corporation tax results. The standard formula may not fully account for all factors present in this edge case, and supplementary analysis or expert consultation may be warranted. Professional best practice involves documenting assumptions, running sensitivity analyses, and cross-referencing results with alternative methods when uk corporation tax calculations fall into non-standard territory.
Group Relief
In the Uk Corporation Tax, this scenario requires additional caution when interpreting uk corporation tax results. The standard formula may not fully account for all factors present in this edge case, and supplementary analysis or expert consultation may be warranted. Professional best practice involves documenting assumptions, running sensitivity analyses, and cross-referencing results with alternative methods when uk corporation tax calculations fall into non-standard territory.
Extremely large or small input values in the Uk Corporation Tax may push uk
Extremely large or small input values in the Uk Corporation Tax may push uk corporation tax calculations beyond typical operating ranges. While mathematically valid, results from extreme inputs may not reflect realistic uk corporation tax scenarios and should be interpreted cautiously. In professional uk corporation tax settings, extreme values often indicate measurement errors, unusual conditions, or edge cases meriting additional analysis. Use sensitivity analysis to understand how results change across plausible input ranges rather than relying on single extreme-case calculations.
UK Corporation Tax Rates 2024-25
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| Profits Band | Rate | Effective Rate |
|---|---|---|
| Up to £50,000 | 19% (small profits rate) | 19% |
| £50,001 - £250,000 | 25% less marginal relief | 19%-25% (graduated) |
| Above £250,000 | 25% (main rate) | 25% |
| Marginal Relief Fraction | 3/200 | — |
| AIA limit | £1,000,000 p.a. | — |
| RDEC credit rate | 20% | — |
| Patent Box rate | 10% | — |
Frequently Asked Questions
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What is the UK corporation tax rate?
From April 2023, the main rate is 25% for companies with profits above £250,000. A small profits rate of 19% applies to companies with profits up to £50,000. Between £50,000 and £250,000, marginal relief applies — the effective rate gradually increases from 19% to 25%, with a particularly high effective marginal rate of 26.5% in this band. These thresholds are divided among associated companies, so groups of companies cannot multiply the small profits band.
What expenses can I deduct from corporation tax?
Allowable deductions include: staff costs (salaries, pensions, NI), premises costs (rent, utilities, rates), professional fees (accountancy, legal), travel and subsistence for business purposes, marketing and advertising, insurance, bad debts written off, and interest on business loans. Capital expenditure isn't directly deductible but qualifies for capital allowances. The Annual Investment Allowance gives 100% first-year relief on qualifying plant and machinery up to £1 million per year.
When is corporation tax due?
For most companies, corporation tax is due 9 months and 1 day after the end of the accounting period. The tax return (CT600) must be filed within 12 months of the period end. Large companies (profits over £1.5 million) must pay in quarterly installments starting in month 7 of the accounting period. Very large companies (profits over £20 million) pay in quarterly installments starting in month 3. Late payment incurs interest; late filing triggers automatic penalties.
How do R&D tax credits work for UK companies?
From April 2024, the merged R&D scheme provides an above-the-line credit. Companies can claim an enhanced deduction of 186% on qualifying R&D expenditure (effectively a 20% tax reduction on qualifying costs at the 25% rate). Loss-making R&D-intensive SMEs can claim a higher rate. Qualifying activities must seek an advance in science or technology by resolving scientific/technological uncertainty. Eligible costs include staff costs, software, consumables, and subcontracted R&D. Claims are made via the CT600 return.
How does marginal relief impact UK corporation tax calculations?
Marginal relief bridges the gap between the 19% small profits rate and the 25% main rate for companies with taxable profits between £50,000 and £250,000. This mechanism means that profits falling within this band are effectively taxed at a marginal rate of 26.5%. For instance, a company earning £100,000 profit would pay £9,500 on the first £50,000 (19%) and £13,250 on the subsequent £50,000 (£50,000 * 26.5%), resulting in a total tax liability of £22,750. The relief reduces the tax calculated at the main rate, ensuring a gradual increase in the effective tax rate as profits rise towards £250,000.
Common Mistakes to Avoid
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- !Not dividing the thresholds for associated companies, resulting in incorrect calculation of whether the small profits rate or main rate applies
- !Confusing accounting profit with taxable profit — depreciation is added back and capital allowances are substituted in the tax computation
- !Missing the 9-month and 1-day payment deadline and incurring interest and surcharges on late payment
- !Overlooking the AIA when making large capital purchases — it can dramatically reduce the tax bill in the year of purchase
- !Not claiming R&D tax credits on qualifying expenditure, particularly for tech and science companies where significant relief is available
- !Forgetting that dividends paid to shareholders are not a deductible expense — they come from post-tax profits
Pro Tip
If your company's profits are just above £50,000 or £250,000, consider whether delaying income or accelerating deductible expenses into the current period would bring profits into a lower tax band. The difference between 19% and 25% on profits in the marginal relief band is worth careful planning.
Did you know?
UK corporation tax has fallen dramatically over recent decades — it stood at 52% in 1979, then 33% in the 1990s, and reached a record low of 17% before being raised to 25% in 2023. The current two-tier system is a novel approach designed to protect small businesses while raising revenue from larger companies.
References
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