Corporation Tax is a levy imposed on the profits of companies and other organisations in the UK. This tax is applicable to both resident companies and foreign companies with UK branches or offices. The current rate of corporation tax is determined by the government's fiscal policies and the appliedcan vary depending on the size and profit levels of the company.
Companies must calculate their taxable profits, which include trading income, investments, and chargeable gains. Deductible expenses, such as operating costs, interest payments, and certain capital allowances, reduce the taxable profit. Companies are required to file a corporation tax return annually, typically within 12 months after the end of their accounting period.
Corporation Taxes are crucial for government revenue, funding public services like healthcare, education, and infrastructure. Compliance is enforced by HM Revenue and Customs (HMRC), with penalties for late or incorrect filings.
Corporation tax rates in the UK vary based on the size and profits of a company. Historically, the main rate of corporation tax has been set uniformly, but recent changes introduced a tiered system to differentiate between small and large enterprises.
As of April 2024, the "Main rate" of corporation tax is 25% for companies with profits over £250,000. This rate applies to the majority of large businesses operating in the UK. For smaller companies with profits up to £50,000, a lower rate, known as the "Small profits rate", of 19% is applied, easing the tax burden on small businesses and startups. Companies with profits between £50,000 and £250,000 face a tapered rate, known as Marginal Relief, which gradually increases from 19% to 25%, ensuring a smoother transition as profits rise.
Find out what current corporation tax rate applies for your business by using our handy corporation tax calculator above.
Marginal Relief is a tax relief mechanism designed to help small and medium-sized enterprises (SMEs) in the UK manage the transition between the small profits rate and main rate of corporation tax. This relief applies to companies with profits between £50,000 and £250,000, allowing them to pay a rate of tax that increases gradually rather than jumping directly from the lower rate of 19% to the main rate of 25%.
The purpose of Marginal Relief is to smooth out the effective tax rate for businesses whose profits are in the middle range. This ensures that companies don't face a sudden increase in their tax burden as their profits grow.
- Corporation Tax rates and allowances - GOV.UK
- Marginal Relief for Corporation Tax - GOV.UK
