Understanding Corporation Tax Changes in 2026/27
Breaking down the latest corporation tax rates and regulations. What UK businesses need to know about the current 19% and 25% tax bands and how to optimize your tax position.
Profits up to £50,000
Profits £50k-£250k
Profits over £250,000
Two-Tier System in Effect
From April 2023 onwards, the UK operates a two-tier corporation tax system with marginal relief for companies with profits between £50,000 and £250,000.
1Understanding Marginal Relief
If your company's profits fall between £50,000 and £250,000, you'll pay a marginal rate through marginal relief. This ensures a gradual transition between the two rates rather than a cliff edge.
Example Calculations
Tax at 19%
Effective rate 24%
Tax at 25%
2Associated Companies Impact
Critical Point
The profit thresholds (£50,000 and £250,000) are divided by the number of associated companies plus one. This is crucial for business owners with multiple companies.
What Makes Companies "Associated"?
Companies are associated if:
- •One company controls another
- •Both companies are under control of the same person or group
- •Control can be through voting rights, shareholding, or directors
📊 Impact Example
If you have 2 companies (1 active + 1 associated), thresholds become:
Small profits rate threshold
Marginal relief band
Main rate applies
3Tax Planning Strategies
⏱️Timing of Income and Expenses
- • Consider deferring income to the next accounting period if near a threshold
- • Accelerate qualifying expenses before year-end
- • Review timing of dividend payments vs. retained profits
💼Utilize Capital Allowances
- • Annual Investment Allowance: 100% relief up to £1 million
- • Full expensing: 100% first-year relief on qualifying plant and machinery
- • First-year allowances for energy-efficient equipment
📈Maximize Tax-Deductible Expenses
- • Employer pension contributions (corporation tax deductible)
- • R&D tax credits for qualifying innovation
- • Patent Box regime for qualifying intellectual property
🔄Group Relief
If you have multiple companies in a group, consider:
- • Transferring losses between group companies
- • Optimizing profit distribution across entities
- • Group payment arrangements to manage cash flow
4Compliance Requirements
📅 Filing Deadlines
- →CT600: 12 months after accounting period end
- →Tax payment: 9 months and 1 day after period end
- →Quarterly: For large companies (£1.5m+ profits)
📋 Record Keeping
Maintain records for at least 6 years:
- • All business income and expenses
- • Details of business assets and liabilities
- • Supporting documentation for all claims
- • Capital allowances computations