UK Corporation Tax Rates 2026 FAQ

UK Corporation Tax (CT) is governed by the Corporation Tax Act 2009 and the Corporation Tax Act 2010, with rates set annually by Finance Acts. The two-tier structure introduced in April 2023 continues into 2026, creating real planning consequences for UK private limited companies (Ltd). This FAQ answers the questions Gyoseishoshi (行政書士) practitioners hear most often from international founders running UK Ltds.

Q1. What are the Corporation Tax rates in 2026?

For the financial year 1 April 2025 to 31 March 2026 and announced for 1 April 2026 to 31 March 2027:

• Small profits rate (SPR): 19% on profits up to £50,000
• Main rate: 25% on profits above £250,000
• Marginal Relief: applies between £50,000 and £250,000, producing an effective rate that ramps from 19% toward 25%

Statutory basis: Finance (No. 2) Act 2023 (rates) and Corporation Tax Act 2010 Part 3A (Marginal Relief mechanics).

Reference: https://www.gov.uk/government/publications/corporation-tax-charge-and-rates-from-1-april-2022-and-small-profits-rate-and-marginal-relief-from-1-april-2023

Q2. How does Marginal Relief work?

Marginal Relief is calculated under section 18B–18N of the Corporation Tax Act 2010. The simplified formula:

MR = (Upper Limit – Augmented Profits) × (N/A) × Standard Fraction

Where:

• Upper Limit = £250,000 (divided by associated companies + 1)
• Standard Fraction = 3/200 (set in Finance Act)
• N = Total Taxable Profits
• A = Augmented Profits (Total Profits + most non-group dividends received)

For most single-entity Ltds with no dividend income, the effective rate at £100,000 profit is approximately 22.75%, at £150,000 about 23.83%, and at £200,000 about 24.42%.

Q3. What if my company has associated companies?

Under CTA 2010 s.18E, the £50,000 lower limit and £250,000 upper limit are divided by the number of associated companies plus one. Two associated companies under common control share the lower limit at £25,000 each and upper at £125,000 each. This is the post-April 2023 successor to the pre-2015 “associated companies” rules and catches family-owned groups, multi-Ltd structures, and overseas parents with multiple UK subsidiaries.

Q4. When is Corporation Tax due?

CT payment dates depend on profit level:

• “Small” companies (taxable profits ≤ £1.5M): 9 months and 1 day after the end of the accounting period
• “Large” companies (>£1.5M): quarterly instalments
• “Very large” companies (>£20M): accelerated quarterly instalments (months 3, 6, 9, 12 of the AP)

The £1.5M threshold is divided by associated companies under CTA 2010 s.279F.

The CT600 return must be filed within 12 months of the end of the accounting period under Finance Act 1998 Schedule 18 paragraph 14.

Q5. What is the Diverted Profits Tax replacement?

The Diverted Profits Tax (DPT), introduced in 2015, was effectively replaced by a new Undertaxed Profits Rule (UTPR) in line with OECD Pillar Two. From accounting periods beginning on or after 31 December 2024, large multinationals (consolidated revenue ≥ €750M) face top-up taxes under the Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT) ensuring a 15% effective rate.

For typical UK SME Ltds, Pillar Two does not apply.

Reference: https://www.gov.uk/government/publications/multinational-top-up-tax-and-domestic-top-up-tax-mtt-and-dtt

Q6. What is the Annual Investment Allowance (AIA)?

The AIA, under Capital Allowances Act 2001 sections 38A–51N, allows companies to deduct 100% of qualifying plant and machinery expenditure up to £1,000,000 per year. Permanent at this level since 2023.

This sits alongside Full Expensing (introduced from 1 April 2023, made permanent by Finance Act 2024), which allows 100% first-year deduction on main rate plant and machinery without the £1M cap, and 50% first-year allowance on special rate assets.

Q7. What about R&D tax relief?

The R&D regime was reformed from 1 April 2024 into a single merged scheme under CTA 2009 Part 13 (replacing the separate SME and RDEC schemes). The merged scheme provides:

• 20% above-the-line credit (RDEC-style)
• An enhanced support rate of 27% for “R&D intensive” loss-making SMEs (R&D expenditure ≥ 30% of total expenditure)

PAYE/NIC cap applies. Subcontracted R&D rules tightened.

Reference: https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief

Q8. How do dividends interact with Corporation Tax?

Dividends paid by a UK Ltd are not deductible for CT — they are paid out of post-tax profits. Dividends received by a UK Ltd from another UK or qualifying overseas company are generally exempt from CT under CTA 2009 Part 9A. This dividend exemption is one of the strongest features of the UK system for holding company structures.

Q9. What records must I keep?

Under Finance Act 1998 Schedule 18 paragraph 21, a company must keep records sufficient to file an accurate CT return for 6 years from the end of the accounting period (longer for capital allowances claims). Records include:

• Sales invoices
• Purchase invoices and receipts
• Bank statements
• Asset registers
• Payroll records
• Contracts and minutes

Failure to retain records is a separate penalty under FA 1998 Schedule 18 para 23 — up to £3,000 per accounting period.

Q10. What happens if I file or pay late?

Penalties under Finance Act 2009 Schedule 55 (filing) and Schedule 56 (payment):

• 1 day late filing: £100
• 3 months late: additional £100
• 6 months late: 10% of unpaid tax (HMRC determines liability)
• 12 months late: additional 10% (or up to 100% in deliberate cases)

Late payment interest accrues at HMRC’s published rate (currently 7.75% from 22 February 2026, varying with Bank of England base rate).

Q11. Does a UK Ltd with no UK trade pay UK CT?

A UK-incorporated company is UK tax resident under CTA 2009 s.14 unless treaty tie-breaker overrides. UK tax residence brings worldwide profits into UK CT, subject to relief for foreign taxes under double taxation agreements. A UK Ltd run from overseas remains UK-resident by incorporation unless central management and control plus a treaty residence article re-route residence.

Q12. Do I need an accountant or can I do CT myself?

Legally, a director can prepare and file CT600 personally. Practically, the marginal relief calculations, capital allowances optimisation, and R&D claim methodology benefit from a UK-qualified accountant. A Gyoseishoshi cannot file CT600 or act as a UK tax agent.

Conclusion — A Tax System That Rewards Planning

The 2026 UK CT regime — 19% small / 25% main / Marginal Relief between — creates significant planning opportunities for SMEs structured to keep profits below £50,000 per Ltd and use AIA, full expensing, and R&D relief.

A Gyoseishoshi cannot file UK CT returns. Scrib🐮 produces the corporate documents — board minutes approving accounts, dividend resolutions, and shareholder communications — that sit alongside every CT filing.

Create your corporation tax documentation with Scrib🐮

¥22,000/month pass for unlimited access to all 18 document types across 7 countries. Start Free Preview →

Disclaimer

Legal information, not legal advice. MmowW Scrib🐮 is operated by a licensed Gyoseishoshi (行政書士) office in Japan. We are not UK solicitors.

Sources

• Corporation Tax Act 2010: https://www.legislation.gov.uk/ukpga/2010/4/contents
• Corporation Tax rates and allowances: https://www.gov.uk/government/publications/corporation-tax-charge-and-rates-from-1-april-2022-and-small-profits-rate-and-marginal-relief-from-1-april-2023
• R&D tax relief: https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief
• Multinational Top-up Tax: https://www.gov.uk/government/publications/multinational-top-up-tax-and-domestic-top-up-tax-mtt-and-dtt