Corporation Tax Marginal Relief Calculator United Kingdom

This calculator applies the statutory Corporation Tax formula to your company’s figures and shows the relief, the tax due and the rate you pay on the next pound of profit. Enter your taxable total profits and the number of associated companies, and use the advanced options for a short accounting period or exempt distributions.

The two rates and the band between them

Since April 2023 the UK has had two main Corporation Tax rates. The small profits rate of 19% applies where augmented profits are at or below the lower profits limit of £50,000. The main rate of 25% applies at or above the upper profits limit of £250,000. In between, a company pays the main rate and subtracts Marginal Relief, so the effective rate rises smoothly from 19% at the bottom of the band to 25% at the top.

Without the relief, one extra pound of profit could cost a company thousands. The relief removes that cliff edge, but the rate on profit inside the band ends up higher than the main rate itself. Many directors miss this, so the tool reports the marginal rate as a separate output.

How the marginal relief calculator works

The calculation has four steps. First it works out your augmented profits: taxable total profits plus any exempt distributions from companies outside your group. Second it scales the profit limits, dividing each by the number of associated companies plus one and multiplying by the days in your accounting period divided by 365. Third it decides which band your augmented profits fall into. Fourth, if you are inside the band, it applies the relief formula.

The formula is set by statute. Relief is the marginal relief fraction of 3/200 (0.015) multiplied by the gap between the upper limit and your augmented profits, then multiplied by the ratio of taxable profits to augmented profits. That ratio only matters when you have exempt distributions; without them it is one. Your Corporation Tax is your taxable profits at the main rate, less the relief.

A worked example

A company has £120,000 of taxable profit, no associated companies, no exempt distributions and a full twelve-month period. Augmented profits are also £120,000, inside the band. The relief is 0.015 × £130,000 (the gap to the upper limit), or £1,950. Tax at the main rate would be £30,000, so the bill is £28,050, an effective rate of 23.38%, leaving £91,950 after tax.

Now change one thing at a time. With two associated companies, the limits fall to about £16,667 and £83,333; £120,000 is above the upper limit, no relief is due and the bill rises to £30,000. With a 183-day period instead, the limits fall to about £25,068 and £125,342. Or take a company with £100,000 of taxable profit that also receives £20,000 of exempt distributions: augmented profits are £120,000, the ratio is five sixths, and the relief is £1,625 rather than £1,950.

Associated companies in practice

Two companies are associated if one controls the other, or if both are controlled by the same person or persons. Control usually turns on share capital, voting power or entitlement to assets on a winding-up, and in some circumstances the rights of associates such as spouses and business partners are counted too. Dormant companies are generally ignored, as are passive holding companies that meet specific conditions.

The rule stops a business splitting itself into several small companies to keep each in the 19% band. It applies to companies anywhere in the world, so an overseas subsidiary or another company owned by the same director can reduce your limits. If you are unsure how many associates you have, count conservatively and then check, because getting this wrong is a common cause of under-declared Corporation Tax.

Planning around the 26.5 per cent band

Because each extra pound of profit between the limits costs 26.5%, timing decisions have the most effect in the band. Legitimate options include an employer pension contribution for a director, capital allowances such as the Annual Investment Allowance or full expensing on qualifying plant and machinery, and moving a discretionary cost from one accounting period to another. Raising a director’s salary reduces company profit but attracts employer National Insurance, so model the two together.

It works the other way too. If profits sit just under the lower limit, an unexpected exempt distribution or a newly associated company can pull you into the band without any change in trading. Review associated company status before the year end; it is cheaper than amending a return.

Paying and reporting

For a company outside the quarterly instalment regime, Corporation Tax is due nine months and one day after the end of the accounting period, and the CT600 return is due twelve months after the period end. Marginal Relief is claimed on the return; there is no separate election. Companies with augmented profits above £1.5 million, scaled for associates, pay by quarterly instalments, and the largest pay on an accelerated schedule.

The figures are an estimate based on the profits, associates and period you enter, using the published rates and limits. They are not tax advice and do not cover every adjustment that can affect taxable total profits. Check the position with your accountant before filing.

About This Marginal Relief Calculator

Use this marginal relief calculator to get an instant, accurate estimate. The figures follow official GOV.UK guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.