Wenzo guidesHow are the rates set?
Since 1 April 2023 the rate of Corporation Tax depends on your company’s taxable profits for the accounting period. GOV.UK publishes the current rates:
- £50,000 or less: the 19% small profits rate.
- £50,001 to £250,000: the 25% main rate, reduced by Marginal Relief.
- Over £250,000: the 25% main rate.
Can the £50,000 and £250,000 limits change?
Yes. The limits are reduced for an accounting period shorter than 12 months, and they are divided between associated companies. For example, if your company has 3 associated companies, the limits are divided by 4, so they become £12,500 and £62,500.
Non-UK resident companies and close investment holding companies cannot claim Marginal Relief.
Want your Corporation Tax worked out for you?
We prepare your accounts and Company Tax Return, bookkeeping included, and show you the figures before anything is filed. It’s £199 for turnover up to £90,000, or £499 for turnover above £90,000.
See our pricesHow does Marginal Relief work?
Between the two limits, tax is worked out at 25% and then reduced by Marginal Relief, so the effective rate rises gradually from 19% to 25%. The standard fraction is 3/200 of the difference between the upper limit and your profits, as HMRC explains in its Marginal Relief guidance.
- Work out tax on the taxable profit at 25%.
- Take your profits away from the upper limit, and multiply the difference by 3/200. That is your Marginal Relief.
- Take the Marginal Relief off the tax at 25%. What is left is the Corporation Tax due.
As an illustrative example, take £100,000 of taxable profit over a 12-month period with no associated companies. Tax at 25% is £25,000. Marginal Relief is (£250,000 − £100,000) × 3/200 = £2,250. That leaves £22,750 of Corporation Tax due, an effective rate of 22.75%.
What if my accounting period spans 1 April?
Rates apply by financial year, which runs from 1 April. If the rates changed during your accounting period, the profit is split by the number of days in each financial year and taxed at each year’s rate.
How does this connect to paying myself?
The way you take money out of the company affects its tax. Our guides to salary or dividends and director’s loan accounts cover both, and accounts and tax returns explained shows where the tax fits in your year.
How can Wenzo help?
Our £199 and £499 packages work out the taxable profit, apply the right rate and any Marginal Relief, and prepare the CT600 alongside your annual accounts, with bookkeeping included. You approve the figures before we file.
See the Corporation Tax return service, check when the tax is due in the CT600 deadline guide, or call us on 020 7123 9335.
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