For the financial year 2026, the statutory framework maintains the tiered corporation tax system introduced in recent years. Section 13 of the Finance Act 2025 sets the main rate of corporation tax at 25%. Section 11 of the Finance Act 2026 confirms this 25% main rate continues into the financial year 2027.
The legislation also protects smaller businesses through the small profits rate (SPR). Section 14 of the Finance Act 2025 fixes the standard small profits rate at 19% for the financial year 2026.
Table: Corporation Tax Thresholds and Rates (2026/27)
| Profit Threshold | Applicable Rate | Statutory Treatment |
|---|---|---|
| £50,000 or less | 19% | Subject to the Small Profits Rate (SPR). |
| £50,001 to £250,000 | 25% less Marginal Relief | Bridges the gap between the SPR and the Main Rate. |
| Over £250,000 | 25% | Subject entirely to the Main Rate. |
“The small profits rate will apply to profits below the lower limit of £50,000 and profits exceeding the upper limit of £250,000 will be charged at the main rate.”
Statutory Steps for a Corporation Tax Calculator
When building or using a corporation tax calculator, practitioners must follow the strict chronological steps set out in Paragraph 8, Schedule 18 of the Finance Act 1998.
- Calculate the tax chargeable: Apply the relevant rate (25%) to the company’s total taxable profits.
- Give effect to reliefs: Deduct reliefs such as marginal relief for companies with small profits or double taxation relief.
- Add other assessable amounts: Include additional charges, such as section 455 tax on loans to participators.
- Deduct amounts to be set off: Subtract items like income tax borne by deduction to arrive at the final tax payable.
You must also factor in capital allowances before arriving at the taxable profits. Notably, the government has made “full expensing” permanent, allowing companies to claim a 100% first-year allowance for main rate plant and machinery expenditure.
Calculating Marginal Relief
If a company generates profits between £50,000 and £250,000, you must apply marginal relief to gradually increase the effective tax rate. Section 14 of the Finance Act 2025 sets the standard marginal relief fraction for the financial year 2026 at 3/200ths.
HMRC manuals define the formula for marginal relief as F x (U - A) x (N/A).
- F represents the standard marginal relief fraction (3/200).
- U represents the upper limit (£250,000).
- A represents augmented profits.
- N represents the taxable total profits.
The Impact of Associated Companies
You cannot apply the £50,000 and £250,000 limits blindly. The legislation requires you to divide these limits equally by the total number of associated companies.
The rules define a company as associated with another if one controls the other, or if the same person or group of persons controls both companies at any time within the preceding 12 months. Furthermore, you must proportionately reduce the lower and upper limits for short accounting periods (periods of less than 12 months).
Next steps for research: Review the specific criteria for determining “augmented profits” when calculating marginal relief, particularly how the calculator should handle exempt distributions. Additionally, examine the precise application of the associated company rules when dealing with complex group structures or overseas entities.
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