Corporation tax: the 26.5% band between £50,000 and £250,000
Companies with profits between the two limits pay an effective marginal rate of 26.5%, higher than the main rate. Knowing where your profit falls changes how you plan.
Corporation tax has two headline rates: 19% on profits up to £50,000 and 25% on profits above £250,000. In between, marginal relief eases a company from one to the other. The average rate rises smoothly, but each extra pound of profit in the band is taxed at 26.5%.
A single company with a 12-month accounting period and no associated companies.
Show the data
| £0k | 19% |
|---|---|
| £25k | 19% |
| £50k | 19% |
| £75k | 21.5% |
| £100k | 22.8% |
| £125k | 23.5% |
| £150k | 24% |
| £175k | 24.4% |
| £200k | 24.6% |
| £225k | 24.8% |
| £250k | 25% |
| £275k | 25% |
| £300k | 25% |
Why it matters
A company with £150,000 of profit pays £36,000 in corporation tax, an average of 24%. If it makes £10,000 of deductible spending before its year end, such as an employer pension contribution or a planned equipment purchase, it saves £2,650 in tax: more than it would at either the 19% or the 25% rate.
The limits are shared between associated companies and reduced for short accounting periods. A company with three associated companies divides them by four, so its band runs from £12,500 to £62,500.
Questions worth asking before the year end
- Where will this year’s profit land, and how much of it falls in the 26.5% band?
- Is planned spending that qualifies for capital allowances better made before the year end?
- Are director pension contributions part of the plan?
- Do associated companies reduce your limits?
This insight is general information, not advice for your circumstances. Talk to us before acting on it.