Quick answer, reviewed 11 October 2026
The standard Corporation Tax structure remains 19% for eligible small profits and 25% at the main rate, with marginal relief between the usual £50,000 and £250,000 limits. Those limits can fall for short periods and associated companies. Review genuine business expenses, qualifying capital expenditure, pension contributions and losses using your accounting period and eligibility conditions.
Start with the company's actual rate
Corporation Tax is charged on taxable profits, which can differ from the profit shown in your accounts. For the financial year starting 1 April 2026, eligible companies use the 19% small profits rate up to the lower limit and the 25% main rate above the upper limit. Marginal relief bridges the band between them. Certain companies, including close investment holding companies, do not qualify for the small profits rate or marginal relief.
The usual limits are £50,000 and £250,000 for a twelve-month period, but they are divided between associated companies and reduced for short accounting periods. The rate test also considers augmented profits, which can include particular exempt distributions. Two companies under common control may therefore have lower thresholds even if each operates a different trade. See HMRC's 2026 rates and marginal relief guidance.
A marginal relief example
Assume a UK trading company has a twelve-month period, no associated companies, taxable and augmented profits both of £200,000, and full eligibility. Main-rate tax is £50,000. Marginal relief is (£250,000 minus £200,000) multiplied by 3/200, giving £750. The tax is therefore £49,250, an average rate of 24.625%.
Under those same simple assumptions, an extra £1 of profit within the marginal band increases tax by 26.5p. This marginal rate is different from the average tax rate on all profits. Use a complete calculation when comparing expenditure or remuneration, especially where an associated company or exempt distribution changes the inputs.
Ordinary expenses need a business purpose
Review costs incurred wholly and exclusively for the business, such as staff costs, rent, accountancy fees, business insurance and eligible software subscriptions. Separate private costs, client entertaining and other disallowable amounts. An invoice and payment prove that money was spent; they do not by themselves establish deductibility.
Year-end planning should reflect the commercial facts and the applicable accounting rules. Simply delaying an invoice does not necessarily move the underlying revenue into a later period. Before committing cash, compare the cost with the expected tax reduction: spending £1 solely to save part of that amount is not a saving for the business overall.
Full expensing and the Annual Investment Allowance
Full expensing can give companies a 100% first-year deduction for qualifying new and unused main-rate plant and machinery. A separate 50% first-year allowance can apply to qualifying new and unused special-rate assets. Cars and other excluded expenditure require different treatment. Second-hand assets do not qualify for these two allowances, although another relief may be available. Read HMRC's eligibility conditions.
The Annual Investment Allowance is generally up to £1 million for qualifying plant and machinery and can cover eligible second-hand equipment. Cars are excluded; groups and some related businesses share an allowance, and short periods can affect the available amount. AIA can also be useful for special-rate assets. Compare the allocation before choosing an allowance. See the AIA rules.
For illustration, £100,000 of equipment qualifying for a full deduction reduces current tax by £25,000 if the deduction falls wholly in the 25% band and there are sufficient taxable profits. That is an illustrative calculation, not an unconditional refund. Disposal of assets previously given first-year relief can create a balancing charge.
Capital allowance changes already effective in 2026
A new 40% first-year allowance applies to qualifying expenditure from 1 January 2026, with conditions different from full expensing. Main-pool writing-down allowances fell from 18% to 14% from 1 April 2026 for Corporation Tax. Periods spanning the change use a hybrid rate. New assets bought for leasing may merit review under the 40% rules; cars and second-hand assets are excluded from that allowance.
These changes are already effective, rather than merely a future Budget proposal. Check the asset type, acquisition date and use before claiming. Sources: HMRC's measure and Finance Act 2026.
R&D relief requires technical evidence
For accounting periods beginning on or after 1 April 2024, eligible companies generally consider the merged R&D expenditure credit or enhanced R&D intensive support. The merged credit is 20% of qualifying costs and is taxable; a 25% tax assumption gives a 15% benefit before payment restrictions and other adjustments. Routine software configuration or ordinary product development does not automatically qualify.
Document the advance in science or technology, the uncertainty and the competent professionals involved. Contracted work, overseas expenditure, notification requirements and the additional information form need separate attention. See our R&D guide and HMRC's scheme guidance.
Employer pensions and losses
Employer pension contributions may be deductible where the business-purpose rules are satisfied; relief normally depends on payment. The standard personal pension annual allowance is £60,000, counting pension inputs from all sources. Tapering, the money purchase annual allowance and carry-forward rules can change the individual's position. The annual allowance is not an automatic company spending entitlement. See HMRC's allowance guidance.
Qualifying trading losses can generally be used against current profits and then carried back against the previous twelve months, subject to conditions. Terminal trading losses can have a three-year carry-back route; the temporary pandemic extension is not a standing three-year rule for all current losses. Carried-forward relief has its own restrictions. See trading loss guidance and terminal loss guidance.
A useful pre-year-end review brings together forecasts, group structure, capital purchases, remuneration and cash needs. Record the assumptions and revisit them if the profit forecast changes. This creates a supported tax calculation rather than relying on a headline rate alone.
Frequently asked questions
Does every UK company pay 25% Corporation Tax?
No. Eligible companies can pay the 19% small profits rate or benefit from marginal relief. Profit limits are reduced for associated companies and short periods, and some companies are excluded.
Can second-hand equipment qualify for full expensing?
No. Full expensing and the 50% first-year allowance require qualifying new and unused assets. Eligible second-hand plant and machinery may instead qualify for the Annual Investment Allowance.
What is the main-pool writing-down rate in 2026?
The main-pool rate is 14% from 1 April 2026 for Corporation Tax. Accounting periods spanning that date use a hybrid rate.
Reviewed against the linked primary sources on 11 October 2026. This guide gives general information; the tax treatment depends on your circumstances and the relevant tax or accounting period.
For support with your records and calculations, see our corporation tax service or contact Angel Accountancy to discuss your requirements.