From 1 April 2023, the main Corporation Tax rate is 25% for companies with profits over £250,000. A 19% small profits rate applies to profits up to £50,000, and companies with profits between £50,000 and £250,000 receive Marginal Relief, which tapers the rate between 19% and 25%.
In September 2022, the mini-Budget proposed cancelling the planned rate rise, but in October 2022 the government reversed that plan, and the increase went ahead from 1 April 2023.
What is Corporation Tax?
UK limited companies, most public corporations, and some unincorporated associations must pay Corporation Tax on their taxable profits.
Since offshore companies engaged in the oil and gas industry are subject to a different corporation tax regime, the tax is frequently called “onshore corporation tax.”
Current Corporation Tax Rates (from 1 April 2023)
For businesses with more than £250,000, the corporation tax rate was about to rise from 19% to 25% as of April 1, 2022, under the previous administration’s proposals.
Depending on how much profit a firm produced, the corporation tax rate for businesses between £50,000 and £250,000 increased steadily from 19% to 25%. A decrease in the banking surcharge from 8% to 3% was planned, along with an increase in the tax allowed from £25 million to £100 million.
The government has cancelled this planned increase in CT. No matter how much profit a company makes, the corporation tax rate will be 19%. However, the banking surcharge will continue to be 8%, meaning that the banks will still be subject to a 27% overall tax rate.
- 19% small profits rate: profits ≤ £50,000
- 25% main rate: profits > £250,000
- Marginal Relief: profits £50,000–£250,000 (taper between 19% and 25%)
These limits are reduced for short accounting periods and divided by the number of associated companies. For example, with three associated companies (four in total), the limits drop to £12,500 and £62,500.
Banks pay the 25% main rate plus a 3% banking surcharge (with a £100m allowance), giving a 28% combined rate on in-scope profits.
The corporate tax deduction would Boost the Economy & Living Standards:
From 1 April 2023, businesses can benefit from new investment incentives:
- Full expensing (100% first-year allowance) for qualifying main-rate plant & machinery was introduced and made permanent at the Autumn Statement 2023.
- A 50% first-year allowance applies to most special-rate assets.
- The Annual Investment Allowance (AIA) remains available up to £1m, but you cannot claim both AIA and full expensing on the same expenditure.
- R&D tax relief moved to a merged scheme for accounting periods from 1 April 2024, with enhanced support for R&D-intensive SMEs.
You can use HMRC’s Marginal Relief calculator to estimate Corporation Tax when your profits fall between £50,000 and £250,000, or your year spans different regimes.
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