A guide to the various corporation tax rates over the past few years and an overview of the previous marginal relief calculation.

A freeview 'At a glance' guide.

Company tax rates

		2023-24		2017/18 to  2022/23	2015/16 to 2016/17	2014/15	2013/14	2012/13	2011/12	2010/11
Rate	Profits bands £	Effective %	Profit bands £	Effective %	Effective %	Effective %	Effective %	Effective %	Effective %	Effective %
Small	0-50,000	19%	0 - 300,000	19	20	20	20	20	20	21
Marginal	50,001-250,000		300,001 - 1,500,000	19	20	21.25	23.75	25	27.5	29.75
Main	>250,000	25%	>1,500,000	19	20	21	23	24	26	28
Fraction		3/200		n/a	n/a	1/400th	3/400ths	1/100th	3/200ths	7/400ths

Notes

The company tax year starts on 1 April.

The main rate of company tax for all non-ring fence profits is 19% for Financial Years 2017-2022.

From 1 April 2023:

• The main rate of Corporation Tax will increase from 19% to 25%.
• The small company rate (19%) will apply to single companies with profits of less than £50,000.
• Marginal relief will be given for companies with profits between £50,000 (lower limit) and £250,000 (upper limit)
• The upper and lower limits of the new chargeable profits bands will be apportioned according to the number of companies which are associated for corporation tax.
• The thresholds for marginal relief will also be apportioned for for short accounting periods.

From 1 April 2023: the marginal relief calcluation

Marginal relief is given by reducing charge to Corporation Tax (25%) by the following:

(U-A) x N/A x F

F = Standard marginal relief fraction (3/200)

U = Upper limit (£250,000*)

A = Augmented profits

N = Taxable total profits

Augmented profits are "taxable total profits" and any exempt distributions received companies that are not 51% subsidaries or held through a consortium.

*Upper and lower limits are reduced where:

1. There is a short period of account.
2. There are associated companies; by dividing the limits by one plus the number of associated companies, which the company has at any time during its accounting period.

Up to 31 March 2015: the marginal relief calculation

Marginal relief is given by: 

(Upper limit – profits) x basic profits x fraction
                                           profits

1. The upper limits were £300,000 or £1,500,000.
2. Basic profits are the companies profits.
3. Profits are basic profits + franked investment income, which is grossed up by 100/90.
4. Group dividends are from 51% groups (51% + subsidiaries or fellow 51% + subsidiaries of a parent).
5. The fraction depends upon the financial year applies, and when a company’s accounting period spans two financial years it may be necessary to time apportion the profits. This does not affect associates unless there is a change in the relevant bands.

Upper and lower limits are reduced where:

1. There is a short period of account.
2. There are associated companies, by dividing the limits by one plus the number of associated companies, which the company has at any time during its accounting period.

Alternatively, you can calculate Corporation Tax on slices of profit using marginal rates: 

• The first £300,000 of profit is taxed at the small company rate (20%).
• The next £1,200,000 is taxed at the marginal rate (variable).
• Profits over £1,500,000 are taxed at the main rate (24%).

Basic example

For a company with a 31^st March 2012 year-end and profits of £500,000 and no associated companies and no franked investment income, the marginal relief calculation is as follows:

Tax @ 26% on £500,000            =          130,000
Less:
Marginal relief

(1,500,000 – 500,000) x 3/200 =          (15,000)

Tax due                                     =          115,000

Alternatively, you can do this calculation as follows:

First 300,000 @ 20%                 =            60,000

Next £200,000 @ 27.5%           =            55,000

Tax due                                    =          115,000

What is the marginal rate?

If small company’s rate is 20% and the main rate is 26%

300,000 x 20%              =  60,000

1500,000 x 26%            = 390,000

1200,000 x X%              = 330,000

330,000/1,200,000         =27.5% marginal rate

 

If small company’s rate is 20% and the main rate is 25%

300,000 x 20%              =  60,000

1500,000 x 24%            = 360,000

1200,000 x X%              = 300,000

300,000/1,200,000         =25% marginal rate

What is the marginal rate fraction?

The difference between the main rate and the marginal rate expressed as a fraction. 

So 29.75% - 28% = 1.75% = 7/400 

28.75% - 27% = 1.75% = 7/400 

27.5% - 26% = 1.5% = 3/200

26.25% - 25% = 1.25% = 1/80

 

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