The rates
Corporation tax is charged on a company's taxable profits for each accounting period. For financial years starting 1 April 2023 up to and including the one starting 1 April 2026, the rates are:
| Taxable profits | Rate |
|---|---|
| £50,000 or less | 19% (small profits rate) |
| Between £50,000 and £250,000 | 25%, reduced by marginal relief |
| More than £250,000 | 25% (main rate) |
The £50,000 and £250,000 limits are divided between associated companies: a company with three associated companies divides both by four. They are also reduced in proportion for an accounting period shorter than 12 months.
Marginal relief, in one calculation
Between the two limits, you work out tax at 25% and then take off marginal relief. For a 12-month period with no associated companies and no dividends from other companies, marginal relief is 3/200 × (£250,000 − profits).
The effect is that each pound of profit between £50,000 and £250,000 is taxed at 26.5%, while the average rate on the whole profit rises gradually from 19% to 25%.
| Step | Amount |
|---|---|
| Tax at 25% on £120,000 | £30,000 |
| Marginal relief: 3/200 × (£250,000 − £120,000) | −£1,950 |
| Corporation tax due | £28,050 |
| Average rate on the whole profit | 23.4% |
| Set aside each month (£28,050 ÷ 12) | £2,337.50 |
HMRC's marginal relief guidance has a calculator and covers associated companies and dividends. Use it, or ask your accountant, when your situation is not this simple.
Taxable profit is not your bank balance
The tax is charged on taxable profits, which are not the same as the profit in your management accounts. Some costs, such as client entertaining, are not deductible. Equipment is usually deducted through capital allowances rather than depreciation. Losses from earlier years can reduce the figure. And none of it depends on how much cash is in the bank. See profitable but short of cash for why the two differ.
A practical rule: set aside from your profit, not your sales, and use the rate for your band. At profits up to £50,000 that is 19%. Between £50,000 and £250,000, put aside 26.5% of each pound above £50,000 on top of £9,500 for the first £50,000 (this gives the same £28,050 in the example). Above £250,000, 25%.
When it is due
Most companies pay 9 months and 1 day after the end of their accounting period. A year ending 31 March 2027 is due on 1 January 2028. The company tax return is due later, 12 months after the end of the period, so the payment comes first.
Companies with taxable profits above £1.5 million a year pay in quarterly instalments, starting during the accounting period itself, and above £20 million earlier still. The corporation tax deadline tool works out your dates.
That gap between earning the profit and paying the tax is up to 21 months. It is the reason a corporation tax bill so often arrives as a surprise.
Making the set-aside routine
- Open a separate savings account for tax and treat its balance as HMRC's money.
- Each month, after the management accounts are done, estimate the year's profit so far and work out the tax on it.
- Transfer the difference between that figure and what is already set aside.
- Review it when your accountant prepares the year-end figures, and correct the balance.
- Put the payment in your cash flow forecast in the week it falls due, so the forecast shows the balance after tax.
HMRC pays interest if you pay corporation tax early, usually from the date you pay up to the deadline, and the earliest date it pays from is 6 months and 13 days after the start of the accounting period. The interest is taxable.
Where Cadence fits
Cadence puts your corporation tax, VAT and PAYE payments into the forecast on their due dates, so the weeks around a tax payment show the balance you will really have. You can try it free for 14 days.
This guide is general information, not tax advice. Rates as published on GOV.UK in October 2026; check them before you rely on them.