To calculate your small business Corporation Tax, you must determine your company’s taxable profit rather than your total revenue, and then apply the correct tiered tax rate. For the 2026/27 tax year, profits up to £50,000 are taxed at 19%. Profits over £250,000 are taxed at 25%.
Anything in between gets marginal relief, which brings the overall effective tax rate down from 25% to somewhere between 19% and 25%.
So a company with £40,000 profit simply pays £40,000 x 19% = £7,600.
This guide walks you through exactly how to calculate small business corporation tax for the 2026/27 tax year.
Let’s break it down!
What Is Corporation Tax and Who Pays It?
Corporation Tax is a tax that limited companies in the UK must pay on their profits from trading, investments, and selling assets. If your company made £100,000 in sales but spent £70,000 running the business, you’re only taxed on the £30,000 left over, not the £100,000.
You need to pay corporation tax if you run:
- A UK limited company
- A foreign company carrying on a trade or business through a UK permanent establishment, or otherwise within the UK.
- A club, co-operative or other unincorporated association (in some cases)
Sole traders and ordinary partnerships don’t pay corporation tax. They pay income tax through self assessment instead. This is important to know before getting into how to calculate small business corporation tax.
What Are Corporation Tax Rates for 2026/27?
For the 2026/27 tax year, the UK Corporation Tax rates range from 19% to 25%. These rates are important to understand if you want to work out small business corporation tax.
The table below breaks down the thresholds and rates that you need to know to make a small company corporation tax calculation today.
| Rate Type | Rate | Taxable Profit |
| Small profits rate | 19% | £0 to £50,000 |
| Main rate | 25% | Over £250,000 |
| Marginal relief applies | Between 19% and 25% | £50,001 to £250,000 |
The Small Profits Rate (19%)
If your company makes a profit of £50,000 or less, things are relatively simple. You fall under the Small Profits Rate. To calculate tax for small companies in this bracket, you just multiply your profit by 0.19. For example, a profit of £40,000 means a tax bill of £7,600.
The Main Rate (25%)
Once your profit goes over the £250,000 mark, you hit the Main Rate. This means a flat 25% tax is applied to your entire taxable profit, not just the amount over the threshold.
The Tricky Middle: Marginal Relief
What happens if you make £100,000? You do not automatically jump straight to 25% on everything, but you do not stay at 19% either. HMRC gives you what is called “Marginal Relief”.
Essentially, your tax rate gradually scales up from 19% to 25% the closer you get to £250,000. Interestingly, the maths behind it means that any profit you earn inside this middle band is effectively taxed at a higher rate of 26.5% until it balances out. You can estimate this using the Marginal Relief calculator provided on GOV.UK.
This makes it incredibly vital to get an accurate small business corporation tax estimate before the year ends.
Note: These thresholds assume your company has a 12-month accounting period and no associated companies. If either of those doesn’t apply to you, the £50,000 and £250,000 limits get reduced proportionally.
How to Calculate Small Business Corporation Tax: Step by Step
Here are the exact steps you need to follow to estimate corporation tax for small businesses:
Step 1: Work Out Your Accounting Profit
To calculate small business corporation tax, you need to add up all earnings from sales, fees, and investments during your company’s accounting period. Then take away your day-to-day running costs. Rent, wages, stock, software subscriptions, insurance, accountancy fees, all of it. What’s left is your accounting profit before tax.
Step 2: Verify Your Allowable Expenses
You need to ensure the costs already deducted in Step 1 meet HMRC rules. You can only keep deductions for day-to-day costs incurred wholly and exclusively for business operations
Step 3: Add Back the Things You Cannot Claim
Some costs you’ve put through the business aren’t allowed for tax purposes, even though they’re perfectly legitimate business expenses on paper. Client entertaining is the classic one. So is depreciation. So in order to calculate small business corporation tax correctly, you must add back “disallowable expenses” to your profit figure.
Step 4: Deduct Capital Allowances
If you bought equipment, a van, computers, tools, or machinery, you can usually claim the Annual Investment Allowance (AIA), which lets you deduct the full cost from your profits in the year you bought it, up to £1,000,000. Worth noting that from April 2026, the main rate writing-down allowance for assets that don’t qualify for AIA dropped to 14%, so it’s worth checking which pool your assets sit in if you want to calculate small business corporation tax correctly.
Step 5: Apply the Correct Rate
Once you’ve got your final taxable profit figure, that’s when you apply the small business corporation tax rates.
- Up to £50,000: 19%
- Between £50,000 and £250,000: 25%, less Marginal Relief if eligible
- Above £250,000: 25%
If you want to use a small business corporation tax calculator, you can use our corporation tax calculator to calculate small business corporation tax.
Example: To Calculate Small Business Corporation Tax
Let us look at a small consulting firm with £90,000 in annual turnover.
- Gross Income: £90,000
- Allowable Expenses (salaries, software, travel): £35,000
- Capital Allowances (new laptops): £5,000
- Net Taxable Profit: £50,000 (£90,000 minus £40,000)
Because the net taxable profit is exactly £50,000, the company falls into the 19% small profits rate.
Corporation Tax Due = £50,000 × 19% = £9,500
If that same company made £60,000 in taxable profit, it would enter the Marginal Relief band. Working out exact tax amounts in that band requires careful adjustments.
How Do Associated Companies Affect Corporation Tax Thresholds?
In the UK, associated companies are businesses linked through shared ownership or common control. Under the rules introduced by HMRC, having associated companies drastically alters how you calculate small business corporation tax because your tax thresholds are divided by the total number of associated companies, including the company being assessed.
For example, if you have one associated company (making two in total), the thresholds get halved to £25,000 and £125,000 each
£50,000 ÷ 2 = £25,000
£250,000 ÷ 2 = £125,000
Similarly, having two associated companies means the limits are shared between three businesses in total and are divided by three, and so on.
When Do You Need to Pay Corporation Tax?
Corporation tax deadlines depend on your company’s accounting year-end.
- Payment Deadline: 9 months and 1 day after your accounting period ends.
- Filing Deadline (CT600 Return): 12 months after your accounting period ends.
For example, if your financial year ends on 31 March 2027, you must pay your corporation tax by 1 January 2028 and submit your CT600 tax return by 31 March 2028.
Larger companies with profits over £1.5 million (adjusted for associated companies) pay in instalments rather than one lump sum. Most small businesses won’t hit this threshold.
The Bottom Line
If you want to calculate small business Corporation Tax, don’t start by multiplying your turnover or accounting profit by 19% or 25%.
Start with the accounts.
Then adjust the accounting profit for tax purposes, consider allowable expenses, capital allowances, losses and other relevant items, and work out the company’s taxable profit. After that, check which Corporation Tax rate and Marginal Relief rules apply.
In short, get the profit figure right, apply the correct rate, and you’ve calculated your small business corporation tax properly.
How Accotax Can Help
At Accotax, we handle Corporation Tax calculations for small businesses across the UK.
Our small business accountants help you track business income, review expenses, prepare statutory accounts, complete Corporation Tax Returns and estimate your Corporation Tax bill before the deadline..
Get in touch today to find out how we can support your business growth!
Disclaimer: All the information provided in this article on “How To Calculate Small Business Corporation Tax In The UK“, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.
