Corporation Tax Rates and Marginal Relief: What UK Directors Must Know

Introduction: Navigating Corporation Tax in 2025

Corporation Tax is one of the most important obligations for UK limited companies, yet it is also one of the areas where directors make the most mistakes. With recent changes to Corporation Tax rates and the reintroduction of marginal relief, it’s vital for directors to understand how profits are taxed and when relief applies.

In this article, we break down HMRC’s rules on Corporation Tax, explain how marginal relief works, and outline the key deadlines and penalties every director must keep in mind.

Corporation Tax Rates Explained

Corporation Tax applies to a company’s taxable profits after allowable expenses are deducted. From April 2023, the system moved from a flat rate to a tiered structure:

• Profits up to £50,000 → taxed at 19% (small profits rate).

• Profits over £250,000 → taxed at 25% (main rate).

• Profits between £50,000 and £250,000 → marginal relief applies, tapering the rate between 19% and 25%.

Important: These thresholds are reduced if your company has associated companies or if the accounting period is shorter than 12 months.

This approach ensures smaller companies benefit from a lower rate, while larger companies contribute more.

Marginal Relief Explained

Marginal relief smooths the jump between the small profits rate and the main rate of Corporation Tax.

• Who qualifies? Companies with profits between £50,000 and £250,000 (adjusted for associated companies).

• How it works: The relief reduces the effective tax rate gradually, meaning the closer your profits get to £250,000, the higher the percentage you’ll pay.

Example

A company with £120,000 in taxable profits will not pay the full 25%. Instead, marginal relief reduces the effective rate to somewhere between 19% and 25%.

HMRC provides an online tool to help companies work out their exact liability: Marginal Relief Calculator.

Filing Deadlines & Penalties

Directors must ensure Corporation Tax is filed and paid on time:

• CT600 filing deadline: 12 months after the end of the accounting period.

• Corporation Tax payment deadline: 9 months and 1 day after the end of the accounting period.

Penalties:

• £100 fine for late filing.

• Additional penalties after 3 and 6 months.

• Daily penalties for persistent non-compliance.

• Interest charged on late payments.

Missing deadlines not only results in financial penalties but can also trigger HMRC scrutiny of your company’s accounts.

Why Expert Support Matters

Corporation Tax rules are complex — especially for directors managing growing companies whose profits fluctuate between thresholds. Misinterpreting marginal relief, overlooking associated companies, or missing a filing deadline can cost thousands in penalties.

At Wexley & Associates, we help directors:

• Accurately calculate Corporation Tax liabilities.

• Apply marginal relief correctly.

• File CT600 returns on time.

• Develop tax-efficient strategies to minimise exposure.

Get Your Corporation Tax Right the First Time

Corporation Tax isn’t just another formality — it’s a legal obligation that can impact your company’s bottom line. With expert planning, you can stay compliant, benefit from reliefs, and focus on growth.

Contact Wexley & Associates today for proactive Corporation Tax support.

References

• HMRC: Corporation Tax rates and reliefs

• HMRC: Corporation Tax marginal relief guidance

• HMRC: Marginal Relief Calculator

• Related Wex Insider article: Limited Companies: What Every UK Director Needs to Know