Corporation Tax

Associated companies: when the limits shrink

Each associated company divides your Corporation Tax profit limits — so a "small" company can pay the 25% rate. Set the number below and watch the thresholds move, on the same engine WrenTax files with.

Corporation Tax due (FY2025, 12-month period)

£12,150.00

Effective rate
20.25%
Marginal relief
£2,850.00
Rate band
Marginal relief band — between 19% and 25%

How the limits divide

The 19% and 25% rates hinge on two limits: £50,000 and £250,000. Those are the figures for a standalone company. Add associated companies and both limits are divided by the number of associates plus one — you count yourself.

No associates
£50,000 lower · £250,000 upper. 19% up to £50k.
One associate
£25,000 lower · £125,000 upper. Marginal band starts at £25k.
Two associates
≈£16,667 lower · ≈£83,333 upper. The 25% rate arrives fast.

Why it catches people out

A contractor with a trading company and a small property company, or two ventures under one owner, can find a modest £60,000 profit taxed in the marginal-relief band rather than at the flat 19% they expected — purely because the limits halved. Most free calculators assume a standalone company and quietly get this wrong.

Not everything counts

Companies dormant for the whole period are ignored, and most pure holding companies that just pass dividends through are too. But a genuinely trading company under the same control counts — including one overseas.

The control test

  • One company controls the other, or both are controlled by the same person or persons.
  • Control = more than 50% of share capital, voting rights, income on distribution, or assets on a winding up.
  • Tested across the whole world, not just UK companies, and for any part of the accounting period.

Common questions

What counts as an associated company?

Broadly, another company is associated with yours if one controls the other, or both are under the control of the same person or persons. Control means more than 50% of share capital, voting rights, income on distribution, or assets on winding up. It applies worldwide, not just to UK companies.

How do associated companies affect Corporation Tax?

The £50,000 lower limit and £250,000 upper limit are divided by the number of associated companies plus one (yourself). One associate halves them to £25,000 and £125,000; two associates cut them to about £16,667 and £83,333. Lower limits mean profits reach the 25% rate — and the marginal band — much sooner.

Are dormant companies counted?

A company that is dormant throughout the accounting period is ignored. So are most non-trading holding companies that only pass dividends through. But a genuinely trading company under common control counts, wherever in the world it is based.

General information about the UK associated-companies rules from April 2023, not tax advice. The control and attribution rules have edge cases — check your specific group structure.