Corporation Tax

Marginal relief: the £50k–£250k band

Between the 19% and 25% rates sits a taper most calculators get wrong. Here's exactly how it works, with a live calculator running the same engine WrenTax files with.

Corporation Tax due (FY2025, 12-month period)

£22,750.00

Effective rate
22.75%
Marginal relief
£2,250.00
Rate band
Marginal relief band — between 19% and 25%

How the taper works

Since April 2023 there are two Corporation Tax rates: 19% on profits up to £50,000, and 25% on profits of £250,000 or more. Between those two limits you're charged the full 25% and then handed a reduction — marginal relief — that pulls the effective rate back down, so it climbs smoothly from 19% to 25% rather than lurching.

The effective rate in the band is above 25%

The marginal rate on each extra pound of profit between £50,000 and £250,000 is actually 26.5% — higher than the headline 25%. That's the taper doing its work, and it's why profit near £250,000 is worth modelling carefully.

The formula, worked through

Marginal relief is calculated as:

  • (Upper limit − Augmented profits) — how far below £250,000 you are,
  • × (Taxable profits ÷ Augmented profits) — the trading share, usually 1 for companies with no exempt distributions,
  • × 3/200 — the standard marginal-relief fraction.

On £100,000 of profit with no associated companies: relief is (£250,000 − £100,000) × 1 × 3/200 = £2,250. Tax is 25% of £100,000 (£25,000) minus £2,250 = £22,750, an effective rate of 22.75%. Change the profit above to watch the rate move.

Where the limits shrink

The £50,000 and £250,000 limits aren't fixed. They're divided by the number of associated companies plus one, and scaled down for accounting periods under 12 months. Two associates alone drop the upper limit to about £83,333 — enough to put a "small" company squarely in the marginal band. This is precisely what most free calculators ignore.

Common questions

What is Corporation Tax marginal relief?

Marginal relief eases the jump from the 19% small-profits rate to the 25% main rate. Between profits of £50,000 and £250,000 you're charged the main 25% rate, then given a reduction (marginal relief) that tapers the effective rate smoothly from 19% up to 25% as profits rise across the band.

What is the marginal relief formula?

Relief = (Upper limit − Augmented profits) × (Taxable profits ÷ Augmented profits) × the standard marginal-relief fraction, which is 3/200. 'Augmented profits' is your taxable profit plus certain exempt distributions. For most companies with no such distributions, augmented profits equal taxable profits.

Do associated companies or short periods change it?

The £50,000 and £250,000 limits are divided by the number of associated companies plus one, and reduced pro-rata for accounting periods shorter than 12 months. So two associated companies and a short period can push a modest profit into — or through — the marginal band.

General information about UK Corporation Tax marginal relief for FY2025. Assumes no exempt distributions and a single 12-month financial year. Not tax advice.