Corporation Tax Calculator: How to Work Out What You Owe

Every UK limited company that makes a profit needs to work out how much corporation tax it owes. The calculation depends on your company's taxable profits, the applicable tax rate, and whether you qualify for marginal relief.

This guide explains how corporation tax is calculated, walks through worked examples at each rate, and covers the factors that affect your bill — including associated companies and short accounting periods.

The Corporation Tax Rates

From 1 April 2023, two rates of corporation tax apply in the UK:

Taxable Profits	Rate
£50,000 or less	19% (small profits rate)
£250,001 and above	25% (main rate)
£50,001 to £250,000	Tapered — marginal relief applies

Source: GOV.UK — Corporation Tax rates

These thresholds are reduced proportionately for short accounting periods and divided by the number of associated companies. Both adjustments are explained below.

Simple Corporation Tax Calculations

If your profits fall clearly within one rate band, the calculation is straightforward.

Example 1 — Small profits rate

Taxable profits: £35,000
Rate: 19%
Corporation tax: £35,000 × 19% = £6,650

Example 2 — Main rate

Taxable profits: £400,000
Rate: 25%
Corporation tax: £400,000 × 25% = £100,000

In both cases, the rate applies to the full profit figure — there is no stepped calculation within a single band.

Marginal Relief Calculation

For profits between £50,000 and £250,000, marginal relief reduces your effective tax rate. You pay the main rate of 25% on all profits, then deduct the marginal relief amount.

The marginal relief fraction is 3/200 (set in UK legislation).

Formula:

``` Marginal Relief = (£250,000 − Taxable Profits) × 3/200 ```

Example 3 — Marginal relief

Taxable profits: £150,000
Tax at 25%: £37,500
Marginal relief: (£250,000 − £150,000) × 3/200 = £100,000 × 0.015 = £1,500
Corporation tax payable: £37,500 − £1,500 = £36,000
Effective rate: approximately 24%

Example 4 — Near the lower threshold

Taxable profits: £60,000
Tax at 25%: £15,000
Marginal relief: (£250,000 − £60,000) × 3/200 = £190,000 × 0.015 = £2,850
Corporation tax payable: £15,000 − £2,850 = £12,150
Effective rate: approximately 20.25%

The effective rate for profits in the marginal relief band ranges from just above 19% (near the £50,000 lower limit) to just below 25% (near the £250,000 upper limit).

For a detailed explanation of how marginal relief works and is reported on the form, see our guide to marginal relief and corporation tax.

What Counts as Taxable Profit?

Your taxable profit is not simply your accounting profit. Before applying the tax rate, you adjust for:

Allowable expenses — costs incurred wholly and exclusively for business purposes
Capital allowances — deductions for qualifying capital expenditure (plant, machinery, equipment)
Losses brought forward — losses from previous years can reduce current year taxable profit
Disallowable expenditure — costs that are not deductible for tax (client entertaining, depreciation, fines)
Directors' loan adjustments — certain overdrawn director loan balances give rise to an additional tax charge (S455 tax)

Your adjusted taxable profit is what enters the CT600 form. The adjustments are made in the tax computations document that accompanies your return.

For an overview of which figures go where on the form, see our CT600 boxes explained guide.

Associated Companies: Adjusted Thresholds

If your company has associated companies — broadly, companies under common control — the £50,000 and £250,000 thresholds are divided by the total number of companies in the associated group (including your company).

How the divisor works:

Box 326 on the CT600 asks for the number of associated companies (not counting your own)
The thresholds are divided by: number of associated companies + 1 (to include your company)

Example — One associated company

Associated companies entered in Box 326: 1
Divisor: 1 + 1 = 2
Adjusted small profits threshold: £50,000 ÷ 2 = £25,000
Adjusted main rate threshold: £250,000 ÷ 2 = £125,000

If your company has taxable profits of £60,000, you would be in the marginal relief band (between £25,000 and £125,000) rather than at the small profits rate — potentially paying a higher effective rate than you might expect.

For a full explanation of the rules around associated companies, see our guide to associated companies and corporation tax.

Short Accounting Periods

If your accounting period is shorter than 12 months — which happens in your first year, or if you change your year-end — the thresholds are reduced proportionately.

Formula:

``` Adjusted threshold = Annual threshold × (Days in period ÷ 365) ```

Example — Nine-month period

Accounting period: 9 months (275 days)
Adjusted small profits threshold: £50,000 × 275/365 = £37,671
Adjusted main rate threshold: £250,000 × 275/365 = £188,356

Your profits for the period are compared against these adjusted thresholds to determine the applicable rate and whether marginal relief applies.

Key CT600 Boxes for Tax Calculation

Once the tax is calculated, it appears in several boxes on the CT600:

Box	Description
Box 410	Total profits chargeable to corporation tax
Box 430	Corporation tax at the main rate (25%)
Box 435	Corporation tax at the small profits rate (19%)
Box 450	Marginal relief deduction
Box 470	Corporation tax chargeable (after marginal relief)

For straddling periods (where the accounting period spans more than one tax year), HMRC requires separate rows for each financial year, with profits time-apportioned between them. Tax software handles this automatically.

Filing and Paying Your Corporation Tax

Once you know your tax liability:

Complete the CT600, entering your taxable profits and claiming any available reliefs
Attach iXBRL-tagged accounts (required by HMRC for all company returns)
Submit online using HMRC-approved software before the 12-month filing deadline
Pay corporation tax due by the payment deadline — nine months and one day after your accounting period ends

For most small companies, corporation tax is due before the CT600 filing deadline. This means you need to know your approximate tax liability earlier in the process — not just at the point of filing.

For a step-by-step guide to the full process, see how to file your company tax return.

Common Calculation Mistakes

Using accounting profit instead of taxable profit. Accounting profit includes depreciation and other non-deductible items. Always make the required tax adjustments before applying the rate.

Forgetting disallowable expenditure. Client entertainment, depreciation, and penalties must be added back to your accounting profit before calculating tax.

Not claiming capital allowances. The Annual Investment Allowance (AIA) lets you deduct the full cost of qualifying plant and machinery in the year of purchase. Missing it can significantly overstate your taxable profit.

Overlooking the associated companies rules. If you or a connected person controls another company, the reduced thresholds may apply — this can push you into a higher effective rate unexpectedly.

Ignoring losses from prior years. If your company made a loss in a previous period, this can be carried forward to reduce the current year's taxable profit.

Summary

Calculating corporation tax for a UK limited company means applying the correct rate — 19% or 25% — to your taxable profit, with a tapered marginal relief for profits between £50,000 and £250,000. Both thresholds reduce proportionately for short accounting periods and are divided by the number of associated companies.

Tax software handles these calculations automatically: you enter your profit figures and the software determines the correct rate, calculates marginal relief where applicable, and populates the CT600. For current rates and thresholds, always refer to the GOV.UK corporation tax rates page.