Associated Companies and Marginal Relief

How do associated companies affect your corporation tax? If your company's profits are between £50,000 and £250,000, marginal relief reduces your tax bill — but having associated companies changes the thresholds. This guide explains how it works in TinyTax.

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Corporation Tax Rates (From April 2023)

Profit level	Rate	What happens
Up to £50,000	19% (small profits rate)	Pay 19% on all profits
£50,001 to £249,999	Between 19% and 25%	Pay 25% minus marginal relief
£250,000 and above	25% (main rate)	Pay 25% on all profits

For accounting periods ending before 1 April 2023, the rate was a flat 19% for all companies regardless of profit level.

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What Is Marginal Relief?

Marginal relief is a tax reduction for companies with profits between the small profits threshold (£50,000) and the upper threshold (£250,000). It ensures the effective tax rate gradually increases from 19% to 25% as profits rise, rather than jumping from 19% to 25% at a fixed point.

TinyTax calculates marginal relief automatically. You do not need to work it out yourself — just enter your figures and the tax computation handles the rest.

How It's Calculated

The formula is:

Marginal Relief = (Upper Limit - Augmented Profits) x 3/200

If your company receives exempt distributions (e.g., dividends from UK companies), the formula is adjusted:

Marginal Relief = (Upper Limit - Augmented Profits) x 3/200 x (Taxable Profits / Augmented Profits)

Where:

• Augmented profits = your taxable profits plus any exempt distributions (UK dividends received)
• The result is deducted from the tax calculated at 25%

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What Are Associated Companies?

Companies are associated if they're under common control — the same person or group controls 50% or more of both companies. This includes:

• Companies you personally control
• Companies controlled by close family members (if commercially interdependent)
• Dormant companies that hold assets (e.g., shares in subsidiaries)

Excluded: Dormant companies with no assets that have never traded do not count.

How Associated Companies Affect Your Tax

The £50,000 and £250,000 thresholds are divided by the total number of companies (your company plus its associates).

Associated companies	Total companies	Small profits threshold	Upper threshold
0	1	£50,000	£250,000
1	2	£25,000	£125,000
2	3	£16,667	£83,333
3	4	£12,500	£62,500
4	5	£10,000	£50,000

With 4 or more associated companies, the small profits threshold equals the upper threshold — meaning marginal relief disappears and the full 25% rate applies to profits above £10,000.

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Where to Enter Associated Companies in TinyTax

The Associated companies field (Box 326) is in the Tax computation section, below the balance sheet.

1. Find the Specialist adjustments chevron and click Show ▾
2. Locate the Associated companies row (Box 326)
3. Enter the number of other associated companies (not including the company you're filing for)

Group Companies (Advanced Filing Type)

If your company uses the advanced filing type (used for companies with both trading and property income, or group/holding companies), the relevant field is Box 625 — "Number of 51% group companies", not Box 326.

1. Open the Specialist adjustments chevron in the Tax computation section — click Show ▾ next to that heading
2. Find Box 625 — Number of 51% group companies
3. Enter the number of other companies in your group (not including the company you're filing for)

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Short and Extended Periods

Short Periods (Less Than 12 Months)

For accounting periods shorter than 12 months, the thresholds are pro-rated based on the number of days in the period. For example, a 6-month period would have thresholds of approximately £25,000 and £125,000.

Extended Periods (More Than 12 Months)

TinyTax automatically splits extended periods into two CT600 submissions. Marginal relief is calculated independently for each period, with thresholds pro-rated for each sub-period.

#### What if my associated company count differs between the two split periods?

TinyTax uses a single Box 326 value for both CT600s when an extended period is split. If your number of associated companies changed during the extended period — for example, 2 in the first 12 months and 1 in the remaining period — you cannot enter a different value for each return in the same filing.

Recommended approach: Enter the number that applied during your first period (the 12-month portion). This ensures the larger, first CT600 is calculated correctly. The second CT600 will use the same count, which may result in slightly conservative thresholds for period 2, but avoids the risk of under-declaring for the more significant first period.

Periods Straddling 1 April 2023

If your accounting period crosses 1 April 2023, profits are apportioned between the two financial years. The pre-April 2023 portion is taxed at the flat 19% rate, and the post-April 2023 portion uses the new rates with marginal relief where applicable.

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Common Questions

Q: My company has profits of £60,000 — what rate do I pay? A: With no associated companies, your profits fall in the marginal relief band. You'll pay 25% minus marginal relief. TinyTax calculates the exact amount automatically — you'll see it in your tax computation.

Q: I own two companies — are they associated? A: If you control 50% or more of both companies, yes. Enter 1 in the Associated companies field when filing for each company.

Q: My other company is dormant with no assets — does it count? A: No. Dormant companies with no assets and that have never traded are excluded.

Q: Where can I see the marginal relief amount? A: In the tax computation section of your filing. Box 435 shows the marginal relief amount, and Box 440 shows your final tax payable after the relief is deducted.

Q: Do I enter associated companies for each filing? A: Yes. The number of associated companies can change between periods, so you set it for each filing. The field is in the Tax computation section — open the Specialist adjustments chevron (or click Show all at the top to expand every section).

Q: My accounting period is split into two CT600s — can I enter a different Box 326 value for each? A: Not within a single extended-period filing. TinyTax applies one Box 326 value to both CT600s. If your count changed between the two periods, enter the number for your first (12-month) period and, if needed, file the second CT600 separately with the correct count for that period.

Q: The HMRC marginal relief calculator shows a different figure from TinyTax — which is correct? A: The most common cause is a difference in the period start date. The HMRC calculator uses whatever dates you enter — if you used a different start date than your actual accounting period (for example, 1 April when your company was incorporated on 4 March), the results will differ because the thresholds are pro-rated by the actual number of days.

TinyTax uses your actual period dates from your Companies House records. The key reasons figures can diverge:

1. Different period length: For periods that are not exactly 12 months, thresholds are pro-rated by the number of days. A longer period produces proportionally higher thresholds, which means more marginal relief and a lower tax figure. For example, a 393-day period gives an upper threshold of £89,726 (with 2 associated companies) rather than the standard £83,333.

1. Extended periods: The HMRC marginal relief calculator only supports single periods of up to 12 months. If your accounting period is longer than 12 months, the HMRC calculator cannot handle it directly. TinyTax shows an aggregate figure on the filing form and then splits the period into two CT600s at the Preview stage — the individual per-period figures appear there.

To cross-check TinyTax'\s figure: re-run the HMRC calculator using your actual period start date. For extended periods, you would need to run the calculator separately for each sub-period using apportioned profit figures.

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Still Have Questions?

If you're unsure whether your companies are associated or how it affects your tax, get in touch.

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Last updated: April 2026