A straightforward example

An eligible company with £40,000 taxable profit pays £7,600 at 19%. At £300,000 taxable profit it pays £75,000 at 25%. These examples assume the same twelve-month period, no associated companies and no exempt distributions affecting the marginal-relief calculation1,2.

Taxable profit is not the bank balance or necessarily the profit printed in the accounts. Depreciation, capital allowances, disallowed expenses and losses can change it.

Marginal relief

For a simple £100,000 taxable-profit example with no relevant exempt distributions, start with £25,000 at the main rate. Relief is (£250,000 − £100,000) × 3/200 = £2,250, leaving £22,750 Corporation Tax2.

Relevant exempt distributions can increase augmented profits for the band and relief calculation even though they are not themselves charged in the ordinary way. Do not omit the investment/dividend questions merely because the bank income seems tax-exempt2.

Check your company’s dates and set a reminder

Search the Companies House register. Your company page shows its filing dates, what to file next and a reminder you can set.

Short periods and associated companies

The £50,000 and £250,000 limits are reduced for shorter accounting periods. They are also divided by the number of associated companies, including this company. For example, one other associated company ordinarily halves the limits before any short-period adjustment2.

Association is a control test, not simply a list of companies owned by this company. Certain dormant companies can be ignored under the applicable rules. Keep the facts of common control available.

Investment-only companies

A close investment-holding company cannot use the small-profits rate or marginal relief. It pays the main rate, including where its profit is below £50,000. A close company holding only a bank deposit can fall within this rule3.

Do not confuse this tax test with the separate micro-entity accounting exclusion. Answer both where relevant. The calculator below is an estimate; the return must reflect the company’s actual period, activities and associated-company position.