A guide to the various corporation tax rates over the past few years and an overview of the previous marginal relief calculation.

A freeview 'At a glance' guide.

Company tax rates

		2017/18 to  2021/22	2015/16 to 2016/17	2014/15	2013/14	2012/13	2011/12	2010/11
Rate	Profits £	Effective %	Effective %	Effective %	Effective %	Effective %	Effective %	Effective %
Small	0 - 300,000	19	20	20	20	20	20	21
Marginal	300,001 - 1,500,000	19	20	21.25	23.75	25	27.5	29.75
Main	1,500,001 and above	19	20	21	23	24	26	28
Fraction		n/a	n/a	1/400th	3/400ths	1/100th	3/200ths	7/400ths

The company tax year starts on 1 April.

The main rate of company tax for all non-ring fence profits is 19% for Financial Year 2017-2019.

Section 46 Finance Act 2016 set the CT rate for Financial Year 2020 as 17%. Prime Minister Johnson made a pre-general election pledge to reverse this in November 2019 and the change is included in Finance Act 2020.

Finance Act 2021 provides that from April 2023, the main rate of Corporation Tax will increase to 25% for companies with chargeable profits over £250,000.

• Companies with chargeable profits of £50,000 or less will still be liable to tax at the current rate of 19%. 
• Companies with chargeable profits of £50,001 to £250,000 will pay tax at 25% but will have the benefit of marginal relief.
• The marginal rate fraction will be 3/200ths.
• The upper and lower limits of the new chargeable profits bands will be apportioned for the number of associated companies in a group.

Companies (up to 2014/15): The marginal relief calculation

Marginal relief is given by: 

(Upper limit – profits) x basic profits x fraction
                                           profits

1. The upper limits were £300,000 or £1,500,000.
2. Basic profits are the companies profits.
3. Profits are basic profits + franked investment income, which is grossed up by 100/90.
4. Group dividends are from 51% groups (51% + subsidiaries or fellow 51% + subsidiaries of a parent).
5. The fraction depends upon the financial year applies, and when a company’s accounting period spans two financial years it may be necessary to time apportion the profits. This does not affect associates unless there is a change in the relevant bands.

Upper and lower limits are reduced where:

1. There is a short period of account.
2. There are associated companies, by dividing the limits by one plus the number of associated companies, which the company has at any time during its accounting period.

Alternatively, you can calculate Corporation Tax on slices of profit using marginal rates: 

• The first £300,000 of profit is taxed at the small company rate (20%).
• The next £1,200,000 is taxed at the marginal rate (variable).
• Profits over £1,500,000 are taxed at the main rate (24%).

Basic example

For a company with a 31^st March 2012 year-end and profits of £500,000 and no associated companies and no franked investment income, the marginal relief calculation is as follows:

Tax @ 26% on £500,000            =          130,000
Less:
Marginal relief

(1,500,000 – 500,000) x 3/200 =          (15,000)

Tax due                                     =          115,000

Alternatively, you can do this calculation as follows:

First 300,000 @ 20%                 =            60,000

Next £200,000 @ 27.5%           =            55,000

Tax due                                    =          115,000

What is the marginal rate?

If small company’s rate is 20% and the main rate is 26%

300,000 x 20%              =  60,000

1500,000 x 26%            = 390,000

1200,000 x X%              = 330,000

330,000/1,200,000         =27.5% marginal rate

 

If small company’s rate is 20% and the main rate is 25%

300,000 x 20%              =  60,000

1500,000 x 24%            = 360,000

1200,000 x X%              = 300,000

300,000/1,200,000         =25% marginal rate

What is the marginal rate fraction?

The difference between the main rate and the marginal rate expressed as a fraction. 

So 29.75% - 28% = 1.75% = 7/400 

28.75% - 27% = 1.75% = 7/400 

27.5% - 26% = 1.5% = 3/200

26.25% - 25% = 1.25% = 1/80

 

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