Budget 2026: what it means for you and your business —
In short
For 2026/27, corporation tax is 19% on profits up to £50,000 and 25% above £250,000, with marginal relief creating an effective rate between the two. Critically, both limits are divided between associated companies under common control — with one associate they halve to £25,000 and £125,000, pushing groups into higher effective rates far sooner than owners expect. Planning around these thresholds, and around capital allowances and profit timing, can materially reduce what you pay.
19% on taxable profits up to £50,000 (the small profits rate). 25% on profits above £250,000 (the main rate). Between the two, marginal relief (fraction 3/200) produces an effective rate that rises gradually from 19% toward 25%.
A company with £150,000 of profit and no associates pays an effective rate of roughly 22%. The rates and thresholds are unchanged from the April 2023 reform.
This is the most commonly missed rule in the regime, and it costs owners real money.
The £50,000 and £250,000 limits are divided by the number of associated companies under common control, plus one. With one associated company they halve to £25,000 and £125,000. With three associates, they quarter.
So a group of small companies, each individually modest, can find itself paying the main rate on profits that a standalone company would pay 19% on. If you control more than one company — including dormant or property-holding companies — this needs checking.
Legitimately, through the reliefs and allowances available to you. Pension contributions attract relief at your marginal rate and can also restore a tapered personal allowance. ISAs shelter investment income and gains entirely. Gift Aid extends your basic-rate band. Marriage allowance, where eligible, transfers unused personal allowance.
For directors and business owners, the salary and dividend mix is the single biggest lever — and the maths changed for 2026/27, with the dividend allowance at just £500 and dividend tax at 10.75% / 35.75% / 39.35%.
Capital allowances and full expensing — qualifying plant and machinery can attract 100% first-year relief, so the timing of a purchase relative to your year end matters.
Employer pension contributions — generally an allowable expense, and not subject to income tax or NI in the way salary is. One of the most straightforward and most under-used reliefs.
R&D tax relief — where the activity genuinely qualifies (see our R&D page).
Loss relief — carried back, carried forward, or surrendered within a group.
Profit timing — accelerating or deferring income and expenditure around the £50,000 and £250,000 thresholds.
Payment is due nine months and one day after the end of your accounting period. The CT600 return is due twelve months after the period end.
Note the payment comes *before* the return — which catches a great many directors out. Larger companies pay by quarterly instalments instead.
HMRC’s free Corporation Tax online filing service closed on 1 April 2026. All companies must now file the CT600 using commercial software. If you were relying on the free portal, you need an alternative in place — we provide this as part of our compliance service.
We check your associated companies position — the single most expensive thing firms overlook.
Planning before the year end, when it can still change the outcome.
Capital allowances reviewed properly — including timing around your year end.
Chartered (ICAEW) tax specialists — planning built to withstand scrutiny.
Software included — no scramble now HMRC’s free filing has closed.
This page provides general information about the 2026/27 UK tax year and is not advice on your particular circumstances. Tax and regulatory rules change frequently. Please contact us before acting, or refraining from acting, on anything set out here. LMJ Group is a firm of Chartered Accountants regulated by the ICAEW. LMJ Group is not a registered auditor and does not provide audit services. Last reviewed: July 2026.
