Marginal Relief (Corporation Tax)

Marginal Relief is the mechanism that smooths the gap between the small profits rate (19%) and the main rate (25%) of Corporation Tax. Without it, a company with £50,001 of profit would suddenly pay 25% on the lot — a £3,000 cliff for one pound of extra profit. Marginal Relief replaces the cliff with a gradient.

The formula: CT = (profit × 25%) − (£250,000 − profit) × 3/200. That 3/200 is the marginal relief fraction. At £50k of profit the effective rate is 19%; at £250k it's 25%; in between, the rate rises gradually.

The marginal effective rate on each extra pound of profit inside the band is 26.5% — higher than either headline rate. That's not a bug: it's how the average rate ends up at 25% by £250k.

Associated-company rules divide the thresholds. If your company has one associated company, the £50k and £250k thresholds halve to £25k and £125k. This catches group structures and husband-and-wife companies trading together.

Related terms

• Corporation Tax — Tax on company profits — 19% small profits rate up to £50k, 25% main rate above £250k, with marginal relief between.
• Employment Allowance — A reduction in an eligible employer's NI bill — £10,500/year (raised from £5,000 in April 2025).
• Dividend tax — The tax charged on dividend income above the £500 dividend allowance — 10.75%, 35.75%, or 39.35% depending on your tax band (2026-27).