Advanced Taxation (UK) · Corporation tax: the comprehensive calculation of the corporation tax liability, including overseas aspects

Corporation Tax Rates, Marginal Relief and Instalments for ACCA ATX

Updated 11 October 2026 · Fact-checked

Companies pay 19% on augmented profits up to £50,000 and 25% above £250,000. Between those limits you pay 25% less marginal relief. Limits are divided by associated companies plus one and time-apportioned for short periods. Large companies with augmented profits over £1,500,000 pay by quarterly instalments.

Understand Corporation Tax Rates, Marginal Relief and Instalments

Corporation tax is charged on a company's taxable total profits for each accounting period. The rate depends on the company's augmented profits. These are taxable total profits plus exempt distributions received from non-group companies.

There are two rates. The small profits rate is 19% and the main rate is 25%. The lower limit is £50,000 and the upper limit is £250,000. Augmented profits at or below the lower limit give 19%. Augmented profits at or above the upper limit give 25%.

In between, the company pays the main rate and then deducts marginal relief. This gives a smooth rise in the effective rate. The relief uses a standard fraction of 3/200. The tax tables give the formula, but you must know how to apply it.

The limits are cut in two situations. First, if the company has associated companies, divide both limits by the number of companies in the group of associates, including itself. Second, if the accounting period is shorter than 12 months, multiply both limits by months ÷ 12. Do both where they apply.

Large companies pay in quarterly instalments instead of nine months and one day after the period end. A company is large if its augmented profits exceed £1,500,000, and that threshold is also divided by associates and time-apportioned. Large companies pay on the 14th day of months 7, 10, 13 and 16 from the start of a 12-month period.

Very large companies pay earlier, on the 14th day of months 3, 6, 9 and 12. A company is very large if its augmented profits exceed £20,000,000, divided by the number of associated companies plus one (the company counts itself) and adjusted for period length. The tax tables give only the £1,500,000 threshold. They do not give the £20,000,000 threshold or any of the instalment dates, so you must learn these from the legislation.

Key rules to remember

Small profits rate and main rate: 19% if augmented profits ≤ £50,000; 25% if augmented profits ≥ £250,000; Limits are for a 12-month period with no associated companies. Rates apply to financial years 2023, 2024 and 2025.
Marginal relief: (Upper limit − Augmented profits) × 3/200 × Taxable total profits ÷ Augmented profits; Use when augmented profits fall between the lower and upper limits. Deduct from tax at 25% on taxable total profits.
Adjusted limits: Limit ÷ (1 + number of associated companies) × months ÷ 12; Applies to lower limit, upper limit and the £1,500,000 instalment threshold.
Augmented profits: Taxable total profits + exempt distributions received from non-group companies; Dividends from group companies are excluded. Use augmented profits to test the limits, in the marginal relief formula and for the instalment test.
Quarterly instalments: large company: Augmented profits > £1,500,000 (adjusted for associates and period length); Instalments are due on the 14th day of months 7, 10, 13 and 16 from the start of a 12-month period (i.e. six, nine, twelve and fifteen months after the start of the period). Very large companies pay on the 14th day of months 3, 6, 9 and 12. The very large threshold is £20,000,000 divided by the number of associated companies plus one, adjusted for period length. The tax tables give only the £1,500,000 figure, so learn the £20,000,000 threshold and the dates from the legislation. Check the facts about the company's status in the question.

How to solve Corporation Tax Rates, Marginal Relief and Instalments questions

Work in a fixed order so that the limits are right before you compute any tax.

1Find the length of the accounting period in months. Split it if it exceeds 12 months or if the question mixes financial years.
2Count associated companies. Divide by the number of companies including the one in question. Check control tests and ignore dormant ones only where the rules allow it.
3Adjust the lower limit, upper limit and £1,500,000 threshold for associates and for months ÷ 12.
4Compute augmented profits: taxable total profits plus exempt distributions from non-group companies.
5Compare augmented profits with the adjusted limits to select 19%, 25% or the marginal relief band.
6In the marginal band, compute tax at 25% on taxable total profits and deduct marginal relief using the formula.
7Compare augmented profits with the adjusted £1,500,000 threshold. If they exceed it, state the instalment dates and amounts. Remember that a very large company (augmented profits over £20,000,000 divided by associates plus one, adjusted for period length) pays on the 14th day of months 3, 6, 9 and 12. Learn that threshold and the dates from the legislation, as the tax tables do not give them. Otherwise state the single due date, nine months and one day after the period end.
8Show all workings, round to the nearest £ and state your conclusion clearly.

Quickest way: Limits first, then three-way test

When to use it: Use for any computation question where you are told the profit figures and the number of companies.

Write the adjusted lower and upper limits at the top of your answer.
Write augmented profits next to them.
Below the lower limit: tax at 19%. Above the upper limit: tax at 25%.
In between: 25% × taxable total profits less (upper − augmented) × 3/200 × taxable ÷ augmented.
Check the result lies between 19% and 25% of taxable total profits.

Common mistakes in Corporation Tax Rates, Marginal Relief and Instalments

Using the unadjusted £50,000 and £250,000 limits when the company has associates.
Students read the profit figures first and forget to count the group.
Fix: Count associates before anything else and divide by the total number of companies, including the company itself.
Using taxable total profits instead of augmented profits to test the limits.
The two figures are the same unless there are exempt distributions, so the difference is easy to overlook.
Fix: Always check whether the company received dividends from non-group companies and add them in.
Forgetting to time-apportion limits for a short accounting period.
Students focus on the profit figure and do not look at the period length.
Fix: Multiply every limit by months ÷ 12, including the £1,500,000 instalment threshold.
Using the wrong profit in the marginal relief fraction.
The formula has three different profit figures.
Fix: The fraction is taxable total profits ÷ augmented profits. The first bracket uses upper limit less augmented profits.
Stating the wrong instalment dates for a large company.
Students apply the nine-months-and-one-day rule to all companies.
Fix: Large companies pay on the 14th day of months 7, 10, 13 and 16 from the start of a 12-month period, i.e. six, nine, twelve and fifteen months after the start. Learn the pattern and apply it.

Worked examples

Example 1

Alpha Ltd has a 12-month accounting period to 31 March 2026. Taxable total profits are £180,000, with no exempt distributions. Alpha has no associated companies. Calculate the corporation tax liability.

Show the solution

Limits are £50,000 and £250,000 because there are no associates and the period is 12 months.
Augmented profits are £180,000, which lies between the limits, so marginal relief applies.
Tax at 25% = £180,000 × 25% = £45,000.
Marginal relief = (£250,000 − £180,000) × 3/200 × £180,000 ÷ £180,000 = £70,000 × 3/200 = £1,050.
Tax liability = £45,000 − £1,050 = £43,950.

Answer: Corporation tax payable is £43,950.

Example 2

Beta Ltd has one 100% associated company. For the 12 months to 31 March 2026 it has taxable total profits of £100,000 and received exempt dividends of £20,000 from a non-group company. Calculate its corporation tax liability and say whether it pays by instalments.

Show the solution

Two companies, so limits are £50,000 ÷ 2 = £25,000 and £250,000 ÷ 2 = £125,000.
Augmented profits = £100,000 + £20,000 = £120,000, which lies between the limits.
Tax at 25% on taxable total profits = £100,000 × 25% = £25,000.
Marginal relief = (£125,000 − £120,000) × 3/200 × £100,000 ÷ £120,000 = £5,000 × 0.015 × 0.83333 = £62.50.
Tax liability = £25,000 − £62.50 = £24,937.50, which is £24,938 to the nearest £.
Instalment threshold = £1,500,000 ÷ 2 = £750,000. The instalment test uses augmented profits. Beta's augmented profits of £120,000 are below £750,000, so Beta is not large.

Answer: Corporation tax is £24,938 (£24,937.50 to the nearest £), payable in one amount nine months and one day after the period end. Beta's augmented profits of £120,000 are below the £750,000 threshold, so there are no instalments.

Exam tips

Write the adjusted limits at the top of the answer. Markers can then award marks even if later arithmetic slips.
Always look for dividends received and for associated companies. Scenario questions hide these in the text.
For short periods, state your time apportionment, for example 6 ÷ 12, so the marker can follow it.
In advice questions, comment on the cash flow effect of instalments and on whether a group could manage profits across companies. Link to the client's position for professional skills marks.
The tax tables give the rates, limits and formula. Use them, but learn the instalment dates because the tables do not give them.

Practice questions from Corporation tax: the comprehensive calculation of the corporation tax liability, including overseas aspects

Corporation Tax Rates, Marginal Relief and Instalments in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Applied SkillsCorporation Tax Rates and Marginal Relief

Corporation Tax Rates, Marginal Relief and Instalments: frequently asked questions

What is the difference between the small profits rate and the main rate?

The small profits rate is 19% and applies where augmented profits are £50,000 or less. The main rate is 25% and applies where they are £250,000 or more. Between those limits, you pay the main rate less marginal relief.

How do associated companies change the limits?

You divide the lower and upper limits by the number of associated companies plus one, because the company counts itself. This pushes the company into the main rate sooner. The same division applies to the £1,500,000 instalment threshold.

How are short accounting periods treated?

Multiply the limits by the number of months in the period divided by 12. This applies to the £50,000 and £250,000 limits and to the £1,500,000 threshold. Do it after adjusting for associates.

When does a large company pay quarterly instalments?

A company is large when its augmented profits exceed £1,500,000, adjusted for associates and period length. It then pays four instalments instead of one payment nine months and one day after the period end. Very large companies pay earlier, on the 14th day of months 3, 6, 9 and 12. Their threshold is £20,000,000 divided by associates plus one. The tax tables give only the £1,500,000 figure, so learn the £20,000,000 threshold and the dates from the legislation.