Advanced Taxation (UK) · Corporation tax: taxable total profits

Corporation Tax Rates and Marginal Relief for ACCA ATX-UK

Updated 11 October 2026 · Fact-checked

Corporation tax is charged at 19% if augmented profits are £50,000 or less, and 25% if they exceed £250,000. Between those limits you pay 25% less marginal relief: (£250,000 – augmented profits) × 3/200 × taxable total profits ÷ augmented profits. The limits are scaled for short periods and associated companies.

Understand Corporation Tax Rates and Marginal Relief

Corporation tax is charged on a company's taxable total profits (TTP) for each accounting period. The rate depends on the level of profits, not on who owns the company. The tables ACCA gives you show a small profits rate of 19% and a main rate of 25% for the financial years 2023, 2024 and 2025.

The rate is decided by augmented profits, not by TTP alone. Augmented profits are TTP plus exempt distributions received from companies that are not 51% group companies (the ones you do not include in TTP). Distributions from 51% group companies are left out. In most exam questions, augmented profits equal TTP unless the question gives you dividend income.

There are two limits. The lower limit is £50,000 and the upper limit is £250,000. If augmented profits are at or below the lower limit, all TTP is taxed at 19%. If they are above the upper limit, all TTP is taxed at 25%. In between, the company pays 25% on TTP, then deducts marginal relief. When augmented profits equal TTP (no dividends), this gives an effective marginal rate of 26.5% on the extra profit in that band. With dividends present, the marginal rate is different.

The limits are not fixed in every question. They are divided by one plus the number of associated companies, and they are reduced pro rata if the accounting period is shorter than 12 months. Always test the limits that apply to the company in front of you, not the headline figures.

Marginal relief is only a deduction from the tax calculated at 25%. It uses TTP in the numerator and augmented profits in the denominator, so dividends reduce the relief.

Key rules to remember

Small profits rate: 19% × TTP, where augmented profits ≤ lower limit (£50,000); Limits are adjusted for associated companies and short accounting periods.
Main rate: 25% × TTP, where augmented profits > upper limit (£250,000); No marginal relief is due above the upper limit.
Augmented profits: Augmented profits = TTP + exempt distributions from companies that are not 51% group companies; Distributions from 51% group companies are not added.
Marginal relief: (Upper limit – augmented profits) × 3/200 × TTP ÷ augmented profits; Applies where augmented profits exceed £50,000 but do not exceed £250,000. The standard fraction is 3/200.
Tax in the marginal band: Corporation tax = 25% × TTP – marginal relief; If augmented profits equal TTP, the fraction TTP ÷ augmented profits is 1, so relief = (upper limit – TTP) × 3/200.
Adjusted limits: Limit = £ limit × months in period ÷ 12 ÷ (1 + number of associated companies); Apply to both the £50,000 and £250,000 limits.

How to solve Corporation Tax Rates and Marginal Relief questions

Use this order for any question asking for corporation tax liability or the rate applying to a company.

1Compute TTP for the accounting period. If the period exceeds 12 months, split it first; the question will tell you how.
2Compute augmented profits: TTP plus any exempt distributions from companies that are not 51% group companies.
3Adjust the lower and upper limits for associated companies and for a period shorter than 12 months.
4Compare augmented profits with the adjusted limits to see which band applies.
5If at or below the lower limit, charge TTP at 19%. If above the upper limit, charge TTP at 25%.
6If in between, charge TTP at 25%, then compute and deduct marginal relief using the formula.
7State the final liability and, if asked, the due date and instalment position.

Quickest way: Band check, then one formula

When to use it: Use when time is short and the question asks only for the corporation tax liability of a single company.

Write down the adjusted limits first (£50,000 and £250,000, divided as needed).
Mark TTP and augmented profits on a line between the limits.
If outside the band, multiply TTP by 19% or 25% and stop.
If inside the band, calculate 25% × TTP, then the relief, and subtract.
Check that the relief is smaller than the tax at 25% and that the answer is sensible.

Common mistakes in Corporation Tax Rates and Marginal Relief

Using TTP instead of augmented profits to pick the rate or compute relief.
Students forget dividends received are added back for this test.
Fix: Always write augmented profits as a separate line, even if it equals TTP, and say so.
Adding dividends from a 51% group company to augmented profits.
Students add all dividends received without checking who paid them.
Fix: Add only exempt distributions from companies that are not 51% group companies. Distributions from 51% group companies are excluded.
Forgetting to scale the limits for a short accounting period.
The £50,000 and £250,000 figures are memorised as fixed.
Fix: Check the period length first and multiply both limits by months ÷ 12.
Ignoring associated companies when setting the limits.
The associated company count is hidden in the scenario text.
Fix: Read for companies under common control and divide the limits by one plus the number of associated companies.
Applying marginal relief when augmented profits are above £250,000 or at or below £50,000.
Students apply the formula automatically without testing the band.
Fix: Test the band first. Relief only applies strictly between the adjusted limits.
Putting TTP rather than augmented profits in the denominator of the relief formula.
Both numbers appear in the formula and are easy to mix up.
Fix: The fraction is TTP over augmented profits. Label each figure clearly before substituting.

Worked examples

Example 1

Hartley Ltd has no associated companies. For the year ended 31 March 2026 it has TTP of £180,000 and received no dividends. Calculate its corporation tax liability.

Show the solution

Augmented profits = TTP = £180,000, as there are no dividends.
The limits are £50,000 and £250,000, as the period is 12 months and there are no associated companies.
£180,000 is 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.
Corporation tax = £45,000 – £1,050 = £43,950.

Answer: Corporation tax liability is £43,950.

Example 2

Mercer Ltd has one associated company. For the 6 months ended 30 September 2025 it has TTP of £60,000 and received exempt dividends of £20,000 from a non-group UK company. Calculate its corporation tax liability.

Show the solution

Augmented profits = £60,000 + £20,000 = £80,000.
Lower limit = £50,000 × 6/12 ÷ 2 = £12,500.
Upper limit = £250,000 × 6/12 ÷ 2 = £62,500.
Augmented profits of £80,000 exceed the upper limit of £62,500, so the main rate applies and there is no marginal relief.
Corporation tax = £60,000 × 25% = £15,000.

Answer: Corporation tax liability is £15,000. The dividends push augmented profits over the adjusted upper limit, so the full 25% applies to TTP.

Exam tips

Write out the adjusted limits at the top of your answer. Markers award marks for correct limits even if later arithmetic slips.
Look for hidden triggers: a short period, an associated company, or dividend income. Each changes the answer.
Show the marginal relief formula with numbers substituted. Working marks are available.
Use the tax tables in the exam to check the standard fraction of 3/200 and the rates. Do not rely on memory.
In longer questions, link the result to planning, such as how pulling profit into or out of a period changes the band.

Practice questions from Corporation tax: taxable total profits

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

What are the corporation tax rates for ATX-UK?

The small profits rate is 19% and the main rate is 25%, with a lower limit of £50,000 and an upper limit of £250,000. These apply for the financial years 2023, 2024 and 2025 in the tax tables. Marginal relief applies between the limits.

What does augmented profits mean?

Augmented profits are taxable total profits plus exempt distributions received from companies that are not 51% group companies. They are used to decide which rate applies and to compute marginal relief. Distributions from 51% group companies are not included.

How do I calculate marginal relief?

Use (upper limit – augmented profits) × 3/200 × TTP ÷ augmented profits. Then deduct the result from tax at 25% on TTP. It only applies when augmented profits are between the adjusted limits.

Do the £50,000 and £250,000 limits ever change?

Yes. Divide them by one plus the number of associated companies, and reduce them in proportion for an accounting period shorter than 12 months. Test the adjusted limits before choosing the rate.