The Corporation Tax main rate for companies with profits in excess of £250,000 increased to 25% on 1 April 2023. A Small Profits Rate (SPR) of 19% was also introduced from the same date for companies with profits of up to £50,000 ensuring these companies continue to pay Corporation Tax at the same rate as was previously the case.
Where a company has profits between £50,000 and £250,000 a marginal rate of Corporation Tax applies that bridges the gap between the lower and upper limits. The lower and upper limits are proportionately reduced for short accounting periods of less than 12 months and where there are associated companies.
The effect of marginal relief is that the effective rate of Corporation Tax gradually increases from 19% where profits exceed £50,000 to 25% where profits are more than £250,000.
The amount of Corporation Tax to pay will be found by multiplying taxable profits by the main rate of 25% and deducting marginal relief. For the fiscal year 2023, the marginal relief fraction will be 3/200. HMRC also has an online calculator that can be used to calculate marginal relief on Corporation Tax profits. The calculator can be found at www.tax.service.gov.uk/marginal-relief-calculator