SimpleReturns

Marginal relief explained (the 19% to 25% taper)

Updated 27 June 2026
The short answer

If your company's profit is £50,000 or less, you pay Corporation Tax at 19%. If it's over £250,000, you pay 25%. In between, you pay a rate that slides up from 19% toward 25% as your profit grows. Marginal relief is the discount that creates that slide, so a company in the middle isn't jumped straight to the full 25%. On a £100,000 profit it works out to about 22.75%, or £22,750 of tax.

Why isn't there just one rate?

Two rates do most of the work. Profit of £50,000 or less is taxed at 19%. Profit over £250,000 is taxed at 25%.

The problem is the gap. Without something in the middle, a company on £50,001 would suddenly owe a lot more than one on £49,999. So for profit between £50,000 and £250,000, you get a rate that climbs gently from 19% up toward 25% as your profit rises. Marginal relief is what makes that climb gentle instead of a cliff edge.

So what is marginal relief?

It's a discount. You start by working out the tax at the full 25%, then you knock an amount back off. The closer your profit is to £50,000, the bigger the discount, so your real rate sits near 19%. The closer you are to £250,000, the smaller the discount, so your real rate climbs toward 25%.

You don't pay a tidy round percentage. You pay whatever the discount leaves you with, and it lands somewhere between 19% and 25%. We work that exact figure out for you.

A real example: £100,000 profit

Say your company made £100,000 profit in the year, with no other companies linked to it.

  1. Step 1. Tax at the full rate: £100,000 × 25% = £25,000.
  2. Step 2. The marginal relief discount: £2,250.
  3. Step 3. Take the discount off: £25,000 − £2,250 = £22,750.

So you pay £22,750. That's an effective rate of 22.75%, sitting neatly between 19% and 25%, which is exactly what you'd expect for a profit halfway up the range.

You never have to work the discount out by hand. We do the sum and show you the result before anything is sent.

Does anything change the £50,000 and £250,000 limits?

Yes, two things move them, and both can push you into the higher rate sooner than you'd think.

Other companies you're linked to. If your company is connected to other companies (for example you control more than one), the £50,000 and £250,000 limits are shared out between them. With one other linked company, each limit is halved: the 19% band stops at £25,000 and the 25% band starts at £125,000. The more linked companies, the smaller your slice.

A short accounting period. If your company's year is shorter than 12 months, the limits shrink to match. A six-month period gets half the limits. So a short first year can reach the higher rate on a smaller profit than a full year would.

Both of these are easy to get wrong, and both change your tax. We ask you the right questions and apply the correct limits for your situation.

How SimpleReturns handles it

You tell us your figures (or we read them from your records and statements), and we work out your taxable profit for you, the proper way, with the adjustments a limited company has to make rather than just totting up money in and out. Then we check that profit against the £50,000 and £250,000 limits, adjust those limits for any linked companies or a short year, work out the marginal relief discount, and show you the final rate and the final tax. You never touch the formula.

Common questions

What rate will my company actually pay?

If your profit is £50,000 or less, 19%. If it is over £250,000, 25%. Anywhere in between, a rate that slides up from 19% toward 25%. On a £100,000 profit with no linked companies, that is about 22.75%.

Is marginal relief something I have to claim?

No. It is built into how the tax is worked out for a company in the middle band. We apply it for you, so you don't pay the full 25% when you shouldn't.

My company made exactly £100,000, how much tax is that?

£22,750, if it is a full 12-month year and there are no other companies linked to yours. Linked companies or a shorter year would change it, and we'd factor those in.

Why does having another company change my bill?

Because the £50,000 and £250,000 limits are split across the companies you are linked to. With one other, your limits halve, so you hit the higher rate on a smaller profit. We work out the right limits for you.

Does a short first year really cost more?

It can. A year shorter than 12 months gets smaller limits, so the higher rate kicks in sooner. We adjust the limits for the length of your period automatically.

Ready to do it the easy way?

You don't need to know any of the above to file. We take your year's figures, work out your taxable profit the proper way, apply the right rate and the marginal relief discount, and show you every figure before anything is sent, for £99, once, no subscription.

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Or, if your company is part of a group or has several linked companies, an accountant may be the better fit, and that's an honest call to make.

General guidance, not advice. This guide explains how the rules generally work for small UK limited companies. It isn't tax advice for your specific situation, if you're unsure, check with us or an accountant.