How Corporation Tax is calculated
Current Rates
As of April 2023, the Corporation Tax main rate is 25% for companies with profits over £250,000. However, the Small Profits Rate remains at 19% for companies with profits of £50,000 or less.
Marginal Relief
If your profits fall between £50,000 and £250,000, you are eligible for Marginal Relief. This provides a gradual increase in your effective tax rate, smoothly bridging the gap between 19% and 25%. The exact calculation involves applying the 25% rate and then deducting the marginal relief fraction.
Examples
If your profit is £40,000, your tax is exactly 19% (£7,600). If your profit is £300,000, your tax is exactly 25% (£75,000). If your profit is £100,000, you pay 25% minus marginal relief, resulting in an effective rate somewhere between 19% and 25%.
WeFile Auto-Calculation
You don't need to perform complex tax math. Once you input your financial data, WeFile automatically determines your profit level, identifies the correct rate, factors in your accounting period length (which adjusts the £50k/£250k thresholds), and applies any applicable marginal relief to accurately calculate your liability.