Rates from 1 April 2025

Corporation tax rates and thresholds for the financial year to 31 March 2026 remain unchanged as follows:

Financial year to 31 March 2026
Main rate	25%
Small profits rate	19%
Small profit threshold	£50,000
Main rate threshold	£250,000
Marginal relief fraction	3/200
Effective marginal relief rate	26.5%

The thresholds must be equally shared between companies in a group and those controlled by the same person or persons. If an associated company is dormant, then it is not included in this calculation. However, an associated company with only limited activity would be included, which could lead to higher than necessary effective rates of corporation tax. If you are in this situation speak to us about how you might be able to mitigate this.

Companies with profits between the small profit and main rate thresholds will qualify for marginal relief, which effectively means they pay tax at 19% up to the lower threshold and at 26.5% on the balance of their profits.

Roadmap

A corporate tax roadmap has been published by the government, with the view of creating a stable and predictable tax environment. This includes the following commitments:

• The corporation tax rates will not increase beyond the rates shown above. This includes retaining the small profits rate and marginal relief.
• Maintaining the annual investment allowance, giving 100% tax relief on the acquisition of up to £1 million worth of new or second-hand qualifying plant and machinery each year.
• Maintaining the ‘full-expensing’ regime, giving 50% or 100% tax relief on the acquisition of new and unused qualifying plant and machinery, without limit.
• Maintaining the rates of the current Research and Development (R&D) tax reliefs (see below).

Research & Development (R&D) reliefs

The R&D tax relief regime has seen a lot of change in recent years, and the Labour government is committing to the current rates of relief. Since 1 April 2024, this equates to a 20% taxable contribution from HMRC on qualifying R&D expenditure in the “merged scheme” (used by most claimant companies) and, for ‘loss-making R&D intensive SME companies’, an 86% uplift in deductible qualifying expenditure with a 14.5% payable tax credit.

An R&D intensive company is one that qualifies as an SME and at least 30% of its total expenditure is invested in R&D.

HMRC continue to take measures to tackle non-compliance in this area, which has led to a reduction in the number of claims made. They carried out compliance checks on 17% of claims received in 2023/24, compared with 10% for 2022/23. Please talk to us if you are considering making a claim so that we can help you to navigate HMRC’s compliance checks.

Annual Tax on Enveloped Dwellings (ATED)

Companies and some other entities may need to file ATED returns or pay ATED if they hold a UK residential property with a market value over £500,000. The rates of ATED will increase from 1 April 2025 so please contact us if you require any support with this.