Marginal relief reduces the Corporation Tax bill of a company whose profits fall between £50,000 and £250,000, so that its rate rises gradually from 19% to 25% rather than jumping straight to the main rate.
How it works
A company with profits between the lower limit (£50,000) and the upper limit (£250,000) is charged at the 25% main rate and then claims marginal relief to bring the bill down. Where the company has no exempt dividend income, the relief is:
(£250,000 − profits) × 3/200
An example
A company with no associated companies makes taxable profits of £100,000 in a 12-month period.
- Tax at 25%: £25,000
- Marginal relief: (£250,000 − £100,000) × 3/200 = £2,250
- Corporation Tax due: £22,750, an overall rate of 22.75%
When the limits are smaller
Both limits are divided by the number of associated companies plus one, and are reduced in proportion for an accounting period shorter than 12 months. Close investment-holding companies and companies not resident in the UK cannot claim.
Read more: Marginal relief on the CT600.