marginal relief calculator

What is marginal relief?

Marginal relief reduces Corporation Tax for companies whose profits sit between the lower and upper profit limits. Instead of jumping straight from the small profits rate to the full main rate, companies in this middle band receive a taper. This helps smooth the tax increase as profits rise.

In practical terms, if your profits are modest, you pay tax at the small profits rate. If profits are high, you pay the main rate. If profits are in between, marginal relief applies and your effective tax rate gradually climbs between those two rates.

Who should use this calculator?

• Limited company directors planning for year-end tax.
• Freelancers and contractors operating through a UK company.
• Finance teams building management accounts and forecasting Corporation Tax.
• Advisers and students who want a quick, transparent estimate.

How the calculator works

1) It adjusts the profit limits

The standard limits are:

• Lower limit: £50,000
• Upper limit: £250,000

If your company has associated companies, these limits are divided by the total number of companies in the group (your company + associated companies). For example, with 1 associated company, each limit is halved.

2) It decides the tax band

• Small profits rate (19%) if taxable and augmented profits are at or below the adjusted lower limit.
• Main rate (25%) if augmented profits are at or above the adjusted upper limit.
• Marginal relief band in between those limits.

3) It applies the marginal relief formula

In the marginal band, the calculator uses:

Marginal Relief = (Upper Limit − Augmented Profits) × Taxable Profits ÷ Upper Limit × (3/200)

Then:

Corporation Tax = (Taxable Profits × 25%) − Marginal Relief

Quick example

Suppose taxable profits are £120,000, augmented profits are £120,000, and there are no associated companies. The company is between £50,000 and £250,000, so marginal relief applies. The calculator computes the relief amount and subtracts it from the 25% main-rate tax, giving you an effective rate between 19% and 25%.

Common mistakes to avoid

• Forgetting to include associated companies when adjusting limits.
• Entering augmented profits below taxable profits.
• Using this estimate as a final filing value without checking period-specific rules.
• Ignoring other tax factors such as losses, group relief, or relief claims.

Why this matters for planning

Understanding marginal relief helps you make better decisions around dividends, reinvestment, bonus timing, and budgeting. Even a small shift in profit can affect your effective tax rate. A quick estimate today can prevent surprises when your final Corporation Tax bill is due.