Headlines
- 25% for any profits over £250K
- 19% for any profits for £50K or below
- Scaling tax rate for any profits between £50-250K
Marginal relief
- Marginal Relief formula is:
- (Adjusted upper limit - taxable profit including distributions) × (taxable profit ÷ taxable profit including distributions) × (Marginal Relief fraction)What is the Marginal Relief fraction?
- The standard marginal relief fraction is the difference between the main rate and the marginal rate expressed as a fraction.
- What is marginal rate? Where the small profits rate is 19% and the main rate is 25%: Corporation Tax Payable on profits at the upper limit = £62,500 (£250,000 × 25%) Less Corporation Tax payable profits at the lower limit = £9,500 (£50,000 × 19%) Equals Tax payable on the difference of £200,000 = £53,000
- The marginal rate is therefore 26.5% (£53,000 ÷ £200,000)The difference between the marginal rate of 26.5% and the main rate of 25% is 1.5% which is then expressed as 3÷200.
Example
- If profits are £100,000, then the formula is:
- (£250,000 - 100,000) x 1 (Basic Profits/Total Profits) x 3/200
- 150000 x 1 x 3/200
- 2,250
*Total Profits = Basic Profits + Dividends from other companies
- Total tax of
- 25,000
- MINUS MSCR of 2,250
- £22,750