Most of the directors we speak to find out what they owe months after the year they earned it in. The accounts get prepared, the CT600 goes in, and a figure appears with a payment date attached. By then the money has usually been moved, spent or drawn.

That gap is the whole problem. Corporation tax is payable nine months and a day after the end of the accounting period for most companies, so there is a long stretch where the liability exists but nobody has put a number on it. We think the number should exist before the year closes, not after. Everything that follows in this article is about why that is harder than it sounds and what actually decides the figure.

Think about what happens in the meantime. A dividend goes out in July. A van or a piece of equipment is bought in October. Someone is hired in January. Every one of those is a decision with a tax consequence, and if nobody has forecast the profit and the rate, each one is taken on instinct.

For a consultant with a handful of large invoices, one late payment landing either side of the year end can move taxable profit by tens of thousands and change which band the company sits in. For a trades business with staff, the timing of a big material purchase does the same thing. Guessing is fine when the rate is flat. It stopped being fine in April 2023.

Here is the part that still catches people out. From 1 April 2023 there has been no single corporation tax rate for non-ring-fence profits. GOV.UK’s rates and allowances page sets out three positions for 2026/27 rather than one.

• Taxable profits below the £50,000 lower limit: the small profits rate of 19%.
• Taxable profits above the £250,000 upper limit: the main rate of 25%.
• Taxable profits between the two limits: the main rate, reduced by marginal relief.

The effective percentage in that middle band moves with profit, so two companies in the same trade with different profits pay genuinely different rates. The answer to “what is my corporation tax rate” is now a calculation, not a fact you can memorise.

Plenty of directors are still told, in passing, that corporation tax is 19% and that is the end of the conversation. It is not wrong, exactly. The small profits rate for 2026/27 is 19%, and for a company whose taxable profit genuinely sits under £50,000 that is the rate.

The problem is what the statement leaves out. It holds only while profit stays under the lower limit, only if the accounting period is a full twelve months, and only if there are no associated companies. Our audience is established limited companies turning over £150,000 or more, and a decent proportion of them clear £50,000 of taxable profit without thinking about it. For those companies, 19% is a number from a different company’s return.

Above the lower limit, the main rate of 25% applies and marginal relief claws some of it back. HMRC’s marginal relief guidance describes it as a gradual increase in the rate between the small profits rate and the main rate, worked out using the standard fraction of 3/200 for 2026/27.

In practice that means the effective rate climbs as profit rises through the band, and the profit earned in the middle of that band is taxed at a higher marginal cost than either end suggests. An extra £10,000 of profit at £60,000 does not cost the same as an extra £10,000 at £240,000. Marginal relief is not optional and it is not obscure, but most directors have never seen the working behind their own figure.

An example from our own work, anonymised. A director ran an established trading company and set up a second one the previous year for a new venture. Sensible enough on its own terms. He assumed both companies were taxed on the same basis as the first one always had been, because nobody had told him otherwise and nothing in the paperwork suggested a change.

The second company was small, barely trading, and he treated it as an administrative detail rather than a tax event. That is the normal reaction. Forming a company is cheap and quick, and nothing at the point of formation prompts anyone to ask what it does to the profit limits on the company that was already there.

The lower and upper limits are proportionately reduced by the number of associated companies. With two associated companies, the limits are divided by two, so the lower limit drops to £25,000 and the upper limit to £125,000. HMRC’s own example goes further: a company with three other associated companies divides the limits by four, giving a lower limit of £12,500 and an upper limit of £62,500.

So the trading company that had always sat comfortably in small profits territory was suddenly into the marginal relief band, purely because a second company existed. Nothing about the trade had changed. The limits had. The same applies if an accounting period runs short, because the limits are reduced in proportion to the period.

This is where I am blunt about how a lot of practices work. The software applies a rate based on what is entered into it. If the associated company box is not completed, the return still files, the numbers still foot, and nothing flags. A junior prepares it, a review signs it off on the basis that it balances, and the file moves on.

Structure is not a number that appears in the bookkeeping. It is something a person has to ask about, usually in a conversation that nobody is paid to have. That is the gap. The arithmetic was never the hard part of corporation tax for limited companies. Knowing which limits apply to this particular director, this year, is the hard part.

The consequence was predictable and entirely avoidable. By the time the higher figure was known, dividends for the year had already been voted and paid, and the cash that should have covered the difference was sitting in personal accounts rather than the company’s.

That is the real cost of finding out late. The tax itself was correct and payable either way. What went wrong was the sequencing: a dividend policy set against an assumed 19%, and a liability calculated against a reduced set of limits. Recovering from that means either repaying money, taking less the following year, or paying late. None of those are good options, and all three were available to be avoided nine months earlier.

The way we handle this is to start with the set-up rather than the ledger. Before any forecast is worth anything, we establish how many associated companies there are, what the accounting period length is, and therefore what the lower and upper limits actually are for that company this year.

Only then do we look at profit, and only then at the salary and dividend split. Doing it the other way round produces a confident figure built on the wrong limits. For this director it meant confirming the associated company position, resetting the expected rate, and planning distributions around the corrected number. It is not complicated work. It just has to happen before the year ends rather than after.

He now gets his corporation tax figure around a month before it is due, with the dividend headroom alongside it. That is the standard at Nexus rather than something arranged specially, and it changes the nature of the conversation.

When the number is visible in advance, dividends get planned against it, a capital purchase can be timed deliberately, and the cash is set aside rather than found. The second company still exists, the limits are still halved, and the rate is still what it is. The difference is that none of that arrives as news. Knowing early does not reduce the tax by itself, but it does mean every decision in the year is taken with the cost attached.

If you take one thing from this, make it a question for whoever prepares your return: which lower and upper limits apply to my company this year, and how many associated companies have you counted? If the answer comes back as a flat 19% with no further detail, it is worth pressing.

The figures to hold onto for 2026/27 are the £50,000 lower limit, the £250,000 upper limit, 19% below, 25% above, and marginal relief in between, all divided by the number of associated companies and adjusted for a short period. Everything else is arithmetic. The rate that applies to you is decided long before the return is filed.