Coventry Accountant for Limited Companies: Corporation Tax Rates and Reliefs for 2026/27

26 Oct

Corporation tax is usually the biggest single tax bill a limited company faces, and the rules around it have shifted again for the 2026/27 financial year. Rates are unchanged, but capital allowances have been reworked and late filing penalties have doubled. A Coventry accountant who works with limited companies every day will tell you the same thing: the companies that pay the least tax are the ones that plan before their year-end, not after it.

Here is what Coventry limited company directors need to know for 2026/27.

Corporation Tax Rates for 2026/27

The corporation tax financial year runs from 1 April 2026 to 31 March 2027, which is different from the personal tax year (6 April to 5 April). The two-rate structure introduced in 2023 continues:

Profits up to £50,000: 19% (small profits rate)
Profits between £50,001 and £250,000: 25% less marginal relief (effective rate between 19% and 26.5%)
Profits over £250,000: 25% (main rate)

The government has also committed to capping the main rate at 25% for the duration of this Parliament, which gives limited companies some certainty when planning.

How Marginal Relief Works

If your company’s profits fall between £50,000 and £250,000, you don’t jump straight from 19% to 25%. Tax is calculated at the 25% main rate, then reduced by marginal relief using this formula:

Marginal relief = (£250,000 − profits) × 3/200

In practice, this means profits in the marginal band are effectively taxed at up to 26.5% on each extra pound earned. Here is how it looks at different profit levels:

£50,000 profit: £9,500 tax (19% effective rate)
£100,000 profit: £22,750 tax (22.75% effective rate)
£150,000 profit: £36,000 tax (24% effective rate)
£250,000 profit: £62,500 tax (25% effective rate)

Any accountant in Coventry advising owner-managed companies will watch this band closely, because profits sitting inside it are taxed more heavily than profits on either side. That creates real planning opportunities, such as pension contributions or timing of equipment purchases.

Associated Companies and Short Accounting Periods

The £50,000 and £250,000 limits aren’t fixed for every company. They’re reduced:

Where there are associated companies. The limits are divided by the number of associated companies, including ones you control through family or other connections. A company with one associated company, for example, only gets the small profits rate on profits up to £25,000.
For accounting periods shorter than 12 months, such as in a company’s first year.

Directors with more than one company are often caught out by this. A Coventry accountant should review your group structure before your year-end so the thresholds are applied correctly.

Key Corporation Tax Reliefs Worth Knowing

Capital allowances (changed this year)

If your company buys equipment, machinery, vehicles or tools, capital allowances let you deduct that spend from your taxable profits. Several things changed in 2026:

Full expensing continues to give companies 100% first-year relief on qualifying new plant and machinery.
Annual Investment Allowance (AIA) of £1 million remains available for most qualifying equipment.
Main pool writing-down allowance fell from 18% to 14% from 1 April 2026. Companies with accounting periods straddling that date use a blended rate.
A new 40% first-year allowance applies to main-rate assets bought on or after 1 January 2026, including most assets bought for leasing.

For manufacturers, contractors and anyone investing in machinery, the timing and type of spend can noticeably change the tax outcome.

Employer pension contributions

Contributions your company makes into a director’s pension are usually deductible against profits, and they’re not subject to employer National Insurance. For companies sitting in the marginal relief band, a well-timed contribution can reduce profits back towards the lower rate, which makes this one of the most effective routes to tax efficiency. A Coventry accountant can model the numbers before you commit.

R&D tax relief

Companies developing new products, processes or software may qualify for R&D relief under the merged scheme, which pays an above-the-line credit of 20% of qualifying spend. Loss-making, R&D-intensive SMEs can access an enhanced scheme. Many Coventry businesses, particularly in engineering, automotive, manufacturing and tech, are eligible without realising it. Claims need to be supported by a clear technical narrative, so they’re best prepared with professional help.

Loss relief

Trading losses can be carried forward against future profits of the same trade, and in some cases carried back to earlier years. Planned properly, a loss doesn’t have to be wasted.

Patent Box

Companies earning profits from patented inventions can apply a reduced 10% rate on qualifying profits, which is relevant to a smaller number of innovative businesses.

Allowable business expenses

Many expenses reduce taxable profits, including salaries, rent, insurance, professional fees, software subscriptions, marketing and travel for business purposes. Good bookkeeping makes sure none of these are missed.

Deadlines and Penalties for 2026/27

Two separate deadlines apply to every limited company, and they’re often confused:

Paying corporation tax: 9 months and 1 day after your accounting period ends
Filing your CT600 return: 12 months after your accounting period ends

Late filing penalties have doubled. For returns with a filing date on or after 1 April 2026, the penalty for missing the deadline is twice what it used to be, with further charges the longer a return is outstanding. Companies House filing for annual accounts is a separate deadline again, and missing it carries its own penalties.

Reliable reminders and a proactive accountant matter here. These are avoidable costs, not bad luck.

Why Limited Company Directors in Coventry Use a Specialist Accountant

Many directors start out handling their own corporation tax, but the rules around associated companies, capital allowances, R&D claims and the marginal relief band make it easy to overpay without noticing. The right accountants Coventry for a limited company will:

Review your profits before the year-end, not after
Time equipment purchases and pension contributions to cut your tax bill
Check whether you qualify for R&D relief or other reliefs
File accurate accounts and your CT600 on time
Explain your tax position in plain English

Work With Coventry Accountants Who Plan Ahead

Cheylesmore Accountants supports limited companies across Coventry and Warwickshire with fixed-fee packages covering annual accounts, corporation tax returns, bookkeeping, payroll and ongoing tax planning. Fees start from £150 ex VAT per month, with no hidden extras.

If you’re looking for an accountant Coventry limited companies can rely on to flag savings before the year-end, book a free 15-minute consultation to talk through your company’s position for 2026/27.

Call 02476 017778 or book a discovery call to get started.