Marginal Relief

Marginal Relief in CT600 software: small profits rate edge cases.

Since 1 April 2023, many companies need more than a flat Corporation Tax rate. Marginal Relief depends on profit levels, dates, associated companies, and the way the CT600 computation is reviewed.

Why Marginal Relief matters

GOV.UK explains that from 1 April 2023 the Corporation Tax main rate is 25% for profits above the upper limit, while the small profits rate is 19% for companies with profits below the lower limit. Marginal Relief provides a gradual increase between those rates.

In practice, that means a small company near the thresholds cannot always be reviewed with a single headline rate. The software needs to know the accounting period, profit mix, associated-company position, and whether any apportionment is needed.

The headline limits are only the starting point

GOV.UK's rates and allowances table shows the Marginal Relief lower limit and upper limit for relevant financial years. Those headline figures are useful, but a CT600 workflow needs to go further because limits may be adjusted.

  • Accounting periods can straddle financial years with different rules.
  • Short accounting periods can require time apportionment.
  • Associated companies can reduce the effective limits.
  • Augmented profits, dividends, and chargeable gains can affect review.
  • Ring fence profits have separate rate and fraction rules.

Associated companies are the common hidden trap

For owner-managed groups, associated companies can move a company into a different effective threshold position. A director may think of each company separately, but the Corporation Tax calculation may need to divide the limits across associated companies.

This is where CT600 software should prompt rather than assume. A company with profits that look comfortably below a headline threshold may still need a different review once associated companies are counted.

What accountants should review before signing off

  • Accounting period start and end dates, including any short period or long accounts case.
  • Taxable total profits and any augmented profits figure used by the computation.
  • Whether the company has associated companies during the accounting period.
  • Whether profits straddle a financial year boundary.
  • Whether ring fence or specialist activities are present.
  • Whether loss relief, capital allowances, or other claims move the company across a threshold.
  • Whether the CT600 figures agree with the computation and accounts attachments.

Why directors see surprising effective rates

Directors often expect Corporation Tax to be either 19% or 25%. Marginal Relief creates a transition, so the effective rate can feel unintuitive when profits sit between the limits. It is also easy to confuse the effective rate on all profits with the marginal cost of the next pound of profit.

A good review pack should explain the result in plain language: what profit figure was used, which limits applied, whether associated companies changed those limits, and how the final Corporation Tax payable reached the CT600.

Automation and AI filing risks

Marginal Relief is exactly the kind of area where AI-assisted filing needs structured controls. A model can summarise the rule, but the return still needs deterministic calculation, source data, and review evidence.

API-led CT600 workflows should avoid free-text prompts such as "apply small company rate". Instead, they should pass explicit period dates, profit figures, associated-company counts, relief claims, and computation outputs.

How Robocount handles Marginal Relief workflow

Robocount treats Marginal Relief as part of the Corporation Tax computation and CT600 review flow. The aim is not only to get a number, but to keep the assumptions behind the number visible enough for a practice reviewer, director, or automated workflow.

  • Uses accounting period dates and tax computation data as structured inputs.
  • Keeps rate, relief, and threshold-sensitive review points visible before submission.
  • Supports review notes for associated-company and apportionment judgments.
  • Connects the computation outcome to the CT600 package and approval trail.
  • Gives AI and API workflows a controlled route for Corporation Tax calculations.

FAQ

What is Corporation Tax Marginal Relief?

Marginal Relief reduces the main Corporation Tax rate for companies with profits between the small profits limit and upper limit, producing a gradual increase between the small profits rate and main rate.

Do all small companies get the 19% small profits rate?

Not automatically. The company's profit level, accounting period, associated companies, and specialist facts can affect the result. Companies between the limits may need Marginal Relief rather than a simple 19% rate.

Why do associated companies matter?

Associated companies can reduce the effective lower and upper limits used in the rate calculation. That can change whether Marginal Relief applies and how much relief is due.

Can Robocount support AI-led Marginal Relief workflows?

Robocount is designed for structured CT600, computation, review, and filing workflows. For AI-assisted work, Marginal Relief should be handled through controlled inputs and review evidence rather than unsupported free-text assumptions.

Useful official references

This guide is general product and filing workflow information, not tax advice. Check current GOV.UK guidance, HMRC manuals, and the company's facts before filing.