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Marginal Relief Shrinks For Owners Of More Than One Company

ended 25. July 2026

When Corporation Tax split back into two rates on 1 April 2023, a quieter rule came back with it. A company with taxable profits below £50,000 pays 19 per cent, one with profits above £250,000 pays the full 25 per cent, and Marginal Relief tapers the rate for profits in between. But those £50,000 and £250,000 thresholds are divided across your company and its associated companies. On gov.uk's own example, a company with three other associated companies sees the limits split by four, so the lower limit falls to £12,500 and the upper limit to £62,500. The 25 per cent rate starts biting far sooner than the headline figure suggests.

An associated company is broadly one you control, or one under common control with yours: a second trading company, a consultancy, a property company, or a spouse's company that is commercially interdependent with yours. A company that is dormant for the whole period does not count, but an overseas company under common control does. The catch is simple. Undercount your associated companies and you claim too much Marginal Relief and underpay Corporation Tax, often without realising the threshold ever moved.

HMRC is now acting on it. On 23 July 2026 it added a new letter campaign to its list of genuine contact: from 7 April to 30 September 2026 it may write to companies where its records show associated companies were not declared on a Company Tax Return when Marginal Relief was claimed. The owner most exposed is not a large group with advisers, but the ordinary owner-manager who runs a second active company and never thought of the two as linked.

  1. Is dividing the Marginal Relief thresholds by the number of associated companies a fair way to stop profit-splitting, or a trap that catches owner-managers who never set out to game anything?
  2. Who is hit hardest when these thresholds shrink without warning, and is it fair that the 25 per cent rate can bite at £62,500, or lower still with more companies, for someone who simply owns more than one company?
  3. What should an owner-manager with more than one company do now to check their associated companies and their Marginal Relief claim before a letter arrives? Do you have a client whose plans this would change? If so, please give as much colour and detail as possible.

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Editor
Harvey Dhillon
Founder & CEO at Zmartly
Own a second company and the point where 25 per cent tax starts quietly slides towards you. Corporation Tax has two rates: 19 per cent on profits under £50,000 and 25 per cent over £250,000, with Marginal Relief tapering in between. But those limits are split across your company and each one linked to it. On HMRC's own example, three other associated companies divide them by four, so the lower falls to £12,500 and the upper to £62,500. A firm making £60,000 feels safe, yet once the others count it pays nearly 25 per cent. The rule exists to stop one business splitting into ten to dodge the top rate, which is fair. What is unfair is the silence: a trader with a property company, or a couple whose firms lean on each other, are hit hardest, and few knew the line had moved. HMRC is writing until 30 September, so count every associated company. An overseas one you control counts, one dormant all year does not. Then check each return since April 2023.