Corporation tax is the tax a PSC pays on its profits before any profit is extracted as salary or dividends. For 2026/27 the small profits rate is 19% where augmented profits do not exceed £50,000, and the main rate is 25% where they exceed £250,000. Finance Act 2026 made no change to these rates.
Between £50,000 and £250,000, the main rate applies but is reduced by marginal relief, using a standard fraction of 3/200. The effect is an effective marginal rate of about 26.5% on profits in that band, which is higher than both the small profits rate and the main rate. Many contractor PSCs fall squarely in this marginal band, so it is the rate that matters most for planning.
The £50,000 and £250,000 limits are divided by the number of associated companies. Two companies are associated where one controls the other or both are under common control, so a contractor with several companies, or a connected spouse who also runs a PSC, can see each company's bands shrink. This should always be flagged and checked, not assumed away. The statutory hooks are CTA 2010 Part 3, ss.18 to 18N. See dividend for how the after-tax profit is then extracted.