Corporation Tax UK-wide

Associated companies and Corporation Tax

How associated companies rules affect your Corporation Tax rate thresholds and quarterly instalment obligations.

Guide summary

Check if you control multiple companies. If you do, divide the Corporation Tax profit thresholds equally among them. This decides whether you pay the 19% small profits rate, the 25% main rate, or something in between. It also affects whether you must pay tax in quarterly instalments.

  • Check if your company has associated companies under common control
  • Count all associated companies including yourself
  • Divide the £50,000 small profits threshold equally among all companies
  • Divide the £250,000 main rate threshold equally among all companies
  • Example: 2 companies get £25,000 small profits and £125,000 upper threshold each
  • Exclude dormant companies with no significant transactions
  • Include 51% group subsidiaries automatically
  • The £1.5 million quarterly instalment threshold also gets divided
  • Spouses are not automatically associated unless businesses share customers, staff or premises
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What are associated companies

Two companies are associated if one controls the other, or both are under the control of the same person or persons. The associated companies rules were reintroduced from 1 April 2023 alongside the new Corporation Tax rate structure.

Associated companies share the Corporation Tax thresholds. This determines whether you pay the small profits rate (19%), the main rate (25%), or benefit from marginal relief.

The control test

A person controls a company if they hold or are entitled to acquire:

  • More than 50% of the share capital or issued share capital
  • More than 50% of the voting power
  • Rights to more than 50% of distributable income or assets on a winding up

Attribution rules: The rights of associates such as a spouse or relative are attributed when testing control only in limited circumstances, including where the companies are substantially commercially interdependent through shared customers, premises, staff, equipment or financial support. Marriage alone does not make two otherwise unconnected companies associated.

How thresholds are shared

The small profits threshold (normally £50,000) and the upper limit (normally £250,000) are divided equally by 1 plus the number of associated companies.

1 company (no associates)
Small profits: £50,000 | Upper limit: £250,000
2 associated companies
Small profits: £16,667 each | Upper limit: £83,333 each
3 associated companies
Small profits: £12,500 each | Upper limit: £62,500 each
5 associated companies
Small profits: £8,333 each | Upper limit: £41,667 each

Common scenarios

Husband and wife companies

A director owns Company A and their spouse owns Company B. The companies are not associated by marriage alone. Spousal attribution applies only where the businesses are substantially commercially interdependent, for example through shared customers, premises, staff, equipment or financial support.

Trading company plus property company

A director owns both a trading company and a property company. Both are associated. The thresholds are halved for each company.

Dormant companies

Dormant companies are excluded from the count if they have not carried on a trade or business at any time during the accounting period. A dormant holding company is not automatically excluded.

Quarterly instalment impact

Associated companies also affect the quarterly instalment threshold. The £1.5 million threshold is divided by 1 plus the number of associated companies. With 2 associated companies, the threshold drops to £500,000 each, meaning companies with moderate profits may need to pay Corporation Tax in quarterly instalments.

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