An associated company is one that controls your company, is controlled by it, or is under the control of the same person or persons, and for the financial year from 1 April 2026 each one you have divides the £50,000 and £250,000 corporation tax limits (GOV.UK rates page). A director with one other company therefore works with limits of £25,000 and £125,000 (FY2026), and the £1.5 million quarterly instalment threshold is divided the same way, to £750,000. Correct as at 13 September 2026.
What are associated companies for corporation tax?
Two companies are associated if one has control of the other or both are under the control of the same person or persons (CTA 2010 section 18E; HMRC manual CTM03940). This replaced the 51% group test for accounting periods from 1 April 2023, so two companies with no shares in each other are caught if the same person controls both.
Control takes its close company meaning (sections 450 and 451): the greater part of the share capital, of the voting power, of the income on a distribution, or of the assets on a winding up. Where a group of people controls both companies, HMRC asks whether the same minimum controlling combination controls each (CTM03941).
How many associated companies do I have, and what do the limits become?
The limits are divided by one plus the number of your associated companies (CTM03935), so one associated company halves them to £25,000 and £125,000 and three cut them to £12,500 and £62,500, GOV.UK's own example, for FY2026. The instalment thresholds are divided the same way. A short accounting period reduces the figures again, as how marginal relief and the 26.5% band work explains.
| Associated companies | Lower limit (19% up to) | Upper limit (25% above) | Large company instalment threshold | Very large threshold |
|---|---|---|---|---|
| 0 | £50,000 | £250,000 | £1.5 million | £20 million |
| 1 | £25,000 | £125,000 | £750,000 | £10 million |
| 2 (rounded) | £16,667 | £83,333 | £500,000 | £6.67 million |
| 3 | £12,500 | £62,500 | £375,000 | £5 million |
FY2026, 12-month accounting periods; sources: GOV.UK marginal relief guidance (the 3-associated row is its own example) and the GOV.UK large company and very large company instalment pages.
Can a husband and wife have associated companies?
Yes. Where one spouse's own rights give them control of both companies they are associated whatever the commercial links; otherwise a spouse's or civil partner's shareholding is attributed to you only where the two companies are substantially commercially interdependent, through financial, economic or organisational links (CTA 2010 section 18G; SI 2022/1203; CTM03948), so spouses running unconnected businesses are usually not associated, and spouses whose companies share premises, staff, customers or money usually are. The same applies to a parent, child, brother or sister.
The three heads come from Schedule 1 to the National Insurance Contributions Act 2014: financial (one supports the other, or each has a financial interest in the other's activities), economic (the same objective, the activities of one benefit the other, or common customers) and organisational (common management, employees, premises or equipment). One link is enough (CTM03950).
HMRC's own scenario (CTM03950): a husband and wife own and run two separate companies, but the husband has lent money to his wife's company on terms that entitle him to its assets on a winding up, so he controls both through his own rights.
Do dormant companies, holding companies and overseas companies count?
A company that has not carried on any trade or business at any time in the accounting period is disregarded (section 18E(3); CTM03940), a holding company is disregarded only if it meets every condition in section 18F, and a company outside the UK counts like any other.
A passive holding company must carry on no trade, hold nothing but shares in its 51% subsidiaries, receive nothing but dividends passed on to its shareholders, and have no chargeable gains, management expenses or charitable donations. One that charges a management fee, holds the group's cash or owns the premises counts. A company associated for any part of the accounting period counts for the whole of it unless it was inactive throughout that part.
Example: two companies, £120,000 profit each
Example. Two companies owned by the same director each make £120,000 of taxable profit in the year to 31 March 2027 (FY2026).
Not associated, each keeping the full £50,000 and £250,000 limits: 25% of £120,000 is £30,000, less marginal relief of 3/200 of £130,000 (£250,000 less £120,000), which is £1,950, gives £28,050 each, £56,100 together.
Associated, each with limits of £25,000 and £125,000: 25% of £120,000 is £30,000, less 3/200 of £5,000 (£125,000 less £120,000), which is £75, gives £29,925 each, £59,850 together. The extra tax is £3,750, and one company making £240,000 would pay the same £59,850.
A further £5,000 of profit in either associated company takes it to its £125,000 upper limit, where marginal relief falls to nil and the whole profit is taxed at 25%; the 26.5% marginal rate on the band (FY2026) is explained in the marginal relief article.
How do associated companies change when you pay corporation tax?
A company is large, and pays in four quarterly instalments instead of 9 months and 1 day after its year end, when its profits are at an annual rate above £1.5 million divided by the number of associated companies plus itself (GOV.UK), so the line is £750,000 with one associated company and £375,000 with three. For a 12-month period the instalments fall 6 months and 13 days after the first day, then at three-month intervals, the last 3 months and 14 days after the year end.
Two exceptions: a total liability under £10,000, and profits no more than £10 million (divided the same way) where the company was not large in the previous 12 months, or did not exist or have an accounting period then. A company with profits at an annual rate above £20 million, divided the same way, is very large and pays, for a 12-month accounting period, on the 14th day of months 3, 6, 9 and 12.
Where does the count go on the CT600, and what does HMRC check?
The number of associated companies goes in box 326 of the CT600, the number of companies associated with yours for any part of the accounting period, not counting the company itself (GOV.UK Company Tax Return guide, updated 2 June 2026), and every associated company's return should carry a consistent count.
Instalment payers enter the count at the end of the previous accounting period; boxes 327 and 328 replace 326 where the period straddles two financial years with changed limits or a changed count; box 329 marks the small profits rate or marginal relief claim.
What to do now
List every company you, your spouse or civil partner and your close relatives control, mark the ones that carried on any trade or business in the year, and apply the control test to each pair before the CT600 is filed. The listing can be done from Companies House records. A company associated for any part of the period counts for all of it, so the check belongs before a new company is formed or bought.
The interdependence judgement on a spouse's or relative's company, a count that changed mid-year, an instalment threshold crossed, and whether a second company should be merged, kept or struck off are tax planning questions.
What we do when a client has more than one company
We ask first for the share register and articles of every company you, your spouse or civil partner and your close relatives hold shares in or control, including dormant, holding and overseas companies. We run the control test on each pairing, then the interdependence test for the spouse's and relatives' companies, and record the reason for each inclusion and exclusion so box 326 can be explained if HMRC asks.
Each company's divided limits and instalment threshold are then worked out, forecast profits placed against them, and the choices on timing and on whether the second company should carry on set out. We prepare and file each CT600 with the count and the marginal relief calculation through our accounting service. If the companies are not associated and the count is nil, we will say so and there is nothing to plan.
Frequently Asked Questions
Companies where one controls the other or both are under the control of the same person or persons (CTA 2010 section 18E). The test replaced the 51% group test for accounting periods from 1 April 2023, a company that carried on no trade or business in the year is ignored, and residence makes no difference.
Yes. Where one spouse's own rights, such as a personal loan with rights on a winding up, give them control of both companies they are associated without any interdependence test; otherwise only where the companies are substantially commercially interdependent through financial, economic or organisational links (section 18G and SI 2022/1203). Unconnected businesses usually stay separate.
It is ignored if it has not carried on any trade or business at any time in the accounting period (section 18E(3); CTM03940). Business is wider than trade (HMRC's meaning is at CTM03590), so a company that only holds an investment or a property may still count.
Box 326: the number of companies associated with yours for any part of the accounting period, not counting your own company. Instalment payers use the count at the end of the previous period, and box 329 marks the small profits rate or marginal relief claim.
Talk to Akeel Karim about your companies
Bring the share registers and the last accounts of each company; the first conversation establishes the count and which limits each company is working to. Akeel Karim, Manager, works on the firm's accounts and advisory files. Call 020 8554 2135, email info@visionconsulting.co.uk or use the contact page.
About Vision Consulting. Vision Consulting is a firm of chartered accountants and registered auditors, regulated by ICAEW, with offices in the City of London (the Gherkin, 30 St Mary Axe), the West End (33 Cavendish Square) and Gants Hill, Ilford. The firm provides year-end accounts, bookkeeping, payroll and tax compliance, including Making Tax Digital and VAT, for individuals, landlords, directors and businesses. Its specialist teams provide audit and assurance (company and charity audits and audit-exemption advice), probate and estate administration (the firm is licensed for non-contentious probate), inheritance-tax and estate planning, HMRC tax investigations and voluntary disclosures, property and landlord taxation, and corporation-tax and company advisory.
By the Vision Consulting team.
This is general information, not advice. Your position depends on your circumstances. Speak to us before acting on anything here.