It’s the question I hear more than any other from new limited company directors: "When do I actually have to pay my corporation tax?"
For the vast majority of UK businesses, the rule is refreshingly simple. Your corporation tax payment is due 9 months and 1 day after your company's accounting period comes to an end. Think of it as your core tax deadline – the date you need to have circled in your calendar long before it arrives.
Understanding Your Corporation Tax Payment Dates
Getting to grips with your company's financial calendar is one of the first hurdles every business owner faces. If your company's year-end is the finish line for your financial year, then the corporation tax deadline is the fixed, non-negotiable date HMRC sets for you to settle up.
Here’s where a lot of people get caught out: your deadline to pay the tax is not the same as your deadline to file the tax return. They are two completely different dates, and mixing them up is an easy – and often expensive – mistake to make. While the payment is due within nine months, you get a full twelve months to file the corresponding Company Tax Return (the CT600 form).
Key Takeaway: The money has to be with HMRC long before the paperwork. Your payment deadline is the immediate priority, giving you less wiggle room than the filing deadline.
The Standard Timeline at a Glance
To bring this to life, let’s map it out for a company with a standard 12-month accounting period that runs from 1 January to 31 December. This is the most common setup and serves as a perfect baseline.
The table below breaks down the key dates for a typical business, showing how the deadlines flow from the end of the financial year.
Key Corporation Tax Deadlines for a Typical 12-Month Accounting Period
| Event | Deadline Rule | Example Date (for 31 Dec 2024 Year-End) |
|---|---|---|
| Accounting Period Ends | Your financial year concludes | 31 December 2024 |
| Corporation Tax Payment Due | 9 months and 1 day after the period ends | 1 October 2025 |
| Company Tax Return Filing | 12 months after the period ends | 31 December 2025 |
As you can see, the payment is due a whole three months before the final return needs to be submitted. This system allows HMRC to get the tax revenue it's expecting promptly, while still giving you and your accountant enough time to finalise the accounts and submit a perfectly accurate return.
This is the fundamental principle that underpins the tax schedule for most small and medium-sized enterprises (SMEs) in the UK.
To see how these deadlines slot into the wider financial year alongside things like VAT and PAYE, check out our UK tax diary. Understanding this basic timeline is the first step before we dive into the exceptions and complexities that can crop up with different accounting periods or as your company grows.
Decoding the 9 Months and 1 Day Payment Rule
For most UK limited companies, there’s one core rule you need to know for your corporation tax payment deadline. It’s a simple, predictable formula: your tax bill is due 9 months and 1 day after the end of your company's accounting period. This is the cornerstone of the system for pretty much every small and medium-sized business out there.
Think of it as HMRC’s standard grace period. The moment your financial year ends, the clock starts ticking. You get exactly that amount of time to get your books in order, figure out your profit, calculate the tax you owe, and get the money to them. It’s consistent and, thankfully, easy to plan for.
The key piece of the puzzle here is your company's accounting period end date. Everything flows from this. Once you know that date, you can map out your corporation tax payment deadline with certainty, year after year.
Calculating Your Exact Payment Date
The "9 months and 1 day" rule is meant to be taken literally. You just count forward nine whole calendar months from the end of the month your accounting period finishes, then add one day.
Let’s run through a few real-world examples to see how this plays out:
- Year-End 31 March: If your company's year ends on 31 March 2024, your corporation tax is due by 1 January 2025. (Nine months from the end of March brings you to the end of December. Add one day, and you land on New Year's Day).
- Year-End 30 September: For a 30 September 2024 year-end, the payment must be with HMRC by 1 July 2025. (Nine months from the end of September gets you to the end of June, plus one day).
- Year-End 31 December: A business using the calendar year (ending 31 December 2024) needs to pay its tax by 1 October 2025.
This straightforward calculation is the foundation of your entire tax payment schedule.
A Common and Costly Mistake
Here’s a tripwire that catches out countless business owners: mixing up the tax payment deadline with the tax filing deadline. They are not the same thing.
Remember this: HMRC wants your money long before they need your paperwork. The payment is due at 9 months and 1 day, but you have a full 12 months from your year-end to file the Company Tax Return (CT600).
Miss that payment date, and HMRC will start charging interest immediately—even if your tax return isn’t late. The interest starts racking up the very next day and can quickly inflate what was a manageable tax bill into a much bigger headache.
To sidestep this common pitfall, burn these two separate dates into your financial calendar:
- Payment Due: 9 months + 1 day after year-end.
- Filing Due: 12 months after year-end.
Getting this distinction right is fundamental to good tax planning. It keeps you on the right side of HMRC, saves you from needless costs, and turns a source of stress into a predictable part of your business's financial rhythm. By understanding how to pinpoint your corporation tax payment dates with this one key rule, you’re already well ahead of the game.
For most small and medium-sized businesses, that ‘9 months and 1 day’ rule becomes a familiar part of the financial calendar. It’s predictable. But as your company grows, so do HMRC’s expectations.
Once your profits hit a certain level, you’ll find yourself graduating to a completely different, and much faster, payment schedule.
When Your Payment Schedule Changes
This big shift happens when your company’s annual profits reach £1.5 million. Think of it as HMRC moving you from an annual subscription to a quarterly one. Instead of one single payment well after your year-end, you’ll be required to pay your corporation tax bill in four instalments throughout the year. This system is officially known as Quarterly Instalment Payments (QIPs).
The logic from HMRC’s side is pretty straightforward. They see larger, more profitable companies as having the resources to manage their finances more proactively. So, they expect you to pay your tax closer to the time you actually earn the profits. This move demands a real change in how you manage your cash flow, turning corporation tax from a distant, single event into a regular, ongoing operational cost.
Before we dive into the quarterly system, here’s a quick visual reminder of the standard process most companies follow.
This flowchart clearly maps out the journey from your year-end to that single payment deadline—a path that changes dramatically once you enter the world of quarterly instalments.
The Hidden Catch: Associated Companies
Here’s where things get tricky, and it’s a detail that catches many business owners out. The £1.5 million profit threshold isn’t always a straightforward figure. If your company is linked to others through common control, you have to account for associated companies.
In short, the £1.5 million threshold gets divided by the total number of associated companies in your group. This means the trigger point for moving to quarterly payments can be much, much lower than you think.
Let’s say you own two separate limited companies. The threshold is divided by two, bringing it down to £750,000 of profit for each company. If you have three companies, that threshold plummets to just £500,000 each. It’s a rule designed to stop businesses from artificially splitting profits across multiple entities to stay under the limit.
Key Takeaway: The £1.5 million profit threshold is not a per-company figure if you have multiple businesses. You must divide it by the total number of associated companies to find your true threshold.
Calculating Your Quarterly Instalment Payment Dates
Unlike the standard deadline, the corporation tax payment dates for large companies aren't set after your year-end. Instead, payments are due during your accounting period. For a typical 12-month year, this requires you to estimate your tax liability as you go.
The four payment dates are calculated like this:
- Payment 1: 6 months and 13 days after the first day of the accounting period.
- Payment 2: 9 months and 13 days after the first day of the accounting period.
- Payment 3: 12 months and 13 days after the first day of the accounting period.
- Payment 4: 3 months and 14 days after the last day of the accounting period.
This schedule is all about aligning tax payments with profit generation. You’ll notice that these corporation tax payment dates in the UK often land on the 14th of the month, which fits in with other key HMRC reporting cycles. Missing one can bring on interest and penalties pretty quickly, so staying on top of it is vital. If you’re interested in the wider picture, HMRC's official statistics on corporation tax offer some useful context.
To really get a sense of how different these two systems are, let's compare them side-by-side.
Standard vs Quarterly Instalment Payment Schedules
| Feature | Standard Payment (SME) | Quarterly Instalments (Large Company) |
|---|---|---|
| Who It's For | Companies with annual profits under the threshold (typically below £1.5 million). | Companies with annual profits over the threshold (typically above £1.5 million, adjusted for associates). |
| Number of Payments | One single payment per accounting period. | Four instalment payments per accounting period. |
| Payment Timing | Due 9 months and 1 day after the accounting period ends. | Payments are made during and shortly after the accounting period. |
| Cash Flow Impact | A single, large, predictable outflow that can be planned for well in advance. | A regular, ongoing cost that needs to be factored into monthly or quarterly cash flow forecasting. |
| Forecasting Need | Based on finalised accounts after the year has finished. | Requires estimating current-year profits to calculate instalments, with potential for adjustments. |
| Example (31 Dec Y/E) | Payment is due by 1 October of the following year. | Payments are due on 14 July, 14 Oct, 14 Jan (next year), and 14 April (next year). |
This table highlights the fundamental shift in financial management required. Moving to quarterly payments isn't just an administrative change; it's a strategic one.
For any ambitious business owner, anticipating this transition is crucial. If you see your profits heading towards that threshold, start adjusting your cash flow forecasts now. Planning for this change well in advance will prevent a sudden and disruptive shock to your finances, marking a key milestone in your company’s growth journey.
The Real Cost of Missing Your Payment Deadline
Understanding your corporation tax deadline is half the battle. Knowing what happens when you miss it is what truly protects your company's cash. A late payment isn't just a minor admin hiccup; it's a direct, and completely avoidable, drain on your profits. HMRC’s system of interest and penalties is designed to be a sharp deterrent, quickly turning a manageable tax bill into a growing financial headache.
Think of it like an overdraft you never asked for. The moment your payment deadline passes, HMRC starts charging late payment interest. This isn't a slap on the wrist – it’s a daily charge that keeps adding up, meaning the bill gets bigger the longer it goes unpaid.
How Late Payment Interest is Calculated
The system is hardwired into the UK’s economic weather. HMRC’s formula for late payment interest ensures the penalty reflects the current cost of borrowing.
The interest rate for late corporation tax payments is set at the Bank of England base rate plus 2.5%. This means that when interest rates are high, the penalty for paying late gets a lot more painful.
This direct link is crucial. When it becomes more expensive for everyone to borrow money, the cost of effectively "borrowing" from HMRC by not paying on time also shoots up. This often catches business owners by surprise, as the interest isn't some fixed, predictable figure. It's a moving target that can stack up fast, especially for a growing business.
Filing Late vs Paying Late: A Critical Distinction
It’s absolutely vital to understand that HMRC sees filing your tax return late and paying your tax late as two completely separate issues. Each comes with its own set of penalties.
- Late Payment: This immediately triggers interest charges, which start clocking up from the day after your payment was due.
- Late Filing: This racks up flat-rate penalties that get bigger the longer your return is outstanding, starting at £100 if you're just one day late.
Mixing these two up is a common and costly mistake. You could file your Company Tax Return bang on time but still face hefty interest charges if the payment itself was delayed. On the flip side, you could pay what you think you owe on the due date but still get hit with filing penalties for failing to submit the official CT600 form.
A Real-World Example of Late Payment Costs
Let's make this real.
Imagine a small business, "Creative Solutions Ltd," has worked out its corporation tax bill is £50,000. The payment deadline was 1st October, but a cash flow squeeze meant they couldn't pay it until three months later, on 1st January.
Let's say the Bank of England base rate at the time is 5.25%. That makes HMRC’s late payment interest rate 7.75% (5.25% + 2.5%).
Here’s how that simple delay costs them:
- Annual Interest: £50,000 x 7.75% = £3,875
- Daily Interest: £3,875 / 365 days = £10.62 per day
- Total Interest for 92 Days Late: £10.62 x 92 = £977.04
In just three months, a simple oversight has cost the business nearly £1,000. That’s money that could have been reinvested, paid out as a dividend, or put towards growing the company. If you ever find yourself struggling to meet a deadline, exploring a corporation tax payment plan with HMRC is always a smarter move than just letting the interest pile up.
A Practical Guide to Paying Your Corporation Tax
Knowing your deadline is one thing, but actually getting the payment to HMRC correctly is where the rubber meets the road. It’s the final, crucial step. A successful payment means the right amount of money lands in HMRC's account, on time, and is matched to your specific company.
It sounds simple, but getting any part of this wrong can cause delays, a heap of unnecessary stress, and even interest charges. Let’s walk through a clear checklist to make sure your payment goes off without a hitch, every single time.
Choosing Your Payment Method
HMRC gives you a few different ways to settle your corporation tax bill, but they aren’t all the same. The main thing to watch out for is the clearing time—that’s the time it takes for your money to officially arrive in HMRC’s bank account.
You have a few solid options, and each one has its place:
- Online or Telephone Banking (Faster Payments): This is what most people use, and for good reason. It’s usually instant but can take up to two hours. It’s always smart to give yourself a bit of a buffer, just in case of bank delays.
- CHAPS: This is the express delivery option. It guarantees same-day payment, but your bank will almost certainly charge you for the privilege. It’s really only for those large, last-minute payments where speed is everything.
- Direct Debit: A great 'set-and-forget' choice if you know the exact amount well ahead of time. The catch? You have to set up the Direct Debit instruction at least five working days before you want the payment to actually leave your account.
- At your bank or building society: You can still go in and pay over the counter, but you’ll need a special paying-in slip from HMRC to do it. Honestly, it’s a slower and less common method these days.
It's worth noting that you can no longer pay at the Post Office, and HMRC won't accept personal credit cards for corporation tax. For a step-by-step look at the most popular method, check out our guide on how to pay your corporation tax online.
Your Payment Reference Is Non-Negotiable
This is, without a doubt, the most important part of the whole process. When you send the money, you must use the correct payment reference number. It's how HMRC identifies which company the payment belongs to.
Your corporation tax payment reference is always 17 characters long. It’s made up of your 10-digit Unique Taxpayer Reference (UTR), followed by the letter 'A', and then a mix of numbers and letters specific to your accounting period.
You can find this full 17-character reference on the 'notice to deliver a Company Tax Return' HMRC sends you, or on any payment reminders. Using the wrong one is like sending a letter with the wrong house number on it—it will get lost and cause major delays.
Common Payment Mistakes to Avoid
A simple slip-up can mean HMRC considers your payment late, even if the money left your account on time. Here are the most common traps people fall into:
- Using the wrong reference: Double-check every single digit. Just using your UTR isn't enough; you need the full 17-character code.
- Ignoring bank clearing times: If your deadline is a Friday and your payment takes three working days to clear, it’s going to arrive late. Always send it a few days early to be safe.
- Forgetting about weekends and bank holidays: Your payment has to clear by the last working day before your deadline if the date itself falls on a non-working day.
Thinking about the bigger picture is always a good idea. To get a holistic view, it's worth learning how to prepare for tax season in a more comprehensive way. By following these practical steps and planning ahead, you can turn paying your corporation tax into a straightforward and stress-free part of running your business.
Proactive Cash Flow Planning for Tax Payments
The real mark of a financially savvy business is moving from simply reacting to tax bills to proactively planning for them. Your corporation tax payment should never be a nasty surprise that throws your cash flow into chaos. It's far better to treat it like any other predictable overhead, like your rent or payroll, and budget for it throughout the year.
By weaving tax planning into your company’s normal financial routine, you change a daunting liability into a manageable, forecasted expense. This ensures the money is already set aside well before your corporation tax payment deadline, preventing that last-minute panic that can stall operations or kill a growth opportunity.
The Digital Envelope Method
One of the simplest and most effective tactics I’ve seen is the 'digital envelope' system. The idea is brilliant in its simplicity: open a separate business savings account—preferably one with a decent interest rate—and dedicate it exclusively to your future tax bill. This account becomes a ring-fenced pot, safely separating your tax money from your day-to-day working capital.
Think of it as paying your tax bill in tiny, regular instalments. Every month, set up an automatic transfer to move a calculated percentage of your revenue or profits into this tax pot. It’s a small, consistent action that builds a substantial fund over 12 months without ever feeling like a massive hit to your main account.
A fantastic way to prepare for large, known expenses like this is to adopt a sinking fund strategy. It’s a disciplined approach that guarantees the money is sitting there when you need it, helping you sidestep any cash flow emergencies.
Key Insight: The single most powerful habit a business owner can build is to treat their future tax bill as a current monthly expense. It transforms a huge, stressful annual event into a series of small, painless steps.
Using Technology for Real-Time Forecasting
Thankfully, we've moved past the days of guesstimating your tax bill from dusty, out-of-date spreadsheets. Modern cloud accounting software like Xero or QuickBooks gives you a live, up-to-the-minute view of your company's financial health. This turns tax estimation into a continuous, dynamic process.
These platforms let you see your profit and loss statement at a glance, on any day you choose. Armed with this real-time information, your tax provisions become far more accurate. The benefits are massive:
- Spot-On Projections: You can tweak the amount you set aside each month based on actual performance, making sure you don't save too little or tie up too much precious cash.
- Total Visibility: Live data gives you a crystal-clear picture of your upcoming liability, which gets rid of the guesswork and dials down the financial anxiety.
- Smarter Decisions: When you know your true profit after tax, you can make much better strategic decisions about investing, hiring, or expanding the business.
When you combine the discipline of a separate savings account with the power of real-time data, you shift your business from a state of tax-induced stress to one of complete financial control.
Your Questions, Answered
Even when you think you have a handle on the rules, real-life business scenarios can throw up tricky questions. Let's tackle some of the most common queries we hear from business owners about corporation tax payments.
What Happens If My Corporation Tax Payment Date Falls on a Weekend?
This is a classic trap that catches out so many businesses. If your payment deadline lands on a weekend or a bank holiday, the rule is simple and unforgiving: your payment has to be sitting in HMRC’s bank account by the last working day before that date.
It's not enough for the money to leave your account on the final day; it has to have arrived and cleared.
So, if your deadline is Sunday, 1st October, you need to make sure the funds are cleared with HMRC by Friday, 29th September. This is where understanding your bank’s processing times becomes critical. Some payment methods can take a few working days, so leaving it to the last minute is a surefire way to get hit with interest charges. Always aim to pay a few days early.
Can I Get an Extension on My Corporation Tax Payment Deadline?
To put it bluntly, no. Unlike some other tax deadlines, the date for paying your corporation tax is set in stone. HMRC doesn't grant extensions on the payment itself, and missing it—for any reason—means late payment interest will automatically start to rack up.
That said, if your business is in genuine financial trouble and you know you can't make the payment, don't just bury your head in the sand. You need to be proactive. The best thing you can do is get in touch with HMRC’s Business Payment Support Service before the payment is due.
Crucial Tip: Never wait for the deadline to pass. By contacting HMRC ahead of time, you might be able to set up a 'Time to Pay' arrangement. This is a formal plan to pay in instalments. While you'll still be charged interest on the outstanding amount, it shows you're being responsible and can help you avoid more serious consequences.
My Company Made a Loss. Do I Still Need to Worry About Payment Dates?
If your company made a loss during its accounting period, you won't have any corporation tax to pay. In that case, the payment deadline itself is a non-issue.
But don’t switch off completely! You still have a legal duty to file a Company Tax Return (CT600) with HMRC. The deadline for filing the return is different—usually 12 months after your accounting period ends.
Submitting this return is vital for two big reasons:
- It’s the law: You'll face penalties starting from £100 if you fail to file a CT600, even if you don't owe any tax.
- It banks your loss for the future: Filing the return officially tells HMRC about your loss. You can then carry this loss forward to offset against profits in future years, reducing your tax bill when things turn around. Think of it as putting a tax-saving asset in your back pocket.
What if I Overpay My Corporation Tax?
It's actually quite common to overpay, especially if your company pays in quarterly instalments based on profit forecasts that turned out to be a bit optimistic. If you realise you've paid more than you owe, don't worry—HMRC will refund you.
The refund is usually triggered once you’ve filed your final Company Tax Return. Your CT600 confirms the correct, final tax figure, and HMRC’s system will automatically spot the overpayment. They’ll then send the refund, typically via BACS transfer straight into your company’s bank account.
Just be aware that while HMRC is very quick to charge you interest on late payments, they generally don't pay you interest on overpayments unless the mistake was on their end. It’s always better to get your figures as accurate as possible to avoid having your cash tied up unnecessarily.
Managing your accounts can feel like a minefield, but you don't have to navigate it alone. Whether you need help forecasting your tax bill, staying on top of deadlines, or planning for growth, our team at Stewart Accounting Services is here to bring you clarity and confidence. Visit us at https://stewartaccounting.co.uk to book a consultation and gain peace of mind.