Timely, accurate payment of Corporation Tax is a core compliance duty for UK companies. Directors and finance leads are responsible for ensuring the right amount is calculated, cash-flowed, and paid by the correct deadline using the correct reference. Getting this right avoids interest costs, protects governance standards, and keeps HMRC interactions straightforward.
What this article is about
This guide walks UK company owners, finance directors, and controllers through the Corporation Tax payment process end to end. It explains who pays and on what profits, how payment timetables align to your accounting period, which deadlines apply (including quarterly instalments for larger companies), and which payment methods work best in practice. It also covers how to use your 17-character payment reference, what to do if you make a mistake or need to amend a return, and practical controls to reduce risk and admin load. The structure is deliberately step-by-step so you can follow it at year-end, quarter-end, or during routine tax cash-flow planning.
Section A: Understanding Corporation Tax Payments
Corporation Tax is the principal tax on company profits in the UK. Unlike VAT or PAYE, it is not collected in real time through transactions or payroll but assessed and paid in line with your company’s accounting periods. For directors and finance managers, understanding what triggers a liability and when HMRC expects payment is the first step in staying compliant.
1. Who needs to pay Corporation Tax
Corporation Tax applies to UK-resident companies and certain unincorporated associations (for example clubs and co-operatives). It also applies to non-UK resident companies with a UK permanent establishment carrying on a trade in the UK. Sole traders and traditional partnerships do not pay Corporation Tax; their profits are taxed through Income Tax self-assessment.
2. What profits are taxable
Taxable profits include amounts chargeable to Corporation Tax after statutory adjustments. Broadly, these cover:
- Trading profits from your company’s main business activities
- Investment income such as interest and rental profits
- Chargeable gains on the sale of assets such as property, shares or equipment
- UK property income of non-resident companies (brought within Corporation Tax from April 2020)
Adjustments are often required to align accounting profit with taxable profit, including disallowable expenses and reliefs. Reliefs can reduce taxable profits where the conditions are met.
3. When Corporation Tax becomes due
The payment timetable is tied to your accounting period. For most companies, payment is due nine months and one day after the end of the accounting period. Large and very large companies must pay under the Quarterly Instalment Payments regime, meaning instalments fall during the accounting period (with further instalments shortly after period end). The CT600 filing deadline is 12 months after the period end, so payment usually precedes filing.
4. The importance of notifying HMRC and keeping accurate records
Registration: Companies must register for Corporation Tax within 3 months of starting to trade or carry on business activity (for example beginning to sell, provide services, earn interest or other income). HMRC is usually notified on incorporation, but if trading starts later you must separately register online.
Robust record-keeping—covering revenue, costs, investments, disposals, and evidence for any reliefs—supports accurate computations, timely payment, and smooth interactions during HMRC compliance checks. Clear schedules also help finance teams prepare CT600 returns efficiently.
Section A Summary
Corporation Tax applies to UK-resident companies and non-UK resident companies with a UK permanent establishment, covering trading income, investment income, chargeable gains, and (for non-resident companies) UK property income. Payment is tied to the accounting period and usually falls before the CT600 filing deadline. Early registration with HMRC and disciplined records underpin accurate payments and lower compliance risk.
Section B: Deadlines and Payment Schedule
Paying Corporation Tax on time is as important as paying the correct amount. HMRC imposes strict deadlines, and missing them can lead to interest charges and scrutiny. Understanding the timetable is essential for directors and finance teams when planning year-end processes and managing cash flow.
1. Standard due dates
For most small and medium-sized companies, Corporation Tax must be paid nine months and one day after the end of the company’s accounting period. For example, if your accounting period ends on 31 March, payment must reach HMRC by 1 January of the following year. This deadline applies regardless of when you file the CT600 return.
2. Large companies and quarterly instalments
Companies with annual taxable profits above £1.5 million (adjusted for associated companies and accounting period length) fall under the Quarterly Instalment Payments (QIPs) regime. For a 12-month period, large companies pay in four equal instalments due:
- 6 months and 13 days after the first day of the accounting period
- 3 months after the first instalment
- 3 months after the second instalment (which is 14 days after period end)
- 3 months and 14 days after period end
Very large companies (profits above £20 million, adjusted for associated companies and period length) follow an accelerated schedule: four equal instalments on the 14th day of months 3, 6, 9 and 12 of the accounting period.
3. How deadlines interact with CT600 filing
The CT600 return must be filed within 12 months of the end of the accounting period. This means payment deadlines usually come before the filing deadline. Interest starts accruing from the day after the payment due date if Corporation Tax is unpaid. HMRC may pay interest on early or excess payments, but repayment interest only runs from the later of the statutory due date or the date payment is received.
4. Consequences of missing deadlines
HMRC charges late payment interest from the due date until the tax is paid. For companies in QIPs, underpaid instalments attract ‘debit interest’ until balanced. Persistent late payment can also result in closer HMRC scrutiny. While there is no fixed late payment penalty as with filing, the interest cost can be material.
Section B Summary
The standard payment deadline is nine months and one day after the end of the accounting period, but large and very large companies must pay through QIPs during the period itself. Filing deadlines come later than payment deadlines, so calculations must be ready in advance. Interest applies to late payment, while HMRC may pay repayment interest on early or excess payments under its rules.
Section C: Methods of Paying Corporation Tax
HMRC offers several approved methods to pay Corporation Tax, each with different processing times and practical considerations. Choosing the right option depends on your company’s banking arrangements, cash-flow needs, and internal controls. Mistakes such as using the wrong reference or missing a bank cut-off can cause late payment interest and HMRC allocation errors.
1. HMRC-approved payment methods
Corporation Tax must be paid electronically in most cases. Accepted methods include:
- Online or telephone banking (Faster Payments, CHAPS, Bacs)
- Direct Debit (one-off or variable payments set up in advance)
- Debit card or corporate credit card via HMRC’s portal (note: personal credit cards are not accepted)
- At your bank or building society by cash or cheque, but only if you have an HMRC payslip
2. Processing times and deadlines
The time it takes for a payment to clear varies by method:
- Faster Payments & CHAPS – usually same day (subject to bank cut-off times)
- Bacs – up to 3 working days
- Direct Debit – typically 5 working days for the first payment, then around 3 working days for subsequent payments
- Debit/corporate credit card – usually same or next day
Payments must clear into HMRC’s account by the due date, not simply be initiated then.
3. Using your Corporation Tax payment reference
Every payment must quote the 17-character Corporation Tax payment reference that is unique to your accounting period. Re-using last year’s reference is a common error that delays allocation and can trigger interest. You can find the correct reference on your ‘notice to deliver your tax return’ or in your HMRC online account under the relevant accounting period.
4. Common mistakes to avoid
- Making a payment on the due date without checking clearance times
- Using last year’s payment reference or omitting the 17-character reference
- Assuming a Direct Debit is in place without confirmation
- Overlooking Corporation Tax payments in group-level cash-flow planning
Section C Summary
Corporation Tax can be paid by bank transfer, Direct Debit or card, and—where you hold an HMRC payslip—at your bank by cash or cheque. Clearance times differ by method. Always use the correct 17-character period-specific reference and allow for processing time to ensure payments reach HMRC by the deadline. Errors in payment method or reference can lead to misallocation and late payment interest.
Section D: Compliance, Reliefs and Practical Considerations
Paying Corporation Tax involves more than transferring funds. The amount due must reflect taxable profits after applying available reliefs and allowances, while HMRC expects accurate records and compliance with return filing rules. For directors and finance leaders, Corporation Tax should be integrated into wider financial strategy, governance, and cash-flow management.
1. Interaction with reliefs and tax planning
The Corporation Tax payment should be based on taxable profits after adjustments and reliefs. Key reliefs include:
- Capital allowances on qualifying plant, machinery, and vehicles
- Research & Development (R&D) relief or the R&D Expenditure Credit (RDEC)
- Patent Box relief on profits from patented inventions
- Loss reliefs, such as carrying forward trading losses
- Reliefs on chargeable gains, for example rollover relief or substantial shareholdings exemption
Correct application reduces the Corporation Tax bill and prevents overpayment. Incorrect claims risk HMRC challenge and penalties.
2. Record-keeping and compliance checks
HMRC requires companies to keep detailed accounting and tax records. These include accounts, invoices, payroll, contracts, and evidence supporting any relief claims. HMRC may open compliance checks, and weak or incomplete records can result in penalties. Proper documentation also supports accurate CT600 filings and payment calculations.
3. Adjustments and amended returns
Errors identified after payment may require an amended CT600 return. Amended returns can reduce or increase tax liability. If liability falls, HMRC will refund the overpayment or offset against other taxes. If liability rises, prompt payment is needed to minimise late payment interest. Amendments must be made within 12 months of the statutory filing deadline (effectively up to two years after the end of the accounting period).
4. Practical tips for finance teams and directors
- Integrate Corporation Tax forecasts into cash-flow planning alongside accounts preparation
- Monitor HMRC’s online Corporation Tax account to confirm payments are allocated correctly
- Introduce internal checks for payment authorisations and reference use
- For groups, centralise oversight of all companies’ Corporation Tax payments
Section D Summary
Corporation Tax compliance requires accurate use of reliefs, strong record-keeping, and timely amendments where errors occur. Finance leaders should embed Corporation Tax into wider governance and cash-flow controls to minimise risk and improve compliance with HMRC expectations.
FAQs
How do I know how much Corporation Tax to pay?
Your Corporation Tax liability is calculated from taxable profits after applying reliefs, allowances, and adjustments. The figure is reported on your CT600 return, but payment is usually due before the return is filed. Draft accounts and tax computations prepared by your accountant will provide the amount to pay.
Can I pay Corporation Tax in instalments?
Most companies must pay Corporation Tax in one instalment. Large companies with taxable profits over £1.5 million (adjusted for associated companies and accounting period length) must pay through Quarterly Instalment Payments (QIPs). In some cases, HMRC may agree a Time to Pay arrangement allowing staged payments where a company shows temporary financial difficulty. Note that interest will continue to accrue until the liability is fully paid, but enforcement is usually suspended while the arrangement is kept.
What happens if I overpay Corporation Tax?
If you overpay, HMRC will refund the amount or offset it against other tax liabilities. HMRC pays interest on early or excess payments under published rules. For early payments, HMRC usually pays interest from the date you pay to the normal payment deadline (earliest from 6 months and 13 days after the start of the accounting period).
How do quarterly instalments work for large companies?
Under QIPs, large companies make four payments of estimated Corporation Tax liability across the accounting period (months 7, 10, 13 and 16, relative to the period start). Very large companies pay much earlier in months 3, 6, 9 and 12. Once the final liability is known, adjustments are made for over or underpayments.
What if I cannot pay my Corporation Tax on time?
If payment difficulties arise, contact HMRC immediately. A Time to Pay arrangement may be available, allowing staged payments without enforcement action while you keep to the plan. Interest will still accrue until the balance is cleared.
Conclusion
Paying Corporation Tax is a statutory duty for UK companies and a key part of corporate compliance. For directors and finance teams, it involves understanding when liability arises, what profits are taxed, and which deadlines apply. HMRC expects companies to meet payment obligations without reminder, and the payment timetable usually comes before the CT600 filing deadline.
Compliance also depends on practical details: selecting the correct payment method, using the 17-character reference, and accounting for clearance times. Reliefs such as capital allowances, R&D relief, and Patent Box must be correctly applied to avoid overpayments or HMRC challenge. Where errors occur, amendments must be filed promptly within statutory time limits.
The compliance message is clear: treat Corporation Tax as part of broader governance and financial planning. With robust record-keeping, accurate forecasting, and proactive engagement with HMRC in cases of difficulty, companies can manage Corporation Tax efficiently and protect themselves against interest charges and compliance risks.
Glossary
| Term | Definition |
|---|---|
| Corporation Tax | A UK tax charged on the taxable profits of limited companies, unincorporated associations, and non-UK resident companies with a UK permanent establishment. |
| CT600 | The company tax return form submitted to HMRC, setting out taxable profits, reliefs, and Corporation Tax due. |
| Accounting Period | The period, usually 12 months, used by HMRC to assess a company’s Corporation Tax liability; normally the same as the period covered by your Company Tax Return. |
| Quarterly Instalment Payments (QIPs) | A payment regime requiring large and very large companies to pay Corporation Tax in instalments across their accounting period. |
| HMRC | His Majesty’s Revenue & Customs, the UK government department responsible for tax collection and enforcement. |
Useful Links
| Resource | Link |
|---|---|
| GOV.UK – Pay your Corporation Tax | https://www.gov.uk/pay-corporation-tax |
| GOV.UK – Corporation Tax deadlines | https://www.gov.uk/company-tax-returns |
| GOV.UK – Large companies paying in instalments | https://www.gov.uk/guidance/corporation-tax-paying-in-instalments |
| GOV.UK – Very large companies | https://www.gov.uk/guidance/pay-corporation-tax-if-youre-a-very-large-company |
| GOV.UK – Get a refund or interest on Corporation Tax | https://www.gov.uk/get-refund-interest-corporation-tax |
| GOV.UK – Register (tell HMRC your company is active) | https://www.gov.uk/guidance/corporation-tax-trading-and-non-trading |
| Taxoo – CT600 Guide | https://www.taxoo.co.uk/ct600/ |
| Taxoo – Corporation Tax Payment Deadline | https://www.taxoo.co.uk/corporation-tax-payment-deadline/ |
| Taxoo – Corporation Tax Overview | https://www.taxoo.co.uk/corporation-tax/ |
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.
