Pay Corporation Tax: A Step-by-Step Guide

<p>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.</p>

<p><strong>What this article is about</strong><br>
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.</p>

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<h2>Section A: Understanding Corporation Tax Payments</h2>
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<p>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.</p>

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<h3>1. Who needs to pay Corporation Tax</h3>
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<p>Corporation Tax applies to UK-resident companies and certain unincorporated associations (for example clubs and co-operatives). It also applies to <strong>non-UK resident companies with a UK permanent establishment</strong> 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.</p>

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<h3>2. What profits are taxable</h3>
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<p>Taxable profits include amounts chargeable to Corporation Tax after statutory adjustments. Broadly, these cover:</p>
<ul>
<li>Trading profits from your company’s main business activities</li>
<li>Investment income such as interest and rental profits</li>
<li>Chargeable gains on the sale of assets such as property, shares or equipment</li>
<li><strong>UK property income of non-resident companies</strong> (brought within Corporation Tax from April 2020)</li>
</ul>
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<p>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.</p>

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<h3>3. When Corporation Tax becomes due</h3>
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<p>The payment timetable is tied to your accounting period. For most companies, payment is due <strong>nine months and one day</strong> 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 <strong>12 months</strong> after the period end, so payment usually precedes filing.</p>

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<h3>4. The importance of notifying HMRC and keeping accurate records</h3>
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<p>Companies must notify HMRC that they are within the Corporation Tax regime, typically via online registration. 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.</p>

<p><strong>Section A Summary</strong><br>
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.</p>

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<h2>Section B: Deadlines and Payment Schedule</h2>
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<p>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.</p>

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<h3>1. Standard due dates</h3>
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<p>For most small and medium-sized companies, Corporation Tax must be paid <strong>nine months and one day</strong> 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.</p>

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<h3>2. Large companies and quarterly instalments</h3>
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<p>Companies with annual taxable profits above £1.5 million (adjusted for group structure and accounting period length) fall under the <strong>Quarterly Instalment Payments (QIPs)</strong> regime. These companies must pay Corporation Tax in four instalments spread across the accounting period. Very large companies with taxable profits above £20 million (also adjusted for groups and accounting period length) face an accelerated timetable, with instalments falling much earlier in the period.</p>

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<h3>3. How deadlines interact with CT600 filing</h3>
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<p>The CT600 return must be filed within <strong>12 months</strong> 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. Conversely, HMRC may pay <strong>repayment interest</strong> if you pay too early or overpay.</p>

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<h3>4. Consequences of missing deadlines</h3>
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<p>HMRC charges <strong>late payment interest</strong> from the due date until the tax is paid. Persistent late payment can also flag a company for closer HMRC monitoring. While there is no fixed late payment penalty as with filing, the interest cost can be material. For companies in QIPs, underpaid instalments attract interest until balanced.</p>

<p><strong>Section B Summary</strong><br>
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 repayment interest may apply to early or excess payments.</p>

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<h2>Section C: Methods of Paying Corporation Tax</h2>
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<p>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.</p>

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<h3>1. HMRC-approved payment methods</h3>
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<p>Corporation Tax must be paid electronically. Accepted methods include:</p>
<ul>
<li><strong>Online or telephone banking</strong> (Faster Payments, CHAPS, Bacs)</li>
<li><strong>Direct Debit</strong> (either one-off or variable payments set up in advance)</li>
<li><strong>Debit card</strong> or personal credit card via HMRC’s portal (note: <strong>corporate credit cards are not accepted</strong>)</li>
<li><strong>At your bank or building society</strong> (only available with an HMRC payslip)</li>
</ul>
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<p>Cheques are no longer accepted.</p>

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<h3>2. Processing times and deadlines</h3>
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<p>The time it takes for a payment to clear varies by method:</p>
<ul>
<li><strong>Faster Payments & CHAPS</strong> – usually same day (subject to bank cut-off times)</li>
<li><strong>Bacs</strong> – up to three working days</li>
<li><strong>Direct Debit</strong> – five working days for the first payment, three working days for subsequent ones</li>
<li><strong>Debit/personal credit card</strong> – usually same or next day</li>
</ul>
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<p>Payments must clear into HMRC’s account by the due date, not simply be initiated then.</p>

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<h3>3. Using your Corporation Tax payment reference</h3>
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<p>Every payment must quote the <strong>17-character Corporation Tax payment reference</strong> unique to your accounting period. This ensures HMRC allocates the payment correctly. Using the wrong reference can result in the payment not being matched to your liability, leading to collection notices and interest charges.</p>

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<h3>4. Common mistakes to avoid</h3>
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<ul>
<li>Making a payment on the due date without checking clearance times</li>
<li>Using last year’s payment reference or omitting the 17-character reference</li>
<li>Assuming a Direct Debit is in place without confirmation</li>
<li>Overlooking Corporation Tax payments in group-level cash-flow planning</li>
</ul>
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<p><strong>Section C Summary</strong><br>
Corporation Tax can be paid by bank transfer, debit card, or Direct Debit, but clearance times differ. Always use the correct 17-character 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.</p>

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<h2>Section D: Compliance, Reliefs and Practical Considerations</h2>
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<p>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.</p>

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<h3>1. Interaction with reliefs and tax planning</h3>
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<p>The Corporation Tax payment should be based on taxable profits after adjustments and reliefs. Key reliefs include:</p>
<ul>
<li><strong>Capital allowances</strong> on qualifying plant, machinery, and vehicles</li>
<li><strong>Research & Development (R&D) relief</strong> or the R&D Expenditure Credit (RDEC)</li>
<li><strong>Patent Box relief</strong> on profits from patented inventions</li>
<li><strong>Loss reliefs</strong>, such as carrying forward trading losses</li>
<li><strong>Reliefs on chargeable gains</strong>, for example rollover relief or substantial shareholdings exemption</li>
</ul>
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<p>Correct application reduces the Corporation Tax bill and prevents overpayment. Incorrect claims risk HMRC challenge and penalties.</p>

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<h3>2. Record-keeping and compliance checks</h3>
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<p>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.</p>

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<h3>3. Adjustments and amended returns</h3>
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<p>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 <strong>within 12 months of the statutory filing deadline</strong> (effectively up to two years after the end of the accounting period).</p>

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<h3>4. Practical tips for finance teams and directors</h3>
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<ul>
<li>Integrate Corporation Tax forecasts into cash-flow planning alongside accounts preparation</li>
<li>Monitor HMRC’s online Corporation Tax account to confirm payments are allocated correctly</li>
<li>Introduce internal checks for payment authorisations and reference use</li>
<li>For groups, centralise oversight of all companies’ Corporation Tax payments</li>
</ul>
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<p><strong>Section D Summary</strong><br>
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.</p>

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<h2>FAQs</h2>
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<p><strong>How do I know how much Corporation Tax to pay?</strong><br>
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.</p>

<p><strong>Can I pay Corporation Tax in instalments?</strong><br>
Most companies must pay Corporation Tax in one instalment. Large companies with taxable profits over £1.5 million (adjusted for group structures and accounting period length) must pay through Quarterly Instalment Payments (QIPs). In some cases, HMRC may agree a <strong>Time to Pay arrangement</strong>, allowing staged payments where a company shows temporary financial difficulty.</p>

<p><strong>What happens if I overpay Corporation Tax?</strong><br>
If you overpay, HMRC will refund the amount or offset it against other tax liabilities. You can request repayment online or by contacting HMRC’s Corporation Tax office. HMRC may also pay <strong>repayment interest</strong> on overpayments, subject to its published rates.</p>

<p><strong>How do quarterly instalments work for large companies?</strong><br>
Under QIPs, large companies make four payments of estimated Corporation Tax liability across the accounting period. Two instalments fall during the period, with two more shortly after. Very large companies have an accelerated timetable. Once the final liability is known, adjustments are made for over or underpayments.</p>

<p><strong>What if I cannot pay my Corporation Tax on time?</strong><br>
If payment difficulties arise, contact HMRC immediately. A <strong>Time to Pay arrangement</strong> may be available, allowing staged payments without enforcement action. Approval is not automatic—companies must demonstrate temporary financial difficulty and a credible repayment plan. Failing to engage with HMRC risks accumulating interest, enforcement, and reputational damage.</p>

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<h2>Conclusion</h2>
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<p>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.</p>

<p>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.</p>

<p>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.</p>

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<h2>Glossary</h2>
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<table>
<tr>
<th>Term</th>
<th>Definition</th>
</tr>
<tr>
<td><strong>Corporation Tax</strong></td>
<td>A UK tax charged on the taxable profits of limited companies, unincorporated associations, and non-UK resident companies with a UK permanent establishment.</td>
</tr>
<tr>
<td><strong>CT600</strong></td>
<td>The company tax return form submitted to HMRC, setting out taxable profits, reliefs, and Corporation Tax due.</td>
</tr>
<tr>
<td><strong>Accounting Period</strong></td>
<td>The period, usually 12 months, used by HMRC to assess a company’s Corporation Tax liability.</td>
</tr>
<tr>
<td><strong>Quarterly Instalment Payments (QIPs)</strong></td>
<td>A payment regime requiring large and very large companies to pay Corporation Tax in instalments across their accounting period.</td>
</tr>
<tr>
<td><strong>HMRC</strong></td>
<td>His Majesty’s Revenue & Customs, the UK government department responsible for tax collection and enforcement.</td>
</tr>
</table>

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<h2>Useful Links</h2>
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<table>
<tr>
<th>Resource</th>
<th>Link</th>
</tr>
<tr>
<td>GOV.UK – Pay your Corporation Tax</td>
<td><a href=”https://www.gov.uk/pay-corporation-tax” rel=”nofollow”>https://www.gov.uk/pay-corporation-tax</a></td>
</tr>
<tr>
<td>GOV.UK – Corporation Tax deadlines</td>
<td><a href=”https://www.gov.uk/corporation-tax-deadlines” rel=”nofollow”>https://www.gov.uk/corporation-tax-deadlines</a></td>
</tr>
<tr>
<td>GOV.UK – Corporation Tax overview</td>
<td><a href=”https://www.gov.uk/corporation-tax” rel=”nofollow”>https://www.gov.uk/corporation-tax</a></td>
</tr>
<tr>
<td>Taxoo – CT600 Guide</td>
<td><a href=”https://www.taxoo.co.uk/ct600/”>https://www.taxoo.co.uk/ct600/</a></td>
</tr>
<tr>
<td>Taxoo – Corporation Tax Payment Deadline</td>
<td><a href=”https://www.taxoo.co.uk/corporation-tax-payment-deadline/”>https://www.taxoo.co.uk/corporation-tax-payment-deadline/</a></td>
</tr>
<tr>
<td>Taxoo – Corporation Tax Overview</td>
<td><a href=”https://www.taxoo.co.uk/corporation-tax/”>https://www.taxoo.co.uk/corporation-tax/</a></td>
</tr>
</table>

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