Corporation Tax Payment Deadlines: Instalments, Interest and How to Avoid Both

Corporation tax is the one major UK tax with no late payment penalty. Pay it late and HMRC charges interest, nothing more. That sounds forgiving until you notice the two things that actually catch companies out: the payment deadline falls three months before the return is due, and the threshold that forces you into quarterly instalments is divided by the number of companies you are associated with. A founder with five other companies crosses it at £250,000 of profit, not £1.5 million.

The standard deadline

If your company's taxable profits are up to £1.5 million a year, corporation tax is due 9 months and 1 day after the end of your accounting period. For a period ending 31 December 2026, that is 1 October 2027.

The company tax return is not due until 12 months after the period end — 31 December 2027 in the same example. So you are required to pay a liability three months before you are required to tell HMRC what it is. In practice this means the accounts work has to be substantially finished by the nine-month mark regardless of the filing deadline, and companies that treat the twelve-month date as "the deadline" discover the gap the hard way. HubPal has a companion piece on the corporation tax mistakes non-resident directors make most often, of which mis-reading this gap is the first.

The odd extra day is not a rounding error, incidentally — it is deliberate, and payment on the ninth-month anniversary itself is one day early rather than late.

When instalments kick in

Above £1.5 million the single payment disappears and you pay in four quarterly instalments instead. There are two tiers:

Status	Annual profits	How you pay
Standard	Up to £1.5m	One payment, 9 months and 1 day after period end
Large	Over £1.5m, under £20m	Four instalments, starting mid-way through the period
Very large	Over £20m	Four instalments, starting in month 3

The shift is more disruptive than it looks. A standard payer settles a known liability after the period has closed. A large company pays its first instalment during the accounting period, on an estimate of profits it has not finished earning — which means forecasting, and revising, rather than calculating.

The associated companies trap

This is the part that catches small groups. The £1.5 million and £10 million thresholds are divided by the number of associated companies plus your own. Two companies under common control means a £750,000 threshold each. Six companies means £250,000 each.

So a founder who has spun up separate companies for separate ventures — a trading company, a property company, a consultancy, a dormant holdco — can find a profitable one dragged into quarterly instalments at a level of profit that would never trigger them standalone. The same divisor already applies to the marginal relief bands in the corporation tax rates, so a group structure changes both what you pay and when.

Dormant companies count if they are associated, which is why the count is worth doing properly rather than from memory. If you are structuring a group deliberately, our holding company guide covers what the structure buys you and what it costs.

Instalment dates

For a 12-month accounting period, four equal instalments are due as follows:

Instalment	Large company (over £1.5m)	Very large company (over £20m)
First	6 months and 13 days after the period starts	2 months and 13 days after the period starts
Second	3 months after the first	3 months after the first
Third	3 months after the second	3 months after the second
Fourth	3 months and 14 days after the period ends	3 months after the third

Put simply, a large company pays in months 7, 10, 13 and 16 relative to the start of its accounting period; a very large company pays in months 3, 6, 9 and 12 — finishing before the period has even closed. Shorter accounting periods are pro-rated, and a period of three months or less is settled in a single payment 3 months and 14 days after it ends.

The two exemptions worth knowing

Crossing £1.5 million does not automatically mean instalments. Two let-outs matter, and the first is the one most growing companies can use.

1. The first-year rule. You do not have to pay by instalments if profits are no more than £10 million and, at any time in the previous 12 months, the company either did not exist or did not have an accounting period, or had an annual rate of profit no more than £1.5 million, or an annual tax liability no more than £10,000. In effect, the year you first become large you generally get a pass — instalments start the year after. Note the £10 million ceiling on this relief is itself divided by associated companies.

2. The de minimis. No instalments are required if the company's total liability for the accounting period is under £10,000 — pro-rated for periods shorter than 12 months. This catches companies with high profits but heavily relieved tax bills — capital allowances and the Annual Investment Allowance are the usual reason the liability lands so far below the profit figure.

How HMRC interest works

Corporation tax has no late payment penalty. Interest does the work instead, and it runs in both directions:

• Late payment interest: Bank of England base rate plus 4 percentage points, charged daily from the day after the due date until the tax is paid. This rose from base plus 2.5 points in April 2025.
• Repayment interest: base rate minus 1 percentage point, with a 0.5% floor, paid by HMRC on tax paid before the due date.
• Instalment payers get their own, gentler pair of rates while the period is still open — a lower charge on underpaid instalments and a higher credit on overpaid ones than the standard rates. This is deliberate: HMRC accepts that instalments are estimates and does not want to punish forecasting error at full rates.

Interest is not a penalty and there is no reasonable excuse defence against it. It is simply priced borrowing, which is the right way to think about it: paying corporation tax late is an unsecured loan from HMRC at base plus four, available without an application.

Filing penalties are separate

Paying on time does not protect the return, and the filing side does carry penalties:

How late the return is	Penalty
1 day	£200
3 months	Another £200
6 months	HMRC estimates your bill and adds 10% of the unpaid tax
12 months	Another 10% of any unpaid tax

File late three times in a row and the £200 penalties rise to £1,000 each. The six-month point is the one to avoid: an HMRC determination of your liability is not appealable in the ordinary way, and displacing it means filing the return anyway.

How to avoid paying interest

Three things do most of the work.

Know your date, not the rule. Nine months and one day is easy to mis-apply when the accounting reference date has been changed or the first period is not twelve months. Work out the actual calendar date once, at the start of the year, and put it somewhere that is not your memory.

Count your associated companies before you need to. If a group is anywhere near the divided threshold, the instalment question needs answering during the accounting period, not after it — by the time the standard deadline arrives, the first two instalments would already have been late.

Pay early rather than precisely. Because HMRC pays repayment interest above a floor and charges base plus four below, the asymmetry favours overpaying slightly and reclaiming. Where cash allows, settling on a reasonable estimate ahead of the deadline costs less than the interest on getting it exactly right two months late. If your profits fluctuate with cross-border trade, HubPal's UK tax guide for non-residents is useful on how overseas income and residence affect what lands in the UK charge in the first place, and its guide to double tax treaties covers the relief that often changes the final number.

If you genuinely cannot pay, contact HMRC before the due date about a Time to Pay arrangement. It does not stop interest — nothing does — but it prevents the debt escalating to enforcement while you clear it. And do not delay the return to match a delayed payment: the return is where the penalties live, and filing it on time costs nothing even when the money is late. Keep the two deadlines separate in your head, and only one of them can hurt you.

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