When and How to Pay Corporation Tax in the UK

A surprising number of profitable UK businesses still get caught out by corporation tax. Not because they are careless, but because timing and cash flow rarely line up neatly. One month you are celebrating a strong quarter. The next, an HMRC deadline is staring back at you while your money is tied up in stock, wages, or a late paying client.

If you run a limited company, understanding when and how to pay corporation tax is not optional. It is one of those quiet responsibilities that can either sit comfortably in the background or cause real stress if ignored. Let us make sure it is the first, not the second.

What is Corporation Tax and Who Needs to Pay It?

Corporation tax is charged on the profits of limited companies operating in the UK. That includes trading profits, investment income, and profits from selling assets like property or shares.

Sole traders and partnerships can relax. This tax does not apply to them. But if your business is a limited company, even a small one run from a spare room, HMRC expects its share.

The current rules sit within the corporation tax act, which sets out how profits are calculated, reported, and taxed. The language can be dense, but the obligation itself is simple. Make a profit, declare it, and pay the tax due on time.

When Do You Pay Corporation Tax in the UK?

This is where many business owners slip up.

The standard deadline to pay corporation tax is nine months and one day after the end of your accounting period. If your company year ends on 31 March, payment is due by 1 January the following year.

That date arrives faster than it sounds.

Your company tax return, known as a CT600, has a later deadline. You have up to twelve months after the end of your accounting period to file it. HMRC still expects the money earlier.

So if you are wondering when to pay corporation tax, remember this rule. Pay first, file later.

Larger companies with profits over £1.5 million face a different system called quarterly instalment payments. Most small and medium sized businesses will not fall into this category, but it is worth checking as your company grows.

Also Read – VAT on Loans What Businesses Need to Know Before Borrowing

How to Pay Corporation Tax UK Businesses Rely On

HMRC does not accept cheques slipped into the post anymore. Everything is digital now, and that is not necessarily a bad thing.

Here are the main ways to pay corporation tax in the UK:

• Online or telephone banking using HMRC’s bank details
• CHAPS or Faster Payments for same day or next day clearance
• Direct Debit, which needs setting up in advance
• Debit or corporate credit card, although fees may apply

When you make the payment, you must include your 17 character Corporation Tax payment reference. This tells HMRC which company and accounting period the money relates to. One wrong digit can cause delays and unnecessary letters.

If you have ever searched how pay corporation tax and felt overwhelmed by the options, stick to online banking. It is straightforward, traceable, and familiar.

Can You Pay Corporation Tax in Instalments?

This is a common question, especially during quieter trading periods.

For most small companies, HMRC expects the full amount by the deadline. Instalments are not automatic. That said, if your business is struggling with cash flow, HMRC may agree to a Time to Pay arrangement.

These agreements are assessed case by case. HMRC will want to see that you are being proactive, realistic, and transparent. Waiting until the deadline has passed rarely helps your case.

If you are asking can you pay corporation tax in installments, the honest answer is sometimes. It depends on your circumstances and how early you speak up.

Some business owners choose to bridge the gap using short term finance. Options like best unsecured business loans UK companies use can help cover tax bills without draining operational cash. It is not about avoiding tax. It is about managing timing.

Common Mistakes That Cost Businesses Money

Even experienced directors make these errors:

• Forgetting the payment deadline while focusing on the filing deadline
• Underestimating profits and setting aside too little
• Mixing personal and business funds, leading to confusion
• Assuming HMRC will remind you before payment is due

HMRC does not chase politely before deadlines. Penalties and interest start quietly and build over time.

A simple habit can prevent most of this. Each month, set aside a percentage of profit into a separate savings account. When it is time to pay corporation tax, the money is already there. No panic. No scrambling.
Also Read – How Unsecured Business Loans Work for Small Businesses in the UK

Corporation Tax and Cash Flow Planning

Tax rarely arrives at a convenient moment. It shows up when you are reinvesting, hiring, or finally paying yourself properly.

Smart business owners plan for tax the same way they plan for rent or payroll. It is a fixed obligation, not an unpleasant surprise.

If your business is growing quickly, cash flow can feel stretched even when profits look healthy on paper. This is where funding solutions matter. Access to best uk business loans can smooth out the bumps without slowing momentum.

Used responsibly, finance can support stability rather than create risk.

Why Getting Corporation Tax Right Builds Trust

Paying tax correctly and on time does more than keep HMRC quiet. It strengthens your business foundations.

Accurate tax records improve your credibility with lenders, investors, and partners. They make funding applications smoother. They reduce stress when planning the future.

And perhaps most importantly, they let you focus on running your business instead of worrying about brown envelopes landing on the doormat.

Final Thoughts

Corporation tax is not the enemy of small business. Uncertainty is. Once you understand when to pay corporation tax and how to handle it confidently, it becomes another routine part of running a company.

If your next tax bill feels heavier than expected, you are not alone. The right planning, advice, and funding can turn a stressful deadline into a manageable task.

Strong businesses are not built by avoiding obligations. They are built by meeting them head on, with clarity and confidence.

FAQs

• When do I pay corporation tax for the first time?

Ans. You pay your first corporation tax bill nine months and one day after the end of your first accounting period.

• How do I know how much corporation tax to pay?

Ans. Your accountant calculates it based on your company profits. Accounting software can also estimate it, but professional advice helps avoid errors.

• Can I pay corporation tax before my accounting period ends?

Ans. Yes. Many businesses make payments on account to spread the cost and reduce pressure later.

• What happens if I pay corporation tax late?

Ans. HMRC charges interest from the due date. Continued late payment can lead to penalties and enforcement action.

• Is corporation tax different from VAT?

Ans. Yes. Corporation tax is based on profit. VAT is charged on sales and collected on behalf of HMRC.