How to Handle Late Payment of UK Corporation Tax
Corporation Tax must be paid by a specific deadline after your accounting period ends. Missing it triggers interest immediately — and potentially penalties if the delay is significant. Understanding the rules and HMRC's options for businesses struggling to pay is essential for any company director.
The Payment Deadline
For companies that are not 'large' (profits below £1.5 million), Corporation Tax is due 9 months and 1 day after the end of the accounting period. So for a company with a year ending 31 March 2025, CT is due by 1 January 2026. The CT600 return is not due until 12 months after the period end (31 March 2026 in this example) — but the tax must be paid well before the return is filed.
Large Companies: Quarterly Instalment Payments
Companies with profits above £1.5 million (divided by the number of associated companies plus one) must pay Corporation Tax in quarterly instalments during the accounting period itself, rather than 9 months after. The instalments are due in months 7, 10, 13, and 16 of the accounting period. Large companies face different interest charges if instalments are underpaid.
Interest on Late Payment
HMRC charges late payment interest from the day after the payment deadline at the Bank of England base rate plus 2.5%. This is not a penalty — it is interest on the unpaid debt and cannot be appealed on grounds of reasonable excuse. Interest accrues daily until the tax is paid in full.
Penalties
Unlike Self-Assessment, there is no automatic fixed penalty for late Corporation Tax payment. However, HMRC may issue a determination (an estimated CT assessment) if the CT600 is not filed on time — and late filing of the CT600 attracts penalties: £100 after 1 day late; £200 after 3 months; 10% of unpaid tax after 6 months; a further 10% after 12 months.
Time to Pay Arrangements
If you cannot pay Corporation Tax by the deadline, contact HMRC's Business Payment Support Service (0300 200 3835) before the deadline — not after. HMRC can agree a Time to Pay (TTP) arrangement allowing monthly payments over a period. Interest continues during TTP. HMRC is generally sympathetic to businesses with a genuine cashflow difficulty and a good compliance history. Document your business's financial position clearly when requesting a TTP.
Repayment Interest
If you overpay Corporation Tax (for example, due to Payments on Account that exceed the final liability), HMRC pays repayment interest. However, the repayment rate is lower than the late payment rate — typically Bank of England base rate less 1%. This asymmetry means it is almost always better to underpay slightly and pay interest than to overpay and wait for a slower return.
Avoiding Late Payment
Calendar the payment deadline when you start each accounting period. Use your accounting software to estimate the CT liability throughout the year, not just at year end. Build a CT provision into your monthly management accounts so the cash is set aside. Consider using HMRC's Corporation Tax online service to review your company's outstanding liabilities at any time.
