Paying Corporation Tax in Instalments (Large Companies)

If your company makes substantial profits, you'll need to pay your Corporation Tax earlier than usual – in quarterly instalments rather than in one lump sum nine months after your accounting period ends. This applies when your annual profits exceed £1.5 million, though excepti...

What counts as a large company?

A large company is one with profits between £1.5 million and £20 million in an accounting period. Large companies must pay their Corporation Tax electronically by instalments rather than waiting until the normal payment deadline.

If your company has profits over £20 million, different rules apply and you'll need to pay instalments even earlier.

Adjusting thresholds for associated companies

For accounting periods beginning on or after 1 April 2023, you must reduce the £1.5 million and £10 million thresholds if your company has associated companies.

To calculate your adjusted threshold, divide £1.5 million by the total number of associated companies plus your own company.

Example: A company has 5 associated companies. For the accounting period ending 30 November 2024, its profits are £300,000 and its Corporation Tax liability is £75,000.

The adjusted threshold is: £1.5 million ÷ 6 (5 associated companies + the company itself) = £250,000.

Even though profits are below £1.5 million, they exceed the adjusted threshold of £250,000 and the tax liability exceeds £10,000, so this company must pay by instalments.

What makes a company "associated"?

A company is associated with another company if:

One is under the control of the other, or
Both are under the control of the same person or persons

Control is usually defined by ownership of share capital or voting power. An associated company can be based anywhere – it doesn't need to be UK resident.

Different rules for 2015-2023

For accounting periods beginning between 1 April 2015 and 31 March 2023, associated company rules were replaced by a "51% group test". If your company had related 51% group companies during this period, you would reduce the thresholds by dividing them by the number of related 51% group companies plus your company.

For accounting periods beginning before 1 April 2015, the associated companies rules apply again.

When you don't need to pay instalments

Even if your profits exceed £1.5 million, you don't need to pay by instalments if:

Your total Corporation Tax liability for the accounting period is less than £10,000 (or less than £10,000 at an annual rate for periods under 12 months), or
Your profits don't exceed £10 million and either:

- Your company didn't exist or didn't have an accounting period in the previous 12 months, or

- Your annual profit rate was no more than £1.5 million, or your annual tax liability was no more than £10,000, for any accounting period ending in the previous 12 months

If either condition applies, you can pay your Corporation Tax in full by the normal payment due date (nine months and one day after the end of your accounting period).

When to pay instalments for 12-month accounting periods

For a standard 12-month accounting period, you'll make four equal quarterly payments. Two instalments fall before your accounting period ends, and two fall after.

The instalments are 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 (14 days after the last day of the accounting period)
3 months and 14 days after the last day of the accounting period

Example: For an accounting period from 1 January 2026 to 31 December 2026:

First payment: 14 July 2026
Second payment: 14 October 2026
Third payment: 14 January 2027
Final payment: 14 April 2027

When to pay instalments for shorter accounting periods

If your accounting period is less than 12 months, the final instalment is always due 3 months and 14 days after the last day of your accounting period.

If your accounting period is longer than 3 months, the first payment falls 6 months and 13 days after the first day of the accounting period, with other payments at 3-monthly intervals if the period is long enough.

Example: For an accounting period from 1 January 2027 to 31 August 2027:

First payment: 14 July 2027
Second payment: 14 October 2027
Final payment: 14 December 2027

Example: For an accounting period from 1 January 2027 to 31 March 2027 (3 months):

All Corporation Tax is due in a single instalment on 14 July 2027.

How to calculate your instalment payments

Step 1: Estimate your total liability

First, estimate your Corporation Tax liability for the accounting period. This includes any tax due on:

Loans to directors and other participators in close companies
Controlled foreign companies

Deduct all reliefs and set-offs to arrive at your company's total liability, just as you would when completing your Company Tax Return.

Step 2: Calculate each instalment amount

For a 12-month accounting period, divide your total liability by 4. Each instalment is a quarter of your company's total liability.

For accounting periods of 3 months or less, make one single payment of your company's total liability.

For accounting periods longer than 3 months but less than 12 months:

Each instalment except the last = (total liability ÷ number of months in the accounting period) × 3
The last instalment = total liability minus payments already made

Example: For an accounting period from 1 January 2027 to 31 August 2027 with £900,000 Corporation Tax to pay:

Total liability: £900,000
Months in accounting period: 8
Each instalment except the last: (£900,000 ÷ 8) × 3 = £337,500
Last instalment: £900,000 - (£337,500 × 2) = £225,000

Very large companies (over £20 million profits)

If your company's profits exceed £20 million at an annual rate, you're classed as a "very large company" and must pay instalments even earlier.

The £20 million threshold is also reduced if you have associated companies (for periods beginning on or after 1 April 2023) or related 51% group companies (for periods between 1 April 2015 and 31 March 2023).

For very large companies with 12-month accounting periods, instalments are due:

2 months and 13 days after the first day of the accounting period
3 months after the first instalment
3 months after the second instalment
3 months after the third instalment

This means all four payments fall within your accounting period, on the 14th day of months 3, 6, 9 and 12.

Unlike the first-time exception for large companies, there is no period of grace when you first become a very large company.

Sources

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.