For most UK limited companies, paying corporation tax means a single payment 9 months and 1 day after the accounting period ends. But that is not the whole picture.
If your company pays before that date, HMRC credits you with interest. If your company is large enough (augmented profits over £1.5 million), you are legally required to pay in quarterly instalments throughout and immediately after the accounting period, not in one lump at the end. And if your profits exceed £20 million, those instalments arrive even earlier, inside the tax year itself.
This page explains both routes: the credit interest available when you pay early, and the quarterly instalment payment (QIP) regime for large and very large companies. All interest rates are date-tagged because they float with the Bank of England base rate.
The Case for Paying Corporation Tax Early
HMRC pays you interest when you overpay corporation tax or pay before the normal due date. This is called repayment interest, and the current rate is 2.75% per year (from 9 January 2026). The statutory basis is ICTA 1988 s.826.
The interest runs from the date you make the early payment to the normal 9m1d due date. It is automatic, not something you need to claim separately.
The asymmetry is worth noting. If you pay late, HMRC charges interest at 7.75% per year (from 9 January 2026). Paying early earns you 2.75%. Paying late costs you 7.75%. The rate structure penalises late payers far more heavily than it rewards early payers. For that reason, managing your payment timing is worth attention even before you approach the QIP threshold.
Worked Example A: £50,000 Corporation Tax Bill Paid 6 Months Early
Scenario: A company with a 31 March 2026 year end has a corporation tax liability of £50,000. The standard payment date is 1 January 2027 (9 months and 1 day after the period end). The company pays in full on 1 July 2026, exactly 6 months early.
Credit interest calculation (at 2.75% from 9 January 2026):
- Period: 1 July 2026 to 1 January 2027 = 184 days
- Calculation: £50,000 x 2.75% x (184 / 365)
- Interest earned: £50,000 x 0.0275 x 0.5041 = £693
A 2.75% risk-free return on £50,000 for 6 months is modest. But it is better than most business current accounts, and it scales with the size of your liability. A company with a £500,000 CT bill would earn roughly £6,930 in credit interest over the same period. Whether that is worthwhile depends on your company's liquidity position: some directors prefer to keep the cash in the business until the due date. Others treat early CT payment as a straightforward, zero-effort optimisation.
One thing early payment does not do: it does not affect your penalties for missing the filing deadline. Payment and filing are separate obligations.
The Quarterly Instalment Payment Regime: Who Must Use It
The quarterly instalment payment (QIP) regime is set out in the Corporation Tax (Instalment Payments) Regulations 1998 (SI 1998/3175). It exists because HMRC wants large companies to pay corporation tax during the year in which the profits arise, not 9 months after the year end.
A company is a large company for a given accounting period if its augmented profits exceed £1.5 million. "Augmented profits" broadly means your taxable profits plus exempt dividends received from non-group companies. For threshold purposes, you can treat it as broadly equivalent to your taxable profits in most cases, though your accountant should verify this for your specific situation.
The QIP rules contain three important modifiers:
Associated-Company Division
The £1.5m and £20m thresholds are divided by the number of associated companies (determined at the end of the preceding accounting period). If your company has two associated companies (three in total), the effective large-company threshold per company is £500,000. A company can be inside the QIP regime even if its own profits are well below £1.5m, simply because it is part of a group with several associates.
This is the most common planning trap. Two connected companies, each with £800,000 of profits, might individually look below the £1.5m threshold. But if they are associated, the threshold divides by two, giving an effective threshold of £750,000 per company. Both would be large companies and would need to pay by instalments.
Growth Relief: A One-Year Grace for New Entrants
A company whose profits do not exceed £10 million is NOT treated as a large company if it was not a large company in the preceding 12 months. This one-year grace period exists to protect genuinely growing businesses that have just crossed the threshold for the first time. If you have never been a large company before, you will not face QIPs in that first year above £1.5m (applying the divided threshold). The following year, the regime applies in full.
De Minimis: CT Liability of £5,000 or Less
Even if your profits are large, no instalment obligation arises if your total corporation tax liability for the accounting period is £5,000 or less. This is the de minimis exemption in Regulation 3(2) of SI 1998/3175. It mainly protects companies with large turnover but very low taxable profit in a particular year.
Very Large Companies
A company with augmented profits exceeding £20 million (divided by associated companies in the same way) is a "very large" company. The instalment schedule is substantially earlier, and is covered in its own section below.
Worked Example B: Associated-Company Division Catches a Growing Company
Scenario: Ltd Co A has two associated companies (Ltd Co B and Ltd Co C), giving three companies in total. The accounting period runs from 1 April 2025 to 31 March 2026. Ltd Co A's augmented profits for 2025/26 are £1,800,000.
Threshold calculation:
- Standard large-company threshold: £1,500,000
- Divided by 3 (associated companies including Ltd Co A): effective threshold = £500,000
- Ltd Co A's profits (£1,800,000) exceed £500,000, so Ltd Co A IS a large company for this period.
Estimated CT liability: At the main rate of 25% (profits well above the marginal relief band, per CT rates and marginal relief): approximately £450,000.
QIP due dates (standard large-company schedule, 12-month AP starting 1 April 2025):
| Instalment | Due date | Approximate amount |
|---|---|---|
| 1st | 14 October 2025 | ~£112,500 |
| 2nd | 14 January 2026 | ~£112,500 |
| 3rd | 14 April 2026 | ~£112,500 |
| 4th | 14 July 2026 | ~£112,500 |
Key point: Ltd Co A might have assumed the threshold was £1.5m (the headline figure). The associated-company rule cuts the effective threshold to £500,000. Missing the first instalment in October 2025 would trigger debit interest at 6.25% on the shortfall.
Growth relief check: If Ltd Co A was not a large company in the 12 months to 31 March 2025 (its profits then were £500,000 or less after division), it benefits from the growth relief and no QIPs would be required for 2025/26. QIPs would then apply from 2026/27 onward.
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The Standard Large-Company QIP Schedule
For a standard 12-month accounting period, a large company (augmented profits between £1.5m and £20m, divided by associated companies) pays four instalments. The due dates relative to the accounting period are:
| Instalment | Due date (relative to AP) | Example: AP 1 Apr 2025 to 31 Mar 2026 |
|---|---|---|
| 1st | 6 months and 13 days after AP start | 14 October 2025 |
| 2nd | 3 months after 1st instalment | 14 January 2026 |
| 3rd | 3 months after 2nd instalment | 14 April 2026 |
| 4th | 3 months and 14 days after AP end | 14 July 2026 |
Each instalment is broadly one quarter of the estimated corporation tax liability for the year. The statutory formula (CTM92600) is: 3 x total CT liability / number of months in the accounting period. For a standard 12-month period, that gives 3/12 = 25% per instalment.
In practice, companies estimate and revise each instalment as the year progresses. The first instalment is usually based on the prior year's liability or the best available in-year estimate. Later instalments can be increased or reduced depending on how the year is tracking. Getting the estimates right matters: both underpayment (6.25% debit interest) and significant overpayment have cash-flow consequences, even though HMRC does pay 3.50% credit interest on overpayments.
For accounting periods shorter or longer than 12 months, the payment dates follow the same formula relative to the AP start and end, but the number of instalments and the amount per instalment are adjusted. This is worth flagging to your corporation tax accountant if your company has had a period change.
The Very Large Company Schedule: Profits Over £20 Million
For companies with augmented profits exceeding £20 million (divided by associated companies), the instalment timetable is brought forward substantially. Payments fall due on the 14th day of months 3, 6, 9 and 12 of the accounting period, that is, within the period itself, not after it ends.
For a 12-month accounting period starting 1 April 2025:
| Instalment | Due date | Timing |
|---|---|---|
| 1st | 14 June 2025 | Month 3 of the accounting period |
| 2nd | 14 September 2025 | Month 6 |
| 3rd | 14 December 2025 | Month 9 |
| 4th | 14 March 2026 | Month 12, before the AP even ends |
Very large companies are effectively paying corporation tax while the tax year is still running, based on in-year profit estimates. This creates a significant cash-flow discipline requirement: finance teams at very large companies must maintain an accurate running forecast of the full-year CT liability, with the first material payment due just three months into the year.
The associated-company division applies here too. A company in a group of four, each with profits around £6 million (total group profits £24m), might find each company individually above the £5m divided threshold (£20m / 4 = £5m) and therefore on the very large company schedule.
Interest on QIP Payments: Overpayment and Underpayment
A separate interest regime applies specifically to QIP companies, set out in SI 1998/3176 (the Taxes (Interest Rate) (Amendment No. 2) Regulations 1998). The rates are different from the general corporation tax interest rates.
Overpaid Instalments: HMRC Pays You Credit Interest
If a company pays more in QIP instalments than its final CT liability turns out to be, HMRC pays credit interest at 3.50% per year (from 29 December 2025) on the overpayment. This rate is set by formula as the Bank of England reference rate minus 0.25% (SI 1998/3176). The interest runs from the date the overpayment arises (or the first instalment due date, if later) to the earlier of when HMRC repays the excess or the normal 9m1d due date.
You will notice this rate (3.50%) is higher than the general repayment interest rate (2.75%). HMRC compensates QIP companies slightly more generously because those companies are paying in advance of when the tax would otherwise be due.
Underpaid Instalments: HMRC Charges Debit Interest
If a company's instalment payments fall short of the correct instalment amounts, HMRC charges debit interest at 6.25% per year (from 29 December 2025) on the shortfall. This rate is set as the Bank of England reference rate plus 2.5% (SI 1998/3176). The debit interest runs from the due date of the underpaid instalment to the normal 9m1d payment date.
After the Normal Due Date
Once the 9m1d payment date passes, any remaining unpaid corporation tax (whether by a QIP company or a standard payer) attracts the general late-payment rate of 7.75% per year (from 9 January 2026). This is the higher rate. It is significantly above the QIP debit interest rate and well above the credit interest rates. Getting to and beyond the normal due date with unpaid CT is the most expensive outcome.
The full interest rate picture for corporation tax (as at July 2026) looks like this:
| Scenario | Rate | Effective from |
|---|---|---|
| General early payment / overpayment (repayment interest) | 2.75% | 9 January 2026 |
| QIP overpayment (credit interest on instalments) | 3.50% | 29 December 2025 |
| QIP underpayment (debit interest on instalments) | 6.25% | 29 December 2025 |
| Late payment after 9m1d due date | 7.75% | 9 January 2026 |
These rates all float with the Bank of England base rate. They will change when the base rate changes. Always verify the current rates at gov.uk (search "HMRC interest rates for late and early payments") before relying on them for a planning decision.
Practical Planning for Companies Approaching the QIP Threshold
If your company's profits are approaching £1.5 million (or a lower effective threshold due to associated companies), the QIP regime can arrive with less notice than you might expect. The first instalment falls due just over 6 months into the accounting period. That means if your year starts on 1 April, you could have a payment obligation in mid-October, based on an estimate of profits you have not yet fully earned.
Here are the planning points that matter most:
- Check your associated-company position first. The £1.5m headline threshold applies to an isolated company. If you have connected companies under common control, the threshold divides. Two companies each with £900,000 of profits could individually assume they are safe. If they are associated, the threshold halves to £750,000 and both are inside the QIP regime.
- Use the growth-relief year wisely. If you cross the threshold for the first time, and your profits in the preceding 12 months were below the (divided) threshold, you have a one-year grace. That grace period does not repeat: from the following year, instalments are compulsory. Use the grace year to set up the internal forecasting and payment processes you will need from year two onward.
- Build a running CT estimate into your monthly management accounts. QIP amounts are based on estimated liability. An inaccurate estimate means either a cash-flow hit from overpaying early instalments or a 6.25% debit-interest charge on underpayments. Neither outcome is desirable. A monthly or quarterly CT provision, built into your management accounts, gives you the data you need to size each instalment correctly.
- If you cannot pay, contact HMRC before the due date. HMRC operates a Time to Pay arrangement for companies that genuinely cannot meet a payment obligation. This does not eliminate interest, but it avoids the debt-enforcement consequences of simply missing a date. Speak to HMRC or your accountant before the instalment falls due, not after.
The associated company rules are the single most frequent surprise for owner-managers who run more than one company. A review of your group structure before the accounting period in which the threshold might be crossed gives you the information you need to plan.
For advice tailored to your company's position, including help with CT estimates and instalment calculations, a corporation tax accountant can review your structure and prepare instalment schedules before they fall due.