How UK Companies
Can Pay Their Corporation Tax in Installments
If you own a business in the UK, you know that corporation tax is an important element of keeping legal, but it can also be one of the hardest payments to handle. We have been helping businesses in London for almost 20 years, and we have seen them struggle, stress, and even get in trouble with HMRC because they didn't organise their payments correctly.
The good news? HMRC has practical ways for firms to pay their corporation tax in installments, and with good planning, it's not too hard to do. This article will show you all of your alternatives, help you avoid problems, and show you exactly how to set up payments so that your cash flow stays healthy.
Table of Contents
- Understanding Your Corporation Tax Duties
- Why Payments in Installments Can Save Your Life
- Ways to Pay Corporation Tax in Installments
- How to Get a Payment Plan
- Problems and Solutions That Happen Often
- Payment Plans and VAT
- Getting Ready for the Future
- Final Thoughts
Understanding Your Corporation Tax Duties
Corporation tax is a tax on a company's profits. The rates in the UK as of 2026 are:
● 25% on profits above £250,000
● 19% on profits of less than £50,000
● Profits between £50,000 and £250,000 get marginal relief.
Businesses must file a Company Tax Return and pay any taxes they owe by the timeframes stipulated by HMRC. If you miss a deadline, you'll have to pay interest and penalties, which may add up quickly if you don't pay them.
Important Dates for Corporation Tax
| Type of Tax | Deadline for Filling | Deadline for Payment |
|---|---|---|
| Corporation Tax | 12 months after the end of the accounting period | 9 months and 1 day after the end of the accounting |
| VAT (if registered) | Monthly or Quarterly | 1 month and 7 days after the end of the period |
| PAYE and NIC | Monthly or Quarterly | 22nd/19th of the following month |
From what we at Taxaccolega have seen, one of the most common reasons firms get into problems is thinking that profits are the same as cash on hand. If you make £100,000 in profit, that doesn't mean you have that much money in the bank to pay taxes right away.
Why Payments in Installments Can Save Your Life
Even corporations that make money occasionally have trouble paying their corporate taxes all at once. Some such situations are:
● Changes in revenue by season: Retailers, hotels, and service businesses commonly have busy and slow times.
● Unexpected costs: Fixing equipment, paying legal fees, or making a one-time purchase can quickly use up financial reserves.
● Little business problems: SMEs frequently have little profit margins and can't afford to lock up capital in one big payment.
This is where HMRC's Time to Pay (TTP) plans and quarterly payments can be quite helpful.
Ways to Pay Corporation Tax in Installments
1: Arrangements for Time to Pay (TTP)
Businesses can spread out their corporation tax payments over a period of time that they agree on with HMRC. In my experience, HMRC is fairly lenient as long as you contact them before you miss a payment.
Important points:
● Eligibility: Businesses must show that they are really having trouble with money.
● Length: Usually up to 12 months, however in very rare cases, extensions may be possible.
● Interest: HMRC imposes interest on monies that are still owed, but this is normally far less than the penalty for filing late.
● How to apply: Online through HMRC or by phoning their special helpline.
Don't wait until the last minute, though. If you get in touch with HMRC early and give them actual cash flow numbers, they will usually agree to a structured plan.
2: Payments Every Three Months
HMRC requires larger businesses (those with profits over £1.5 million) to make payments every three months. Smaller firms can ask for quarterly payments on their own, which is a good way to keep cash flow steady.
| Type of Instalments | Companies That Can Use It | Frequency | Notes |
|---|---|---|---|
| Large enterprises (profit over £1.5 million) | Must do this every three months | 4 payments | HMRC needs an automatic payment schedule |
| Voluntary Quarterly | SMEs | 4 payments | must ask HMRC for permission |
Quarterly payments help businesses sync up their tax payments with their cash flow, which lowers stress and keeps them from having to scrabble for money at the last minute.
3. Plans for Paying Corporate Taxes
Plans for paying corporate taxes are a little different from TTP plans. These are structured agreements that can be changed to fit the needs of a business. Small businesses usually get the most out of this because HMRC can authorise monthly or quarterly payments based on realistic cash flow estimates.
How to get a Payment Plan
Based on years of helping clients, here's the step-by-step procedure I suggest:
Look over your accounts: Be sure to know how much money you made and how much cash you have on hand.
Predict your cash flow: Figure out months when you can make payments without hurting your business.
Get in touch with HMRC as soon as you can: Use their website or call them to explain your position.
Negotiate payments: Give realistic numbers and suggest a plan that works.
Stick to the plan: HMRC is flexible, but only if you pay on time.
A short collection of top tips for small businesses:
● Set up a separate tax reserve account.
● Every three months, update your cash flow projections.
● Talk to a qualified accountant to get the best payment plan.
Problems and Solutions That Happen Often
Even with payments in installments, businesses can run into problems:
● If you can't pay a scheduled payment: Get in touch with HMRC right away. From what I've seen, being proactive can help you avoid penalties.
● If you're not sure about voluntary quarterly payments: Consult HMRC or an accountant. Miscommunication can cost you thousands.
● Interest on deferred payments:Consider partial early payments to lower the total interest.
Payment Plans and VAT
Keep in mind that corporate tax isn't the only thing you have to do. VAT, PAYE, and NIC can also make it hard to keep cash flow steady. It can be a lot easier to pay these taxes if your installment plans are in sync.
| Type of Payment | Frequency | Notes |
|---|---|---|
| VAT | Monthly or every three months | If you're having trouble, you can ask for a delayed payment |
| PAYE / NIC | Monthly or Quarterly | Payments in arrears based on payroll reporting |
| Corporation Tax | Quarterly/TTP | Installments plans that are flexible |
Useful tip: I've told clients to make a master tax calendar so they never miss a payment and can arrange their savings accordingly.
Getting Ready for the Future
>As HMRC moves toward more computerised and real-time technologies, planning is getting even more exact.
● Integrating accounting software lets you make precise predictions about payments.
● HMRC will send automated warnings to businesses to let them know when their next payment is due.
● Companies who use these technologies early will avoid surprises and make running their businesses easier.
Final Thoughts
It is not only possible but often necessary to pay corporate tax in installments in order to keep your finances stable. There are many strategies and multiple ways to stay compliant and keep your cash flow in check, such as making payments every three months or setting up a Time to Pay plan.
In our 20 years of practical experience and giving advice to UK firms, we have always found that proactive preparation, early and timely communication with HMRC, and professional help are the best ways to avoid stress and fines.
Taxaccolega's team of expert chartered accountants can help you set up your corporation tax payments, keep track of your cash flow, and make sure you are always following HMRC rules, whether you run a business in Croydon, London, or anywhere else in the UK. Call us today to talk about a plan that is just right for your business.
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