Corporation tax in the UK: rates, deadlines and how to fund the bill
Rates, deadlines, marginal relief and the practical options for funding a corporation tax bill without straining cash flow.
The current rates in one glance
The UK corporation tax main rate is 25% on profits above £250,000. A small-profits rate of 19% applies to profits up to £50,000. Between £50,000 and £250,000, marginal relief tapers the effective rate from 19% up to 25%.
Associated companies share the £50,000 and £250,000 thresholds pro-rata, a common trap for group structures.
When corporation tax is actually due
For companies with taxable profits under £1.5m, corporation tax is due nine months and one day after the end of the accounting period. A December year-end pays by 1 October.
Large companies (profits over £1.5m) pay in quarterly instalments, the first falls in month 7 of the current accounting period, so cash planning has to start earlier than most owners expect.
Funding the bill without draining working capital
If the company cannot pay in full, contact HMRC promptly to discuss whether a Time to Pay arrangement may be available. Eligibility, the application route and interest can change, so check the current GOV.UK guidance rather than relying on a fixed threshold or rate.
For recurring or larger liabilities, a short-dated commercial VAT / tax loan is often cheaper in total cost of capital than the surcharge regime, and does not appear on the HMRC record.
Turn the tax estimate into a cash plan
Confirm the accounting period
Use the company's actual period end and HMRC account. Different rules can apply to long periods, large companies and groups.
Update the estimate
Ask the accountant to refresh taxable profit for reliefs, losses, capital allowances and associated companies rather than applying a headline rate to accounting profit.
Reserve progressively
Set a monthly transfer based on the updated estimate and compare the reserve with the liability at each management-accounts review.
Application checklist
- Accounting period dates
- Latest taxable-profit estimate
- Associated company position
- Capital expenditure and allowances
- HMRC balance
- Payment reference and deadline
Useful primary and industry references
These references support further research. Product terms and official guidance can change.
Frequently asked
Is corporation tax deductible?
No. Corporation tax is a tax on profit, not an expense against profit. The interest cost of a loan taken to pay it is generally deductible.
Can I pay corporation tax by direct debit?
Yes. HMRC supports single-payment direct debits and Faster Payments. Recurring DDs are not available for corporation tax.
What happens if I miss the deadline?
Interest accrues from day one at the HMRC late-payment rate. A penalty regime kicks in for late filing of the CT600 return, separate from the payment.
