There are all kinds of dates and rates to remember when it comes to submitting company tax returns. But corporation tax is slightly different from regular taxes because there isn’t one single deadline for everyone. Instead, when to pay corporation tax depends on your company’s accounting periods.
So, when is corporation tax due?
From when corporation tax has to be paid, to how much — and what happens if you can’t make payment on time — here’s everything you need to know about corporation tax.
Corporation tax is a charge on business profits.
You must pay corporation tax if you run a limited company or a foreign company with UK branches or offices. It also applies to clubs and co-operatives, including organisations like community groups and sports clubs.
You don’t get a bill for corporation tax, so it’s up to you to work out how much you owe, make payments and report your tax to HMRC.
This means registering for corporation tax with HMRC is one of the first things to do if you’re setting up a limited company. You’ll have to register within three months of starting trading, which covers any activities related to buying, selling, advertising services or employing staff.
You can register for corporation tax on the gov.uk website. If you register late, you could face a penalty.
When must corporation tax be paid in the UK?
If you’re wondering when to pay corporation tax, you’re not alone.
Corporation tax payment deadlines differ from other taxes. They depend on your company’s accounting period.
An accounting period is simply the amount of time your accounts cover. This is typically twelve months and starts from the date you launched your company.
You can check your business’s accounting period by signing into your HMRC online account. This is generally in line with your annual accounts and financial statements.
Corporation tax payments are due nine months and one day after the end of this accounting period.
This means corporation tax deadlines are different for each company.
Here’s how the timeline works:
- Business accounts are sent to Companies House — within nine months of the end of your accounting period.
- Corporation tax payments are due — within nine months and one day after the end of your accounting period.
- Corporation tax returns are due — twelve months after your company’s accounting period.
This means that corporation tax payments are due before corporation tax returns. Even so, you’ll have to prepare the return beforehand so you know how much you owe.
When is corporation tax due?
So, when is corporation tax due in practice?
Let’s take a look at a couple of “standard” examples:
- If your company’s accounting period ends on 31 March 2023, you’ll have to pay corporation tax by 1 January 2024. Your corporation tax return will be due to HMRC another three months later, on 31 March 2024.
- If your company’s accounting period ends on 5 April 2023 (the end of the “tax year”), you’ll have to pay corporation tax by 1 February 2024. You’ll need to file your corporation tax return with HMRC by 30 April 2024.
There are a few situations where this might be different:
- New businesses: If you’ve just started a small business, you might have two corporation tax accounting periods. This is because corporation tax accounting periods can’t be longer than twelve months. So, for instance, if you started your business on 1 January, your first accounting period might go up to the end of the tax year. After this, you can begin a full 12-month accounting period.
- Loss-making companies: Even if your company is making a loss, you’ll still need to declare this to HMRC. You’ll have to fill in a “nil to pay” form, which means you don’t have any corporation tax due.
- “Large” or “Very Large” companies: Businesses making over £1.5 million in profits need to pay corporation tax in instalments. These businesses are classed as “large”, with payments made in four quarterly instalment payments (known as “QIPs”). “Very large” businesses have more than £20 million in annual taxable profits. They also have to make four QIPs, just at a slightly earlier date.
What was the corporation tax rate for 2022?
In 2022, corporation tax was charged as 19% of taxable profits.
Taxable profits are classed as any income from:
- Profits made from doing business, known as “trading profits”.
- Any company investments.
- Selling assets for more than they cost, known as “chargeable gains”.
- Any company assets. This could include land or property, equipment and machinery, or company shares.
Working out what corporation tax you owe can be tricky.
There are some corporation tax allowances you can deduct from business running costs. This might include things like mileage, training and accommodation — but only if these expenses are necessary and incurred “wholly and exclusively” for business purposes.
In addition, you might be able to take advantage of corporation tax reliefs. These include things like “creative industry tax reliefs” (for instance, companies working in film, television or gaming), allowing businesses to claim larger deductions on their taxable profits. If your company works on innovative projects in science and tech, “research and development (R&D) relief” might apply.
HMRC has a helpful guide to calculating your taxable profits. If you’re unsure at any point, seek the help of a professional accountant.
What will corporation tax be in 2023?
From 1 April 2023 (the start of the new tax year), the ways UK businesses pay corporation tax will change.
- Companies with profits of £50,000 or less will carry on paying corporation tax at 19%.
- If your profits are over £250,000, you’ll pay corporation tax at 25%.
- For businesses with profits between £50,000 and £250,000, you’ll pay an effective corporation tax rate between 19% and 25%. This depends on how much Marginal Relief you can claim.
The government has a Marginal Relief Calculator to help you understand how much Marginal Relief your company can claim. This will tell you what your effective corporation tax rate is.
What happens if you don’t pay corporation tax on time?
You might face a penalty if your company doesn’t meet corporation tax deadlines and requirements.
If you pay your corporation tax late, HMRC charges interest. This also applies if you don’t pay enough, or don’t pay anything. HMRC starts charging interest on the day after tax should have been paid.
The late payment interest rate is currently 6% (from 6 January 2023).
If you’ve made errors in your corporation tax calculations, you must contact HMRC immediately to correct them. If you do this, your penalty charge might be less. Alternatively, HMRC might decide not to apply a penalty at all.
For instance, HMRC charges up to 30% of potential lost revenue for “non-deliberate” failures. For “deliberate and concealed” failures, the penalty can rise to 100% of the potential lost revenue.
See HMRC guidance on corporation tax penalties and how they’re calculated for more detailed information.
If you know you can’t make your corporation tax payment, contact HMRC as soon as possible. They’ll probably ask for your current accounts and cash flow forecasts to figure out how much tax you can pay immediately. They’ll also determine how long you’ll need to pay the rest of your balance.
You might agree to pay your tax in instalments. This is known as a “Time to Pay” (TTP) arrangement.
If these “informal” steps don’t result in progress, HMRC could take formal enforcement action against your company. This could involve instructing bailiffs to seize assets.
Alternatively, HMRC might issue a “winding up petition” against your company. This forces a company into compulsory liquidation.
If you can’t pay your corporation tax, it’s essential to seek independent legal advice as soon as possible. There might be other options available (depending on your circumstances), such as “Company Voluntary Arrangements” or “Creditors’ Voluntary Liquidation”.
How do you pay corporation tax UK?
Once you’ve worked out how much you owe and your corporation tax deadline, you can pay anything you owe.
Remember, you’ll need to allow time for your payment to reach HMRC (so you don’t face any interest on late payments). If your deadline falls on a bank holiday, you’ll also have to make sure payment reaches HMRC on the last working day before this.
There are several ways of paying UK corporation tax, depending how quickly you need payment to reach HMRC.
Same day or next day payments
- Online or telephone banking (using faster payments or CHAPS)
- Via your company’s online bank account
Three working day payments
- Online or telephone banking via BACS transfer
- Direct Debits (but only if you’ve set this up before)
- Online via corporate credit cards or debit cards
- In person, at your bank or building society
Five working day payments
- Direct Debits (if you haven’t set this up before)
In general, it’s best to log into your HMRC tax account to do this.
Alternatively, you can do this without signing-in, using your corporation tax payment reference number.