Corporation Tax is the key tax a limited company has to pay each year. Our guide to paying Corporation Tax will help ensure you meet tax deadlines and show you the best way to pay
Paying Corporation Tax on any profits your small business makes if it’s registered as a limited company is a legal requirement.
After filing your accounts with HM Revenue & Customs (HMRC), you’ll need to pay Corporation Tax on any profits for the financial year.
Profit is money your business made after all allowable expenses and costs, such as salaries. There are also tax relief and allowances that can be applied to your company profits to lower you Corporation Tax liability.
When does my small business have to pay Corporation Tax?
Depending on the profits your business makes, the deadline for paying Corporation Tax will be different.
If your taxable profits are less than £1.5m, your business has 9 months and 1 day after the end of the accounting period to pay the Corporation Tax that’s due.
The accounting period is usually the financial year of your business – start-ups can have two periods in the first year they were established.
If your taxable profits are above £1.5m, then your business has to pay HMRC in instalments – usually every three months following the first instalment.
How do I pay Corporation Tax?
HMRC offers several ways to pay Corporation Tax, and it is worth noting the deadline of when you need to pay.
If you miss a deadline, you’ll be liable for interest payments on the outstanding amount. However, if you pay your Corporation Tax early, HMRC will pay interest to your business.
Corporation Tax can be paid electronically, and at the Post Office or your bank, depending on how quickly want the payment to clear with HMRC.
In all cases, you’ll need to quote you 17-digit Corporation Tax reference number for the accounting period you’re paying for.
- Same day Corporation Tax payments – you’ll need to pay by CHAPS, online or telephone (Faster Payments) – most high street banks with online business accounts will support online same day transfers to HMRC. You’ll either need to pay HMRC Cumbernauld or HMRC Shipley – your Corporation Tax payslip with tell you which one. If in doubt, pay HMRC Cumbernauld.
- Three working day Corporation Tax payments – BACS bank transfers, Direct Debit, or paying online with your credit or debit card typically take around three working days. The same length applies if you pay at the Post Office, a bank or building society. If you pay at the bank, Post Office or building society, you’ll need to take you Corporation Tax payslip HMRC sent.
- Five working day Corporation Tax payments – if you need to set up a Direct Debit for this and future Corporation Tax payments, it will take five days to process the payment to HMRC.
How do I tell HMRC if there is no tax due?
If you’ve closed your accounts for the financial year and calculated that you don’t owe Corporation Tax, you must tell HMRC that you’ve no tax to pay – don’t assume that because you don’t have anything to pay you don’t have to do anything.
To let HMRC know, complete and return the ‘nil to pay’ form or send back the payslip reminder from the HMRC with the words ‘NIL due’ marked on it.
How do I know if HMRC got my tax payment?
Depending on your payment method, HMRC will update your account with your latest payments within a few days of you paying HMRC.
You can check your online HMRC account to see if your account has been updated with your payment.
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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.
