1. What Is Corporation Tax?
Corporation tax is a tax that UK limited companies and certain organisations pay on their profits. It applies to trading income, investments, and chargeable gains. Unlike personal income tax, there is no tax-free allowance for companies.
2. Who Pays Corporation Tax?
You must pay corporation tax if you run a:
- Limited company
- Foreign company with a UK branch
- Club, society, or association registered as a company
3. Key Deadlines for Corporation Tax
- File Company Tax Return (CT600): Within 12 months after the end of your accounting period.
- Pay Corporation Tax: Usually 9 months and 1 day after the end of your accounting period.
Example: If your company’s year-end is 31 March, you must pay corporation tax by 1 January the following year.
4. How Much Corporation Tax Do I Pay?
- The current UK main rate is 25% (from April 2023).
- A small profits rate of 19% applies if profits are £50,000 or less.
- Companies with profits between £50,000 and £250,000 pay a tapered rate.
5. How to Register for Corporation Tax
- Register your company with Companies House.
- Register for corporation tax with HMRC within 3 months of starting business activity.
- Receive a Unique Taxpayer Reference (UTR) from HMRC.
6. How to Pay Corporation Tax
You cannot pay at a bank branch—payments must go directly to HMRC. Accepted methods include:
- Online or Telephone Banking (Faster Payments, CHAPS, Bacs)
- Direct Debit (set up in your HMRC online account)
- Corporate Credit or Debit Card (online via HMRC portal)
- At Your Bank by Cheque (only if HMRC sends you a payslip)
7. Paying Through HMRC Online Services
- Log into your HMRC online account.
- Select Corporation Tax.
- Enter your company’s UTR and payment reference.
- Choose a payment method and complete the transaction.
8. Payment Processing Times
- Faster Payments / CHAPS: Same day or next day
- Bacs / Direct Debit: 3 working days
- Debit/Credit Card: 3 working days
- Cheque by Post: Allow at least 3 working days
9. Late Payment Penalties and Interest
- HMRC charges interest on late payments.
- Penalties apply if you miss filing deadlines.
- To avoid penalties, always pay before the due date and allow time for bank processing.
10. Reducing Corporation Tax Liability
- Claim allowable business expenses (rent, salaries, utilities, etc.)
- Use capital allowances for equipment purchases
- Apply for R&D tax relief if eligible
- Offset trading losses against future profits
- Contribute to staff pensions
Frequently Asked Questions
When is corporation tax due?
Nine months and one day after the end of your company’s accounting period.
Can I pay corporation tax in instalments?
Large companies (profits over £1.5m) must pay in instalments. Smaller businesses usually pay in a single lump sum.
Do all companies pay 25% corporation tax?
No, small businesses with profits of £50,000 or less pay 19%.
How do I know how much to pay?
You must prepare company accounts and a Corporation Tax Return (CT600) to calculate your liability.
Can I pay corporation tax with a personal card?
No, only corporate cards and business accounts are accepted.
What happens if I don’t pay?
HMRC will charge interest, issue penalties, and may take enforcement action.
Conclusion
Paying corporation tax in the UK is a straightforward process once you understand the deadlines and payment options. Most companies pay 9 months and 1 day after their accounting period ends, using HMRC-approved methods such as bank transfer, Direct Debit, or online card payments. To avoid penalties, ensure you register, file returns, and pay on time.