How Do You Pay Corporation Tax? Complete UK Guide

Table of Contents

1. Introduction

If you run a limited company in the UK, you’ll need to pay corporation tax on your profits. Many new directors ask: how do you pay corporation tax? Understanding the rules, deadlines, and payment methods is crucial to staying compliant and avoiding penalties.

2. What Is Corporation Tax?

Corporation tax is a tax paid by UK companies on their profits. Unlike income tax, there’s no personal allowance—companies pay tax on all profits after expenses.

3. Who Needs to Pay Corporation Tax?

You must pay corporation tax if you run a:

Limited company.
Foreign company with a UK branch or office.
Club, co-operative, or unincorporated association making profits.

4. Current Corporation Tax Rates (2024/25)

19%: For profits up to £50,000.
25%: For profits over £250,000.
Tapered rate: Between £50,000 and £250,000.

5. Steps to Paying Corporation Tax

Step 1: Register with HMRC

Step 2: Keep Accurate Records

Track all income, expenses, and allowances.

Step 3: File Company Tax Return (CT600)

Submit to HMRC online using approved software.
Shows profits, reliefs, and corporation tax owed.

Step 4: Calculate Corporation Tax

Based on your accounting profits minus allowances.
Accountants often assist with accuracy.

Step 5: Pay HMRC

Payment deadline is 9 months and 1 day after the end of your accounting period.

6. Payment Methods for Corporation Tax

Online Banking (Faster Payments, CHAPS, Bacs).
Direct Debit: Set up through HMRC.
Debit or Corporate Credit Card: Pay online at GOV.UK.
At Your Bank or Building Society: Using a payslip (rarely used now).

7. Deadlines You Must Remember

Filing Deadline: Company tax return due 12 months after accounting period ends.
Payment Deadline: Corporation tax due 9 months and 1 day after accounting period ends.

8. Example of Paying Corporation Tax

Accounting year ends: 31 March 2024.
Tax return due: 31 March 2025.
Payment due: 1 January 2025.

9. Penalties for Late Payment

Interest charged on late payments.
Penalties for late filing of tax returns (£100 minimum, increasing with time).

Frequently Asked Questions

1. How do you pay corporation tax in the UK?
By filing a tax return with HMRC and paying via bank transfer, direct debit, or online card payment.

2. Do sole traders pay corporation tax?
No, only limited companies and some organisations do. Sole traders pay income tax instead.

3. Can I pay corporation tax in instalments?
Large companies may need to make quarterly instalment payments.

4. What happens if I miss the deadline?
You’ll pay interest on overdue tax and may face fines for late filing.

5. Can I do my own corporation tax return?
Yes, but many directors use accountants to avoid mistakes.

6. Is corporation tax paid on turnover or profit?
It’s paid only on profits, not total turnover.

Conclusion

To answer how do you pay corporation tax—you must register with HMRC, keep records, file a company tax return, and pay by the deadline using bank transfer, direct debit, or online payment. Staying on top of deadlines avoids fines and ensures your company remains compliant.