Can You Pay Corporation Tax in Instalments?

Corporation Tax is one of the main financial responsibilities for limited companies in the UK. While many businesses pay their bill in a single lump sum each year, this isn’t always the only option. If you’re worried about cash flow or your company’s profits are particularly high, you may be wondering whether you can pay Corporation Tax in instalments.

Planning your Corporation Tax payments, whether as a lump sum or through quarterly instalments, requires accurate forecasting, timely submissions and a clear understanding of HMRC’s rules. If your company is approaching or exceeding the profit thresholds that trigger mandatory instalments, it's important to have the right support in place. Our team of limited company accountants works closely with directors of growing businesses to manage their Corporation Tax obligations efficiently. From calculating your liability to mapping out payment schedules and handling communication with HMRC, we help you stay on top of your responsibilities and avoid unnecessary interest or penalties.

In this article, we explain when instalments are required, when they’re optional, and how to arrange a payment plan with HMRC if your company needs help spreading the cost.

Can Corporation Tax Be Paid in Instalments?

Yes, Corporation Tax can be paid in instalments, but the circumstances differ depending on your company’s size and tax position.

There are two types of instalment scenarios:

1. Compulsory instalments for large companies with high profits

2. Agreed instalments through a payment plan if your company is struggling to pay on time

Let’s explore both in more detail.

1. Instalments for Large Companies

If your company has taxable profits of more than £1.5 million, it is generally required to pay Corporation Tax in quarterly instalments rather than one single payment. This system is designed to bring large companies’ tax payments closer to real-time trading.

These quarterly payments are based on an estimate of the company’s total Corporation Tax liability for the year and are usually due as follows:

• First payment: 6 months and 13 days after the start of your accounting period

• Second payment: 3 months after the first payment

• Third payment: 3 months later

• Final payment: 3 months after the third (and just before the end of the accounting period)

So, for a company with a 12-month year ending 31 December, the first instalment would be due by 14 July.

Important:
If your company is part of a group or has associated companies, the £1.5 million threshold is divided between them. For example, if you have three associated companies, each will be treated as if the threshold is £500,000.

Smaller companies or those new to trading may be exempt from quarterly instalments in their first accounting period.

2. Instalments for Cash Flow Support (Time to Pay)

If your company cannot afford to pay its Corporation Tax bill by the usual deadline (9 months and 1 day after year-end), HMRC may allow you to spread the cost over several months using a Time to Pay arrangement.

This is not automatic—you must contact HMRC before the payment becomes overdue and request a payment plan. If agreed, HMRC will typically allow you to:

• Pay in monthly instalments

• Avoid late payment penalties (though interest will still apply)

• Protect your company’s compliance standing with HMRC

Time to Pay arrangements are most often granted to companies with a temporary cash flow problem that have a track record of filing and paying on time.

You can apply by calling the HMRC Business Payment Support Service on 0300 200 3835 or using HMRC’s online request form.

What Happens If You Don’t Pay Corporation Tax on Time?

If your company fails to pay Corporation Tax by the due date and does not set up a Time to Pay agreement, you will face:

• Daily interest charges on the amount owed (currently 7.75%)

• Enforcement action such as debt collection or court proceedings

• A negative compliance record with HMRC, which may affect future dealings

Planning ahead and contacting HMRC early is always better than ignoring the issue. In many cases, they are willing to be flexible if you are proactive and transparent.

Can You Set Up a Direct Debit to Pay in Instalments?

Yes, but with limitations. You can set up a one-off or recurring Direct Debit to pay Corporation Tax, but this will not automatically split the payment into instalments unless you have an agreed Time to Pay arrangement.

If you want to make advance payments throughout the year (even if you’re not a large company), you can do so voluntarily to help manage cash flow. These will be treated as payments on account and offset against your final bill.

Need help with the actual process of submitting payment? See our article on how to pay corporation tax.

Real-World Example

A digital agency earns £600,000 in taxable profits. Because it exceeds the £1.5 million threshold only when combined with three other associated companies, its share of the threshold is £375,000. Since £600,000 exceeds this adjusted figure, the agency must pay its Corporation Tax in quarterly instalments.

Meanwhile, a small retailer has a Corporation Tax bill of £12,000 due by 1 January but is facing a cash shortfall. They contact HMRC in December, and agree to pay in six monthly instalments of £2,000. Interest applies, but they avoid penalties and legal action.

Final Thoughts

Yes, you can pay Corporation Tax in instalments but how and when depends on your company’s circumstances. For larger, profitable companies, instalments are mandatory. For smaller businesses, help is available if you reach out early.

For smaller companies, particularly those operating on tight margins or with unpredictable cash flow, a sudden Corporation Tax bill can be a source of stress. That’s where our small company accountant service comes in. We work with sole directors, micro-businesses and start-ups to help them understand their tax position well in advance, set aside the right funds, and explore Time to Pay options if needed. Whether you’re in your first year of trading or navigating a temporary cash crunch, we’ll guide you through the process and make sure you stay compliant without overextending your business.

Staying ahead of your tax obligations, planning for payment, and speaking to an accountant can make the process smoother and protect your company from unnecessary financial stress. If you're not sure when your payment is due, here's a guide on when corporation tax is due.

If you’d like to explore related tax content, check out our Corporation Tax Help hub.