How Do I Pay Corporation Tax for My Company

Every limited company in the UK is legally required to pay Corporation Tax on its profits. Whether your business is newly registered or well established, understanding how and when to pay Corporation Tax is essential to staying compliant with HMRC. Missing deadlines can lead to penalties and interest, but paying correctly and on time is straightforward once you know the process. This article explains how Corporation Tax works, how to calculate what you owe, and how to make the payment securely.

What is Corporation Tax

Corporation Tax is the tax your company pays on its taxable profits. These profits include money earned from trading, investments, and any capital gains from selling assets such as property or shares.

The current main rate of Corporation Tax is 25% for profits above £250,000. Companies with profits below £50,000 pay a small profits rate of 19%. Those earning between these limits pay at a marginal rate that gradually increases as profits rise.

Sole traders and partnerships do not pay Corporation Tax. It applies only to limited companies, community interest companies, and some clubs or associations that are registered with Companies House.

When to pay Corporation Tax

Your Corporation Tax payment is due nine months and one day after the end of your company’s accounting period.

For example:

  • If your company year ends on 31 December 2024, your Corporation Tax must be paid by 1 October 2025.

It is important to note that your Corporation Tax return deadline is different. You have 12 months after your accounting year end to file your return, but payment must be made earlier, within nine months and one day.

If you are unsure of your deadlines, HMRC will confirm them in your online Corporation Tax account once you register your company for tax.

How to register for Corporation Tax

You must register for Corporation Tax within three months of starting to trade. This means carrying out business activities such as buying, selling, or providing services with the intention of making a profit.

To register, log in to your HMRC online business account using your Government Gateway ID. You will need:

  • Your company registration number from Companies House.

  • The date your company started trading.

  • The address of your principal place of business.

  • The names and details of company directors.

Once registered, HMRC will create your company’s online tax account and send you a Unique Taxpayer Reference (UTR) by post.

How to calculate Corporation Tax

Before you pay, you must first calculate how much Corporation Tax your company owes.

  1. Prepare your company accounts to determine your profit before tax.

  2. Adjust for tax purposes, removing non-deductible expenses such as client entertaining.

  3. Apply any capital allowances, such as Annual Investment Allowance for qualifying equipment.

  4. Include other taxable income such as interest or asset sales.

  5. Apply the correct tax rate to your taxable profit.

You can use HMRC’s Corporation Tax calculator or accounting software to estimate your liability. Most companies rely on an accountant to prepare statutory accounts and calculate Corporation Tax accurately.

How to pay Corporation Tax

HMRC accepts payments online, by bank transfer, or through business banking services. The most common methods are:

1. Bank transfer or online banking

You can pay Corporation Tax directly from your business bank account using Faster Payments, CHAPS, or BACS.

  • Faster Payments usually clear on the same day.

  • CHAPS payments clear the same day if made before your bank’s cut-off time.

  • BACS takes up to three working days.

Use your 17-character Corporation Tax payslip reference number, which includes your company’s UTR and accounting period, so HMRC allocates the payment correctly.

2. Through your online HMRC account

You can log in to your company’s HMRC online account and pay using a debit or corporate credit card. Be aware that personal credit cards are not accepted, and some business card payments incur a small fee.

3. Direct Debit

If you prefer automatic payments, you can set up a Direct Debit through your HMRC business account. Once in place, you can use it for future Corporation Tax payments.

4. At your bank or building society

You can also pay using the payslip sent by HMRC if you still receive paper correspondence. This option is less common now that most companies pay electronically.

What happens if you pay late

If you pay Corporation Tax late, HMRC will charge interest on the amount owed starting from the day after the payment deadline.

If your return is also late, you may face additional penalties:

  • £100 penalty if your return is up to three months late.

  • Another £100 if it is more than three months late.

  • Further penalties based on a percentage of your unpaid tax if it remains outstanding after six months.

Late payment can also affect your company’s compliance record and delay refunds or credit claims in the future.

How to claim reliefs and allowances

To reduce your Corporation Tax bill, make sure you claim all eligible reliefs and allowances. Common examples include:

  • Annual Investment Allowance (AIA): Deduct the full cost of qualifying equipment and machinery.

  • Research and Development (R&D) Tax Relief: Available to companies developing innovative products or services.

  • Capital allowances: For vehicles, property, and plant equipment.

  • Loss relief: Offset losses against future or previous profits to reduce tax.

An accountant can ensure all available reliefs are applied correctly when preparing your return.

How to amend or correct a Corporation Tax payment

If you have paid too much or too little, you can correct the mistake by logging into your HMRC online account.

  • Overpayment: HMRC will refund the balance or credit it against your next tax bill.

  • Underpayment: Pay the remaining balance as soon as possible to reduce interest charges.

Always check payment confirmations to ensure HMRC has received your funds and applied them to the correct accounting period.

How an accountant can help

Corporation Tax can be complex, especially for growing businesses. An accountant can:

  • Calculate your taxable profits and prepare your Corporation Tax return.

  • Advise on reliefs and allowances to reduce your liability.

  • Ensure payments are made correctly and on time.

  • Communicate with HMRC on your behalf if there are any issues.

  • Help with tax planning to improve long-term profitability.

Having an accountant ensures accuracy and reduces the risk of penalties for late or incorrect filings.

Final thoughts

Paying Corporation Tax correctly and on time is an essential part of running a limited company. You must calculate your tax liability accurately, file your return within 12 months, and make payment within nine months and one day of your year end.

Keeping accurate financial records and using accounting software can simplify the process, but professional advice is always recommended. With proper planning and compliance, you can manage your Corporation Tax efficiently and avoid unnecessary interest or penalties from HMRC.