Paying Corporation Tax in the UK

At Towerstone Accountants we provide specialist limited company accountancy services for directors and owner managed businesses across the UK. We created this webpage for company owners who want clear guidance on Corporation Tax, including how it is calculated, when it is due, and how it should be paid. Our aim is to help you understand your obligations, avoid penalties, and manage your company tax position with confidence.

Paying Corporation Tax is one of the most important responsibilities of running a limited company, yet it is also one of the areas that causes the most confusion. I regularly speak to directors who know they owe Corporation Tax but are unsure when it is due, how to pay it, what reference to use, or what happens if they get it wrong. Others assume their accountant or software automatically handles payment, only to discover too late that the tax was never actually paid.

In reality, paying Corporation Tax is not difficult once you understand the process. What matters is knowing when it is due, how the amount is calculated, how to make the payment correctly, and how to avoid common mistakes that lead to interest, penalties, or HMRC chasing letters.

In this guide I will explain how Corporation Tax works in practice, how to calculate what you owe, the different ways you can pay it, and how to stay compliant. I will also cover what happens if you pay late or make a mistake, and how I advise directors to manage Corporation Tax calmly and confidently.

What Corporation Tax actually is

Corporation Tax is a tax paid by limited companies on their taxable profits.

Taxable profits usually include:

• Trading profits

• Investment income

• Chargeable gains on asset disposals

Corporation Tax does not apply to sole traders or partnerships. It applies only to companies and certain other corporate bodies.

The tax is administered by HMRC and is entirely separate from personal income tax.

Who is responsible for paying Corporation Tax

This is a critical point.

The legal responsibility for paying Corporation Tax sits with the company’s directors, not the accountant, not the bookkeeper, and not the software provider.

Even if:

• An accountant prepares the accounts

• An agent submits the tax return

• Software calculates the figures

The director is still responsible for making sure the tax is paid, on time, and in full.

This is why understanding the process yourself is so important.

When Corporation Tax is due

Corporation Tax has two key deadlines, and they are often confused.

The payment deadline

Corporation Tax is usually due:

• 9 months and 1 day after the end of the accounting period

For example:

• If your accounting period ends on 31 March

• Corporation Tax is due by 1 January the following year

This payment deadline comes before the tax return deadline.

The filing deadline

The Corporation Tax return must be submitted:

• 12 months after the end of the accounting period

Using the same example:

• Accounting period ends 31 March

• Tax return due by 31 March the following year

This means you must pay the tax before the return is actually filed.

This catches many directors out.

How Corporation Tax is calculated

Before you can pay Corporation Tax, you need to know how much you owe.

Corporation Tax is calculated based on your company’s taxable profits, not simply the cash in the bank.

The process usually involves:

• Preparing statutory accounts

• Adjusting accounting profit for tax purposes

• Calculating the Corporation Tax liability

Common adjustments include:

• Disallowable expenses

• Capital allowances

• Timing differences

• Chargeable gains

This calculation is normally done as part of the Corporation Tax return.

How you know how much Corporation Tax to pay

There are three common ways directors know how much to pay.

Through your accountant

If you use an accountant, they will usually:

• Prepare the tax computation

• Tell you the amount due

• Tell you the payment deadline

However, they do not usually make the payment for you unless explicitly agreed.

Through accounting software

Some accounting software:

• Calculates an estimated Corporation Tax figure

• Shows a tax provision

This figure may not be final. It should not be relied on without review, particularly where there are adjustments.

Through your own calculation

If you prepare your own accounts, you will need to calculate:

• Taxable profit

• Applicable Corporation Tax rate

• Final liability

Errors here can lead to underpayment or overpayment.

Corporation Tax rates

Corporation Tax rates can change and may vary depending on profit levels.

The applicable rate depends on:

• The accounting period

• The level of taxable profits

• Whether marginal relief applies

Because rates can change, it is important to use the correct rate for the period you are paying.

Your accountant or HMRC guidance should confirm this.

How to pay Corporation Tax

Corporation Tax must be paid electronically. HMRC does not accept cash or cheques for most companies.

The main payment methods are outlined below.

Paying Corporation Tax by bank transfer

This is the most common and reliable method.

To pay by bank transfer, you need:

• HMRC’s bank details

• Your company’s Corporation Tax reference

The reference is critical. It ensures the payment is allocated correctly.

HMRC bank details for Corporation Tax

HMRC’s bank details can change, so you should always check current guidance, but payments are usually made to:

• Account name: HMRC Cumbernauld

• Sort code and account number provided by HMRC

Always use the official HMRC details from your online account or guidance.

What reference to use when paying

You must use your Corporation Tax reference, also known as the UTR followed by the letter K.

This reference:

• Is unique to your company

• Ensures the payment is matched correctly

Using the wrong reference is one of the most common reasons payments go missing.

Paying Corporation Tax through online banking

Most companies pay Corporation Tax using online banking.

The process is usually:

• Log into your business bank account

• Set up HMRC as a payee

• Enter the correct reference

• Make the payment

I always recommend making the payment a few days before the deadline to allow for processing time.

Paying Corporation Tax by Direct Debit

You can also pay Corporation Tax by Direct Debit, but there are important caveats.

Direct Debits:

• Must be set up in advance

• Can take several days to activate

• Are not suitable for last minute payments

If you want to use Direct Debit, plan ahead.

Paying Corporation Tax by CHAPS or Faster Payments

CHAPS and Faster Payments can be used for same day or next day payments.

This is useful if:

• You are close to the deadline

• You need certainty on timing

There may be bank charges for CHAPS payments.

Can you pay Corporation Tax in instalments

Most small companies pay Corporation Tax in one lump sum.

However, very large companies may be required to pay in instalments under quarterly instalment payment rules.

This usually applies where:

• Profits exceed a high threshold

• The company is part of a large group

Most owner managed companies will not fall into this regime.

What happens after you make the payment

Once you make the payment:

• HMRC allocates it to your company’s Corporation Tax account

• The balance reduces accordingly

You can usually check this through your HMRC online account.

Keep proof of payment, such as bank confirmation, in case of queries.

What if you pay Corporation Tax late

Late payment of Corporation Tax has consequences.

If you pay late:

• HMRC charges interest from the due date

• Interest continues until payment is made

Interest rates can change, so late payment can become costly.

Penalties for late payment

There is no fixed late payment penalty in the same way as for late filing, but:

• Interest applies automatically

• Persistent late payment can trigger compliance action

HMRC may also:

• Restrict repayment claims

• Increase scrutiny of future returns

What if you cannot afford to pay Corporation Tax

If your company cannot afford to pay Corporation Tax on time, ignoring the problem is the worst option.

HMRC may agree to:

• A Time to Pay arrangement

• A structured repayment plan

This usually requires:

• Early contact

• Honest disclosure

• Evidence of affordability

HMRC is far more receptive if approached before the deadline.

Overpaying Corporation Tax

Overpayments can happen, particularly where estimates are used.

If you overpay:

• The excess is credited to your Corporation Tax account

• You can request a refund

• Or leave it on account for future liabilities

Refunds usually require the Corporation Tax return to be submitted.

Paying Corporation Tax for a company being closed

If your company is being closed, Corporation Tax still applies.

You must:

• Prepare final accounts

• Submit a final Corporation Tax return

• Pay any tax due

HMRC will not allow a company to be struck off if Corporation Tax remains unpaid.

Common mistakes when paying Corporation Tax

Over the years, I see the same issues repeatedly.

Paying too late

Directors often focus on the return deadline and forget the payment deadline.

Using the wrong reference

This can result in payments sitting unallocated.

Assuming the accountant pays it

Most accountants do not make payments unless specifically instructed.

Relying on software estimates

Estimated figures may not reflect the final tax position.

Forgetting about short accounting periods

First year and closing periods often have unusual deadlines.

How to check if Corporation Tax has been paid

You can usually check payment status by:

• Logging into your HMRC online account

• Reviewing your accountant’s reports

• Checking bank records

If in doubt, confirm with HMRC rather than assuming.

Record keeping for Corporation Tax payments

I recommend keeping:

• Tax computations

• Copies of CT600 returns

• Proof of payment

• HMRC correspondence

These records should be retained for at least six years.

How I advise directors to manage Corporation Tax

When working with clients, I encourage them to treat Corporation Tax as a planned obligation, not a surprise bill.

Good habits include:

• Setting money aside monthly

• Reviewing tax estimates regularly

• Knowing payment deadlines in advance

• Making payments early

This removes stress and avoids last minute panic.

The link between accounts and Corporation Tax

Corporation Tax does not exist in isolation.

It is directly linked to:

• How accounts are prepared

• How expenses are treated

• How profits are extracted

This is why errors in accounts often lead to tax problems.

What HMRC expects from companies

HMRC expects companies to:

• Take reasonable care

• Pay tax on time

• Communicate if problems arise

Most issues arise not from deliberate avoidance, but from misunderstanding or inaction.

Final thoughts

Paying Corporation Tax is a core part of running a limited company, but it does not need to be complicated or stressful. Once you understand when it is due, how it is calculated, and how to make the payment correctly, it becomes a routine task rather than a source of anxiety.

In my experience, the companies that struggle most with Corporation Tax are those that treat it as an afterthought. Those that plan ahead, set funds aside, and understand the process rarely have issues.

If you are ever unsure, ask for clarification early. HMRC and professional advisers are far more helpful before a deadline than after it has been missed. Corporation Tax is unavoidable, but with the right approach, it is entirely manageable.

You may also find our guidance on when is corporation tax due and can you pay corporation tax in instalments useful when dealing with related Corporation Tax questions. For a broader overview of Corporation Tax rules and support, you can visit our corporation tax help hub.