Most UK companies pay Corporation Tax in a single lump sum, nine months and one day after their accounting period ends. But if your company's taxable profits exceed certain thresholds, you must pay in quarterly instalment payments (QIPs) — and the first payment is due while you're still in the middle of your accounting period.
Here's how QIPs work, who has to pay them, and how to avoid interest charges.
Who must pay quarterly instalments?
You must pay Corporation Tax in quarterly instalments if your company is:
- A large company — annual taxable profits exceed £1,500,000, or
- A very large company — annual taxable profits exceed £20,000,000
These thresholds are divided by the number of associated companies (plus one for your own company). So if your company has one associated company, the large company threshold drops to £750,000.
Associated companies
An associated company is one that is under common control — broadly, where the same person or persons control both companies. Dormant companies count as associated for threshold purposes.
| Number of associated companies (including yours) | Large threshold | Very large threshold |
|---|---|---|
| 1 (no associates) | £1,500,000 | £20,000,000 |
| 2 | £750,000 | £10,000,000 |
| 3 | £500,000 | £6,666,667 |
| 4 | £375,000 | £5,000,000 |
Short accounting periods
If your accounting period is less than 12 months, the threshold is proportionally reduced. For a 6-month period with no associated companies, the large company threshold would be £750,000 (£1.5M × 6/12).
First-year exemption
If your company's profits exceed the QIP threshold for the first time, you don't need to pay instalments in that year — provided your profits don't exceed £10,000,000 (divided by associated companies).
This exemption only applies once. If profits exceed the threshold in the following period, QIPs are required from that point.
Payment dates for large companies
Large companies pay in four equal instalments during and after the accounting period. For a standard 12-month period ending 31 March:
| Instalment | Due date | Months from period start |
|---|---|---|
| 1st | 14 October | Month 7 |
| 2nd | 14 January | Month 10 |
| 3rd | 14 April | Month 13 (1 month after period end) |
| 4th | 14 July | Month 16 (3 months + 14 days after period end) |
The pattern is: 6 months and 14 days from the start of the accounting period, then every 3 months after that.
Payment dates for very large companies
Very large companies (profits over £20M, divided by associates) must pay earlier. The instalments fall in months 3, 6, 9, and 12 of the accounting period — so all four payments are due before the period even ends.
For a 12-month period ending 31 March:
| Instalment | Due date |
|---|---|
| 1st | 14 July (month 4, 14 days in) |
| 2nd | 14 October |
| 3rd | 14 January |
| 4th | 14 March (just before period end) |
This accelerated timetable means very large companies need robust cash flow forecasting.
How to calculate each instalment
Each instalment should be one-quarter of your estimated Corporation Tax liability for the period. The challenge is that your first instalment is due before the period ends, so you're working with estimates.
Step-by-step calculation
- Estimate your taxable profits for the full accounting period
- Apply the Corporation Tax rate (25% for profits over £250,000, or 19% for profits under £50,000, with marginal relief in between)
- Divide by four to get each quarterly payment
- Revise as the period progresses — if your profit estimate changes, adjust the remaining instalments
Example
Company with estimated taxable profits of £2,000,000 and no associated companies:
| Item | Amount |
|---|---|
| Estimated taxable profits | £2,000,000 |
| Corporation Tax at 25% | £500,000 |
| Each quarterly instalment | £125,000 |
If by the second instalment you revise profits up to £2,400,000, the revised total tax is £600,000. You've already paid £125,000, so the remaining three instalments should be £158,333 each (£475,000 ÷ 3).
What happens if you underpay?
HMRC charges interest on late or insufficient instalment payments. The interest rate tracks the Bank of England base rate and is currently 7.25% (as at early 2025, check HMRC for the latest rate).
Interest runs from the date each instalment was due to the date it's paid. This means:
- Underestimating early instalments costs you interest from month 7 (or month 4 for very large companies)
- You can reduce interest by adjusting later instalments upward if your estimate increases
- If you overpay, HMRC pays you repayment interest (at a lower rate — typically 3.5%)
Deliberately underpaying
Some companies deliberately underpay early instalments because the interest rate on underpayment is lower than their return on keeping cash in the business. This is legal but risky — if HMRC considers the estimate unreasonable, they can raise interest from the due date as if the correct amount should have been paid.
How to pay QIPs
Payment methods are the same as regular Corporation Tax:
- Online banking or Faster Payments — use your 17-character Corporation Tax payment reference
- BACS or CHAPS — for larger amounts
- Direct Debit — set up through your HMRC online account
Ensure you use the correct payment reference and allow time for clearing (especially for BACS, which takes 3 working days).
Do QIPs affect your CT600?
Quarterly instalments are payments on account — they don't change what you report on your CT600. Your CT600 shows the total Corporation Tax liability for the period. HMRC's records track how much you've already paid via instalments.
If you've overpaid through QIPs, the excess will be refunded or offset against future liabilities.
Keeping track
- Mark instalment dates in your calendar — missing a date triggers automatic interest
- Review estimates quarterly — adjust each instalment as your management accounts become clearer
- File your CT600 on time — after the period ends, HMRC will reconcile your instalments against your actual liability
Related articles
- How to Pay Corporation Tax to HMRC
- Corporation Tax Rates 2025–26 and Marginal Relief
- Associated Companies and Corporation Tax Thresholds
- Corporation Tax Interest: Late Payment and Repayment Rates
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