Key takeaways
- Companies with taxable profits over £1.5 million are 'large' and pay Corporation Tax in four quarterly instalments.
- For a 12-month period, large companies pay in months 7, 10, 13 and 16; very large companies (over £20 million) in months 3, 6, 9 and 12.
- A company is exempt in its first year of being large if profits are no more than £10 million.
- The thresholds are divided by the number of associated companies plus one and reduced for short periods.
- Instalments are based on an estimate of the year's liability; interest is charged on underpayments and paid on overpayments at favourable rates.
Large companies do not wait nine months after their year end to pay Corporation Tax. They pay quarterly instalments based on their expected profits, starting in the seventh month of the accounting period. Very large companies pay even earlier. Getting the estimates right avoids interest and, in serious cases, penalties.
Who pays by instalments
| Status | Taxable profits for a 12-month period | Payments |
|---|---|---|
| Not large | £1.5 million or less | One payment, 9 months and 1 day after the period ends |
| Large | Over £1.5 million | Quarterly instalments, months 7, 10, 13 and 16 |
| Very large | Over £20 million | Quarterly instalments, months 3, 6, 9 and 12 |
“Profits” for this test include dividends received from non-group companies (franked investment income), as well as taxable profits.
Adjusting the thresholds
- The thresholds are divided by the number of associated companies plus one. A company with three associated companies has a large company threshold of £375,000 (£1.5 million ÷ 4). See associated companies.
- For accounting periods of less than 12 months, the thresholds are reduced proportionately.
The first-year exemption
A company does not pay instalments for an accounting period if:
- its profits for that period are no more than £10 million (also divided by associated companies), and
- it was not large in the previous 12 months
This gives a growing company one year’s grace before it moves to instalments. There is no equivalent exemption from the very large rules.
Due dates for a 12-month accounting period
Large companies
| Instalment | Due | Example: year to 31 December 2026 |
|---|---|---|
| First | 14th day of month 7 | 14 July 2026 |
| Second | 14th day of month 10 | 14 October 2026 |
| Third | 14th day of month 13 | 14 January 2027 |
| Fourth | 14th day of month 16 | 14 April 2027 |
Each instalment is a quarter of the estimated liability for the year. Two payments fall during the accounting period and two after it.
Very large companies
| Instalment | Due | Example: year to 31 December 2026 |
|---|---|---|
| First | 14th day of month 3 | 14 March 2026 |
| Second | 14th day of month 6 | 14 June 2026 |
| Third | 14th day of month 9 | 14 September 2026 |
| Fourth | 14th day of month 12 | 14 December 2026 |
All four payments fall within the accounting period itself.
Estimating the liability
Instalments are based on the company’s best estimate of the Corporation Tax for the whole period, updated at each instalment date as forecasts change. Later instalments should correct for earlier under or overpayments. Good forecasting is essential, particularly for one-off gains, R&D claims and changes in group structure.
Interest
| Situation | Interest |
|---|---|
| Instalment paid late or too little | Debit interest from the due date, at a special rate of base rate plus 1% |
| Instalment paid too much or too early | Credit interest at base rate minus 0.25% |
| Tax still unpaid after the normal due date (9 months and 1 day) | Normal late payment interest at base rate plus 4% |
Interest is deductible for Corporation Tax, and credit interest is taxable. HMRC can charge a penalty of up to twice the interest if a company deliberately or recklessly fails to pay instalments.
Groups
Groups can use a group payment arrangement, under which one company pays instalments on behalf of all the large companies in the group and the payments are allocated after the year end. This reduces the risk of interest where profits shift between group members.
Frequently asked questions
When does a company have to pay Corporation Tax in instalments?
When its taxable profits for an accounting period exceed £1.5 million (divided between associated companies), unless the first-year exemption applies.
When are quarterly instalment payments due?
For large companies, on the 14th day of months 7, 10, 13 and 16 after the start of a 12-month accounting period. Very large companies pay in months 3, 6, 9 and 12.
What is the first-year exemption?
A company is not required to pay instalments in the first year it is large, if its profits are £10 million or less and it was not large in the previous 12 months.
What interest rate applies to late instalments?
Base rate plus 1% until the normal due date, then the standard late payment rate of base rate plus 4%.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.