Quarterly Instalment Payments for Corporation Tax
Overview 📘
Most UK companies pay Corporation Tax once a year, with payment due nine months and one day after their financial year-end. However, companies with higher profits may need to pay their Corporation Tax earlier, through Quarterly Instalment Payments (QIPs).
This means paying Corporation Tax in four instalments, with the first two payments due before the financial year has ended.
💡 The rules are based on taxable profit rather than turnover. Companies with multiple associated companies may also fall within the rules at much lower profit levels.
✅ Who needs to make quarterly instalment payments?
Companies generally need to make quarterly instalment payments when their annual profits exceed £1.5 million. However, the threshold is reduced where a company has associated companies.
What if your company has associated companies?
The £1.5 million threshold is divided by the total number of associated companies, including your own company.
| Number of companies | Profit threshold per company |
|---|---|
| 1 | £1,500,000 |
| 2 | £750,000 |
| 3 | £500,000 |
| 4 | £375,000 |
| 5 | £300,000 |
Associated companies broadly include companies under common control, even where they are not part of the same corporate group. This could be relevant to founders who own or control multiple businesses.
What about very large companies?
Companies with annual profits exceeding £20 million (adjusted for associated companies) are subject to an accelerated payment schedule, with instalments starting in month three rather than month seven. Different rules apply, so please contact us if this is relevant to your business.
🔗 HMRC guidance: Large companies and associated companies
🔍 Are there any exemptions?
There are two important exemptions which may allow a company to continue paying Corporation Tax under the normal rules.
1. First year of becoming a large company
Companies becoming large for the first time may not need to make quarterly instalments immediately.
This exemption generally applies where:
- The company was not large during the preceding 12 months, under the relevant rules.
- Its profits do not exceed £10 million, adjusted for associated companies and shorter accounting periods.
This effectively gives many growing companies a grace period before quarterly payments become compulsory.
2. Small Corporation Tax liability
A company is not required to make quarterly instalments where its total Corporation Tax liability is less than £10,000 for a 12-month accounting period.
This limit is adjusted proportionately for shorter accounting periods.
🔗 HMRC guidance: Quarterly instalment exemptions
📅 When are the payments due?
For a company with a 12-month accounting period, Corporation Tax instalments are due as follows:
| Instalment | Payment deadline |
|---|---|
| First | 6 months and 13 days after the start of the accounting period |
| Second | 3 months after the first instalment |
| Third | 3 months after the second instalment |
| Fourth | 3 months and 14 days after the accounting period ends |
📊 Example: Company with a 31 December 2026 year-end
| Instalment | Due date |
|---|---|
| First | 14 July 2026 |
| Second | 14 October 2026 |
| Third | 14 January 2027 |
| Fourth | 14 April 2027 |
By comparison, a company outside the quarterly instalment regime would normally pay its Corporation Tax on 1 October 2027.
💡 This can have a significant cash flow impact, as half the estimated Corporation Tax liability is payable before the financial year has ended.
Different payment schedules can apply for accounting periods shorter than 12 months.
🔗 HMRC guidance: Quarterly instalment payment dates
💷 How are the instalments calculated?
Quarterly instalments are based on the company's estimated Corporation Tax liability for the financial year. For a 12-month accounting period, this is generally divided into four equal payments.
📊 Example: A growing tech company
A tech company expects taxable profits of £2 million for the year ending 31 December 2026.
Assuming a 25% Corporation Tax rate, no associated companies and no applicable exemptions:
| Calculation | Amount |
|---|---|
| Estimated taxable profits | £2,000,000 |
| Estimated Corporation Tax | £500,000 |
| Each quarterly instalment | £125,000 |
The company would pay £125,000 on each instalment date, starting on 14 July 2026.
What if the estimated tax liability changes?
The final Corporation Tax liability will not be known until after the financial year-end, so instalments must be based on forecasts.
- Profits increase: Additional payments may be needed to make up the shortfall.
- Profits decrease: Future instalments can be reduced, or overpayments may be reclaimed.
- The company makes a loss: Instalments may no longer be required, depending on the revised tax position.
Regular management accounts and updated profit forecasts are important to ensure the company is paying the correct amount.
❌ What happens if payments are late?
HMRC charges interest on late or underpaid instalments.
Interest can arise even where a company has paid its estimated liability in good faith, if its actual tax liability turns out to be higher.
HMRC may also pay interest where instalments have been overpaid or paid early, although different interest rates apply.
Penalties can apply where a company deliberately fails to make the required instalments or deliberately underpays.
💡 Things to remember
- Plan for the impact on your cash flow.
- Corporation Tax may become payable much earlier than expected, particularly for rapidly growing companies.
- Check associated companies.
- Common ownership or control can significantly reduce the profit threshold.
- Review forecasts regularly.
- Instalments should reflect the latest expected Corporation Tax liability.
- Consider tax reliefs., in particular R&D.
- Available reliefs and credits, including R&D tax relief, can affect your taxable profits and the amount payable.
- Watch for the first-year exemption.
- Companies crossing the threshold for the first time may have an additional year before instalments are required.
If you expect your company to exceed the relevant profit threshold, please get in touch. We can help determine whether quarterly instalments apply, calculate the payments and plan ahead to avoid unexpected cash flow pressures.