How to pay Corporation Tax

If you run a limited company, Corporation Tax is one of the main things you’ll need to stay on top of.

It’s not the most exciting part of running a business, but getting it right (and on time) can save you stress, penalties and a last-minute scramble.

In this guide:

• How to pay Corporation Tax
• When you need to pay it
• How long different payment methods take
• What to do if no tax is due
• Some tips to make the whole process easier

If you run a limited company, you’ll usually need to pay Corporation Tax on your profits. That includes money your business earns from sales, investments and selling assets.

Unlike personal tax that sole traders pay on profits, there’s no allowance that makes the first chunk tax-free. If your company makes a profit, Corporation Tax applies except in a few circumstances.

What this means in practice:

• If you’ve just started and haven’t made a profit yet, you probably won’t owe anything (but still need to report it)
• If you’re paying yourself a salary, that’s an expense, so it reduces your profit
• If you take (or plan to take) dividends, they come after Corporation Tax

Thinking of setting up a new business? Use our company registration service and get your new business up and running in as little as 24 hours.

The rate you pay depends on how much profit your company makes:

• 19% on profits up to £50,000
• Up to 25% on profits over £250,000
• A tapered rate applies between those thresholds

Tip: If your profits are close to a threshold, it’s worth speaking to an accountant. Small changes (like timing expenses) can affect how much tax you pay.

The first step in paying your corporation tax is knowing how much you owe. Smart business current accounts like Countingup have accounting and tax built in, so you can see a real-time estimate of your tax at any time.

Once you’ve worked out how much you owe, you can choose how to pay Corporation Tax.

Some methods are faster than others, so if you’re close to the deadline, make sure you choose one of the speedier options. Let’s get into what payment options are available.

You can set this up through your HMRC online account. Your first payment using this method will usually take up to 5 working days, but all direct debits after this should take a max of 3 working days.

Good to know: Direct debit is useful if you like to plan ahead, but it’s not ideal if you’ve left things to the last minute as it takes a few days to arrive with HMRC.

This is one of the easiest and quickest ways to pay because it’s usually instant. All you need to do is log in to HMRC, then approve the payment in your banking app via open banking. Easy peasy.

Good to know: This is often the safest option if you’re close to the deadline, as it’s pretty much instant.

You can also pay manually using a standard bank transfer. These are all pretty quick, but be mindful that Bacs can take a little bit longer if you’re in a hurry.

• Faster Payments: same or next day
• CHAPS: same working day
• Bacs: around 3 working days

You need to pay Corporation Tax within 9 months and 1 day after the end of your accounting period. That usually starts when you set up your company, or when your financial year runs from.

This often confuses people as every company’s deadline is different. Corporation tax deadlines are based on your own accounting period and not the tax year (like with sole traders).

Your return (CT600) is then due after. It might feel a bit backwards, but HMRC asks you to pay Corporation Tax before filing your return because the return itself can take longer to prepare. Instead of waiting for final accounts, you’re expected to estimate what you owe, pay it by the deadline, and then confirm the exact figures later in your CT600. If your estimate isn’t exact, you can simply pay the difference or get a refund.

Let’s look at an example
Let’s say your accounting period ends on 31 March:

• your payment deadline would be 1 January
• your filing deadline would be 31 March (the following year)

So you need to pay before you submit your return.

What happens if you miss the deadline?
HMRC will charge interest on late payments, and if it happens more than once, you could also face penalties.

It’s best not to make a habit of this. Missing it once isn’t the end of the world — it happens. But repeated late payments can start to add up, both financially and in terms of stress.

Struggling to keep track of your tax deadlines? We know. There’s a lot to keep in mind. With a Countingup business current account, you can connect directly to HMRC to get an accurate timeline of all upcoming deadlines. The app will even notify you when a deadline’s approaching so you’re never caught off guard.

If you’re in a situation which means you’re going to miss your Corporation Tax deadline:

• pay what you can as soon as possible
• contact HMRC early to explain your situation – they can be helpful
• don’t ignore it! It won’t go away

The sooner you deal with it, the easier it is to put right.

Do you pay corporation tax on dividends?
Not directly, but this is where things can get confusing.

Your company pays Corporation Tax on its profits first. You then take dividends from what’s left, and pay Dividend Tax personally. So dividends don’t reduce your Corporation Tax bill — they come after it’s already been calculated.

What this means in practice is that dividends aren’t treated like an expense (unlike salaries), so they won’t lower your company’s tax bill. It also means you need to be a bit careful when taking money out. If you don’t plan ahead, you could end up with a Corporation Tax bill for the business and a personal tax bill on top.

A good rule of thumb is to make sure you’ve set aside enough for Corporation Tax before taking dividends and to keep an eye on your profits — not just your bank balance.

Done right, dividends are a flexible way to pay yourself but they work best when you’ve got a clear view of what your company actually owes.

If your company didn’t make a profit, you might not owe any Corporation Tax. But you still need to tell HMRC, otherwise they may still expect a payment and could charge penalties if they think you’ve missed the deadline.

To tell HMRC there’s nothing to pay, you can either complete their ‘nil to pay’ form online or return your payslip reminder with ‘NIL due’ written on it. Make sure you use the right Corporation Tax reference, so HMRC can match it to your company and accounting period.

A simple way to think about it is: even when there’s no payment to make, there’s still admin to close off.

Step by step:

1. Check and confirm that your company made no taxable profit for the accounting period
2. Find your Corporation Tax reference in your HMRC account or on your payslip
3. Submit HMRC’s ‘nil to pay’ form, or mark your payslip reminder as ‘NIL due’ and return to HMRC
4. Submit your Corporation Tax return (CT600) as normal
5. Keep a record of what you sent and when

Even with nothing to pay, missing this step can still lead to penalties, so make sure to follow these steps.

Staying on top of Corporation Tax is a lot easier when your finances are organised throughout the year, not just at the deadline.

With the Countingup business current account, your banking and accounting work together in one app. That means you can track your income, expenses and profits in real time, so you’ve always got a clearer idea of what you might owe.

Instead of digging through spreadsheets or trying to piece things together at the end of the year, you can automatically categorise your transactions, set money aside for tax and share everything with your accountant when you need to.

Not only do we offer a smart business account to help with your finances, but we’ve also got a dedicated resources hub with lots of helpful info to help you start, run and grow your business. You can find in-depth guides that outline all tax-deductible expenses, every business tax deadline this year and ways to reduce your capital gains tax liability.

You can find HMRC’s bank details on your Corporation Tax payslip or in your HMRC account. Make sure you use the correct reference number so your payment is allocated properly.

You can make a payment using your bank over the phone (for example via Faster Payments), but you can’t pay HMRC directly by calling them. You’ll still need to go through your bank.

No — sole traders don’t pay Corporation Tax. Instead, they pay Income Tax through Self Assessment. Corporation Tax only applies to limited companies.