Corporation tax loans: key facts
- For most companies, corporation tax must be paid 9 months and 1 day after the end of the accounting period. The Company Tax Return isn't due until 12 months after the period ends, so the money is due three months before the return.
- Companies with taxable profits at an annual rate of more than £1.5 million normally pay in quarterly instalments instead, two of them before the accounting period has even ended (GOV.UK).
- A company usually doesn't have to pay by instalments in its first year over £1.5 million, as long as profits are no more than £10 million. There's no such grace period for companies over £20 million.
- The £1.5 million and £20 million thresholds are divided between associated companies under common control, so a group of small companies can hit them sooner than you'd expect.
- HMRC charges late payment interest daily from the day after the due date until you pay. GOV.UK says this interest is tax deductible for corporation tax.
- HMRC pays interest the other way too: on tax paid early and on overpayments. That interest is taxable income.
- Late filing has its own penalties: £200 at 1 day, another £200 at 3 months, then 10% of unpaid tax at 6 months and another 10% at 12 months.
- A corporation tax loan is an ordinary business loan: subject to status and the lender's checks, and the lender must explain the cost before you agree.
When is corporation tax actually due?
For most companies, payment is due 9 months and 1 day after the accounting period ends. The Company Tax Return is due later, 12 months after the period ends. So you pay before the return is due, and many companies only find out the final figure when their accounts are done, which can be close to the payment date.
Corporation tax has two separate deadlines, and the one that matters for cash comes first:
| Year end | Tax must be paid by | Return must be filed by |
|---|---|---|
| 31 March | 1 January | 31 March the following year |
| 30 June | 1 April | 30 June the following year |
| 30 September | 1 July | 30 September the following year |
| 31 December | 1 October | 31 December the following year |
(Most companies, with taxable profits up to £1.5 million. Your accounting period is usually your financial year, but a new company can have two accounting periods in its first year.)
The gap is where trade businesses get caught. Accountants often work to the filing deadline, so the accounts and tax computation may not be ready until months after the year end. If you only learn the size of the bill a few weeks before the 9-month date, there's very little time to find the cash or arrange funding. Ask your accountant for an estimate of the bill soon after the year end, even if the final accounts come later.
Practical points from GOV.UK's payment guidance:
- Allow time for the money to clear: Faster Payments, CHAPS and card are same or next day; Bacs or an existing Direct Debit takes 3 working days; a new Direct Debit takes 5.
- If the deadline falls on a weekend or bank holiday, the payment must reach HMRC on the last working day before it, unless you pay by Faster Payments.
- Each accounting period has its own 17-character payment reference. Using an old one can mean the money pays a different bill.
When does a company have to pay corporation tax in instalments?
When its taxable profits are at an annual rate of more than £1.5 million (a 'large' company). It then pays four equal instalments based on an estimate of the year's tax, the first due 6 months and 13 days after the period starts. The first year over the threshold is usually exempt if profits are no more than £10 million.
For a 12-month accounting period, a large company pays a quarter of its estimated liability on each of these dates (GOV.UK's example is for a year running 1 January to 31 December 2026):
| Instalment | When it's due | Example: year to 31 Dec 2026 |
|---|---|---|
| 1st | 6 months and 13 days after the period starts | 14 July 2026 |
| 2nd | 3 months later | 14 October 2026 |
| 3rd | 14 days after the period ends | 14 January 2027 |
| 4th | 3 months and 14 days after the period ends | 14 April 2027 |
Why this matters for cash flow:
- You pay before you know the answer. Instalments are based on an estimate of the year's tax. If the year turns out better than expected, you make top-up payments and may owe interest on the shortfall. If it turns out worse, you can reclaim the overpayment or leave it against future instalments.
- The year you cross the line is a cash squeeze. The first year over £1.5 million is usually exempt (if profits are no more than £10 million and the company wasn't large in the previous 12 months), so that year's tax is paid at the normal 9-month date. If the company stays large, instalments for the next year then begin. In practice, for a period you can be paying the old year's bill and the new year's instalments close together.
- Associated companies share the threshold. For accounting periods starting on or after 1 April 2023, the £1.5 million is divided by the number of associated companies (those under common control) plus your company. GOV.UK's example: a company with 5 associates has a threshold of £250,000.
- Over £20 million is "very large": different rules, and no first-year grace period.
A company that will need to borrow for instalments should plan the facility for the whole cycle, not a single payment. Instalments don't apply where the total liability for the period is under £10,000.
What does HMRC charge if corporation tax is paid late?
HMRC charges late payment interest every day from the day after the due date until the tax is paid. It's automatic, isn't charged on interest itself, and GOV.UK says it's tax deductible. Separately, a late tax return brings fixed penalties, and from 6 months late a penalty of 10% of the unpaid tax.
It helps to keep paying and filing apart, because HMRC treats them differently.
Paying late: interest
- Interest runs daily from the day after the payment deadline until the day HMRC receives the money. It's charged automatically.
- HMRC sets the rate and changes it from time to time. Check the current rate on GOV.UK's "HMRC interest rates for late and early payments" page.
- Late payment interest is tax deductible for corporation tax in the period it's incurred, according to GOV.UK.
- For instalment payers, interest runs from each instalment date, at a lower rate up to the normal 9-months-and-1-day date and a higher rate after it. It's worked out once the return is filed.
- You can't appeal interest, but you can make an "interest objection" in writing if you think HMRC has made a mistake.
Interest also works in your favour: HMRC pays credit interest on tax paid early and repayment interest on overpayments. The interest you receive is taxable. HMRC may also use a refund to clear other taxes you owe, such as PAYE or VAT.
Filing late: penalties
| Return late by | Penalty |
|---|---|
| 1 day | £200 |
| 3 months | Another £200 |
| 6 months | HMRC estimates your tax (a "determination", which you can't appeal) and adds 10% of the unpaid tax |
| 12 months | Another 10% of any unpaid tax |
If the return is late three times in a row, the £200 penalties become £1,000 each. The 6 and 12 month penalties are where unpaid tax and a late return combine, so file on time even if you can't pay. Not having the money is a reason to talk to HMRC or a lender, not a reason to hold back the return.
Should a company use HMRC Time to Pay or a loan for corporation tax?
It depends on why you're short and what HMRC will accept. Time to Pay lets you pay HMRC monthly, but HMRC checks affordability, wants your company's income and spending, expects you to reduce the debt first (for example by releasing assets) and may ask directors to accept lending. A loan clears HMRC in full but adds a lender's costs and checks.
For corporation tax the choice is often less clear-cut than people think, because HMRC's own guidance for companies points towards other money first. GOV.UK says that for company tax debts HMRC will ask how you'll pay as quickly as you can, expects you to reduce the debt as much as possible by releasing assets like stock and vehicles, and may ask directors to put in personal funds, accept lending or extend credit.
| HMRC Time to Pay | Corporation tax loan | |
|---|---|---|
| When you can use it | For a bill you can't pay on time; ideally ask before the deadline | Before or after the deadline; best arranged before |
| What HMRC sees | Your company's income and spending; it checks the plan is affordable | HMRC is paid in full and on time |
| Cost | Late payment interest keeps running on what's unpaid (tax deductible) | The lender's interest and any fees, explained before you sign |
| Conditions | Reduce the debt first; directors may be asked to borrow or inject funds | Lender's credit checks; directors' personal guarantees are common |
| If it goes wrong | HMRC contacts you and tries to renegotiate; if not, it can use debt collectors, take assets or money from bank accounts, or go to court | A debt to the lender; terms depend on the agreement |
Two features of corporation tax tilt the decision:
- Next year's bill arrives on top. If a Time to Pay plan or a loan is still running when the next 9-month date comes round, you're paying two years' tax at once. GOV.UK says a new bill can sometimes be added to an existing plan, but sizing any arrangement to finish before the next due date is safer.
- It's a one-off figure, not a recurring quarter. A single large bill after an unusually good year is a timing problem a loan can solve. A company that can't pay corporation tax every year has a different problem.
Your accountant should be part of this decision. Some companies use Time to Pay for part and funding for the rest.
Why do profitable trade businesses struggle to pay corporation tax?
Because taxable profit isn't the same as cash. A building or plant business can make a profit on paper while its money sits in new machines, stock, work in progress, unpaid applications and retentions. The tax is due on the profit nine months after the year end, whether or not the cash has come in.
- Money spent on kit. If you bought plant or vehicles with cash, the money has gone even though only part of the cost may have reduced this year's taxable profit. How much depends on the capital allowances available. GOV.UK says the annual investment allowance covers up to £1 million of certain plant and machinery spending; ask your accountant what applies to each purchase.
- Retentions. Money held back until practical completion or the end of the defects period may count towards your profit for the year while you won't see it for months or longer.
- Stock and work in progress. Materials on the shelf and half-finished jobs can count towards profit without being cash.
- Customers who pay late. Applications for payment and final accounts that drag on leave profit on paper and the cash with someone else.
- Directors' drawings. Dividends and loans paid out during a strong year can leave the company short when the tax falls due. Loans to directors in close companies can bring their own tax charge; ask your accountant.
- A record year. One big contract can lift profit well above normal, and with it a bill sized for a business you're not every year.
Where the cash is the real problem, the most sensible funding may not be a tax loan at all. If money is tied up in invoices, borrowing against them deals with the cause. If you bought plant outright, refinancing it can release cash (see plant finance), though it's secured on the machine, so missed payments put it at risk.
How can a company plan ahead so corporation tax isn't a shock?
Start in the months before your year end, not after it. Ask your accountant for a profit forecast and tax estimate, think about the timing of planned equipment purchases, set money aside each month, and if you'll need funding, apply well before the 9-month date. Paying early can even earn interest from HMRC.
- 2 to 3 months before the year end: ask your accountant for a forecast of profit and a rough tax figure. This is when you still have choices.
- Before the year end: if you're planning to buy equipment anyway, ask your accountant how the timing affects which year gets the capital allowances, and how buying outright, on hire purchase or leasing would each be treated (see hire purchase vs leasing). Don't buy something you don't need just to save tax.
- Straight after the year end: get an estimate of the bill and the exact payment date. If you might cross £1.5 million (or a share of it if you have associated companies), check whether instalments start next year.
- Every month: move a set amount into a separate tax account. GOV.UK says HMRC pays interest on tax paid early, from as soon as 6 months and 13 days into the accounting period, so paying in advance is an option if cash allows.
- 2 to 3 months before the due date: if there'll be a gap, decide between funding and Time to Pay and start the application. Lenders will want your latest accounts, management figures, bank statements and the tax computation.
- The due date: pay, allowing time for the payment method you use to clear.
- Before 12 months: file the return, whatever happens with the payment.
When is a corporation tax loan a bad idea?
When the company isn't really profitable in cash terms, when last year's tax loan is still being repaid, or when the bill is part of wider arrears with HMRC. Then a loan adds a repayment without fixing the cause. Speak to your accountant, and consider Time to Pay or independent business debt advice first.
A loan works for a timing gap: a big year, cash that will come back from retentions or customers, or an instalment squeeze in the year you become large. It doesn't fix a business that's short of cash every year. Warning signs:
- you're still repaying funding for last year's corporation tax
- you also owe VAT or PAYE that's overdue
- the profit came from work that's in dispute, or customers who may not pay
- you'd need to borrow again to make the loan repayments
If any of these apply, talk to your accountant first. Free, independent business debt advice is available from organisations such as Business Debtline. Be wary of anyone who promises to make a tax debt disappear.
Related guides
Corporation tax loans: frequently asked questions
What is a corporation tax loan?
A short-term business loan a limited company uses to pay its corporation tax to HMRC on time, then repays to the lender in instalments. It's an ordinary business loan used for a specific purpose, subject to status and the lender's checks.
When is corporation tax due?
For most companies, 9 months and 1 day after the end of the accounting period. The Company Tax Return is due 12 months after the period ends. Companies with profits at an annual rate over £1.5 million normally pay in quarterly instalments instead.
Can I pay corporation tax after filing my return?
The return deadline (12 months) is later than the payment deadline (9 months and 1 day) for most companies. If you pay after the payment deadline, HMRC charges late payment interest from the day after it was due, even if the return hasn't been filed yet.
Is there a penalty for paying corporation tax late?
HMRC charges late payment interest daily until you pay. Separate penalties apply for filing the return late, and once a return is 6 months late a penalty of 10% of the unpaid tax is added, so late filing and late payment together cost more.
Is HMRC interest on late corporation tax tax deductible?
Yes. GOV.UK says late payment interest paid to HMRC is tax deductible for corporation tax in the period it's incurred. Interest HMRC pays you is taxable.
What happens the first year profits go over £1.5 million?
Usually nothing changes for that year: a company doesn't normally pay by instalments in its first year over £1.5 million if profits are no more than £10 million. If it stays large, instalments start the following year, with the first due before that year ends.
Can I get HMRC Time to Pay for corporation tax?
You can ask. HMRC will look at your company's income and spending, check the plan is affordable, and expect you to reduce the debt first, for example by releasing assets. It may ask directors to put in funds or accept lending. Interest keeps running on what's unpaid.
Will I need a personal guarantee?
Often, yes. Unsecured business loans commonly ask directors for a personal guarantee. Make sure you understand what you'd be liable for before signing.
Should I still file my company tax return if I can't pay?
Yes. Late filing brings its own penalties, and from 6 months late HMRC estimates your tax and adds a penalty based on the unpaid amount. File on time and deal with the payment separately.
Do you lend money for corporation tax?
No. We are an independent guide and introducer, not a lender or a broker. With your consent we pass your enquiry to one specialist commercial finance broker from our partners. We may be paid for the introduction.
Sources
We checked the facts on this page against these sources on 13 November 2026:
- GOV.UK: Pay your Corporation Tax bill
- GOV.UK: Company Tax Returns
- GOV.UK: Pay Corporation Tax if you're a large company
- GOV.UK: Pay Corporation Tax if you're a very large company
- GOV.UK: Corporation Tax interest charges
- GOV.UK: Get a refund or interest on your Corporation Tax
- GOV.UK: If you cannot pay your tax bill on time
- GOV.UK: Capital allowances