UK Corporation Tax: why payment comes before filing
UK Corporation Tax has a structural quirk that causes more late payments than any rule about rates: the money is due before the paperwork. And since April 2023 there is no single rate to quote — there are two, plus a band in the middle where the effective marginal rate is higher than the headline main rate.
The rates and thresholds for 2026/27
Rates were confirmed unchanged at Autumn Budget 2025, and the government has stated its intention to cap the main rate at 25% for the duration of the current parliament.
| Taxable profits | Rate | How it is computed |
|---|---|---|
| Up to £50,000 | 19% | Small profits rate, applied directly |
| £50,001 – £250,000 | 25% less marginal relief | Effective marginal rate 26.5% |
| Over £250,000 | 25% | Main rate, applied directly |
The small profits rate and marginal relief sit in the Corporation Tax Act 2010. Marginal relief uses a fraction of 3/200. The relief is 3/200 × (upper limit − augmented profits) × (trading profits ÷ augmented profits). The consequence of that formula is the number worth remembering: every extra £1 of profit inside the band costs 26.5p, which is more than the 25% paid by a company on £300,000.
A worked computation
Take a company with taxable profits of £120,000 and no associated companies.
| Step | Calculation | Amount |
|---|---|---|
| Tax at the main rate | £120,000 × 25% | £30,000 |
| Marginal relief | 3/200 × (£250,000 − £120,000) | (£1,950) |
| Corporation Tax payable | £28,050 | |
| Effective rate | 28,050 ÷ 120,000 | 23.4% |
So a company quoting itself “25%” on these profits overstates the liability by £1,950, and a company quoting “19%” understates it by £5,250. Neither headline is the answer.
Now the planning point. Push profits from £120,000 to £140,000 and tax rises to £33,350 — an extra £5,300 on £20,000 of profit, which is the 26.5% marginal rate in action. A pension contribution or capital purchase made before the year end is worth 26.5p in the pound inside this band, against 19p below £50,000.
We prepare accounts, Corporation Tax and Self Assessment work with a UK-qualified professional on the engagement.
Avail our UK tax desk servicesAssociated companies divide the thresholds
The £50,000 and £250,000 limits are divided by the number of associated companies under common control. This is the single most common Corporation Tax error, because it is invisible on the face of one company's accounts.
| Associated companies | Small profits limit | Upper limit |
|---|---|---|
| None | £50,000 | £250,000 |
| One other | £25,000 | £125,000 |
| Three others | £12,500 | £62,500 |
A director with two trading companies each making £40,000 does not get 19% twice. Each faces a £25,000 small profits limit, so both sit in the marginal band. Dormant companies with no assets are generally excluded from the count. Limits are also reduced pro rata for accounting periods shorter than twelve months.
Payment first, return second
For a company that is neither large nor very large:
- Payment is due nine months and one day after the end of the accounting period.
- The return is due twelve months after the end of the accounting period.
A company with a 31 December year end must pay by 1 October and file by 31 December the following year. You therefore cannot work to the return deadline: the computation has to be substantially complete three months earlier, because you have to know what to pay. A company that appoints an accountant in November for a December year end is already a month late on the money.
Larger companies pay quarterly
A large company — broadly taxable profits of at least £1.5 million and a liability above £10,000 — pays in four instalments, the first falling during the accounting period:
| Instalment | Large company | Very large (profits ≥ £20m) |
|---|---|---|
| First | 6 months 13 days from period start | 2 months 13 days from period start |
| Second | +3 months | +3 months |
| Third | +3 months | +3 months |
| Fourth | 3 months 14 days after period end | +3 months |
The £1.5 million and £20 million thresholds are divided by the number of associated companies. There is a one-year grace: a company is not required to pay by instalments in the first year it crosses £1.5 million unless profits exceed £10 million. Crossing the threshold is a material cash-flow event, and it arrives with the tax year rather than with a notice.
One 2026 change that affects the computation
The main-pool writing-down allowance fell from 18% to 14% with effect from 1 April 2026 for Corporation Tax. Where a chargeable period straddles that date, a hybrid rate applies. Full expensing at 100% remains available for most new main-rate plant and machinery, the Annual Investment Allowance remains £1,000,000, and the special rate pool stays at 6%. A company relying on writing-down allowances rather than full expensing will see a lower deduction this year than last on the same asset base.
Where this goes wrong
- Quoting a single rate. Between £50,000 and £250,000 there is no headline rate that is correct.
- Missing associated companies. Two companies under common control halve both thresholds.
- Working to the filing deadline. The payment date is three months earlier.
- A long first period. A first period of account over twelve months becomes two accounting periods for tax — two computations, two returns, two payment dates.
- Not filing a loss. A loss-making company issued a notice to deliver must still file, and filing is how the loss is established for carry-forward.
- Conflating HMRC and Companies House. Different documents, deadlines, bodies and penalties. Meeting one says nothing about the other — see filing annual accounts.
Related: extracting profit as dividends and sole trader versus limited company.
Sources
This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.
Questions people also ask
When is Corporation Tax due?
Unusually, payment falls before filing. For most smaller companies payment is due nine months and one day after the end of the accounting period, while the return itself is due twelve months after that end.
Why is the payment deadline earlier than the filing deadline?
It is simply how the regime is structured. The practical consequence is that you must compute the liability well before the return is due, so treating the twelve-month date as the working deadline produces late payment.
What is an accounting period for tax?
It normally follows your accounting reference date but cannot exceed twelve months, so a longer period of account is split into two accounting periods with two returns.
Do very large companies pay differently?
Yes. Companies above defined profit levels pay by quarterly instalments rather than in one sum, which changes the cash-flow profile substantially.
Does a loss-making company still file?
Yes, if it has been issued a notice to deliver a return. Filing also establishes the loss for carry-forward purposes, so it is in your interest regardless.
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