A finance director we spoke to last year had budgeted for the usual corporation tax deadline: nine months and one day after year-end. Profits had jumped past £1.5 million on the back of a strong contract, and the plan was to hold the cash until the following spring. Then the accounts flagged that the first tax payment had actually been due months earlier. Once a company crosses £1.5 million in taxable profit, the payment rules change, and the money leaves the business sooner than most owners expect.
TL;DR: Companies with taxable profits over £1.5 million must pay corporation tax in four quarterly instalments, not in one lump nine months after year-end. Very large companies, with profits over £20 million, pay even earlier, before the accounting period ends. Miss an instalment and HMRC charges 6.25% interest from the date it fell due.
What Are Corporation Tax Quarterly Instalments?
Most companies pay corporation tax in a single payment, due nine months and one day after the accounting period ends. Once taxable profits pass £1.5 million, that single deadline is replaced by four quarterly instalment payments (QIPs). Large companies pay two of those instalments during the accounting period and two after it. Very large companies pay all four inside the period itself, so tax leaves the business before the year has even closed.
The instalments are estimates. You base each payment on your expected liability for the year, then true up the total when you file the return. That estimate matters, because HMRC charges interest on any shortfall from the instalment date. Getting the forecast wrong is expensive in a way that a late corporation tax return penalty is not.
Which Companies Have to Pay by Instalments?
A company is treated as "large" for instalment purposes if its taxable profits exceed £1.5 million in a 12-month accounting period. It becomes "very large" once profits exceed £20 million (GOV.UK, 2026). Both thresholds are measured on augmented profits, which includes certain dividends from companies you don't control.
There's a one-year grace on the way in. The first year your profits cross £1.5 million, you're not treated as large, so you keep the normal payment date, provided your profits stay under £10 million and you weren't large in the previous year. That breathing space is deliberate: it stops a single good year from forcing an immediate cash-flow shift. No such grace exists for the very large threshold. Cross £20 million and the accelerated dates apply straight away.
The Instalment Payment Dates
For a large company with a 12-month accounting period, instalments fall on the 14th day of months 7, 10, 13 and 16, counting from the first day of the period. Two payments land during the year, two after it ends.
Take a company with a year ending 31 March 2026. Its instalments are due on 14 October 2025, 14 January 2026, 14 April 2026 and 14 July 2026 (GOV.UK, 2026). Each payment is roughly a quarter of the estimated liability.
Very large companies pay on the 14th of months 3, 6, 9 and 12. Every instalment falls inside the accounting period, so the final payment is due before year-end, when the actual profit figure is still an estimate. In our experience, this is the timing that catches finance teams off guard the year a company scales past £20 million.
How Associated Companies Shrink the Threshold
The £1.5 million and £20 million thresholds are not fixed per company. They're divided by the number of associated companies plus one, counting the company itself, measured at the end of the previous accounting period. Two associated companies splits the £1.5 million limit three ways into £500,000 each; ten associated companies drops it to roughly £136,000 (GOV.UK, 2026).
What we see most often is a director who owns several small trading companies, each comfortably under £1.5 million on its own, suddenly pulled into the instalment regime once the limit is split. The same associated-company logic sets the bands for the 25% main rate and marginal relief, so it's worth mapping your group structure before the year starts. This is the same principle behind quarterly VAT filing: the obligation depends on thresholds that move with your circumstances, not on a single flat rule.
What Happens If You Underpay an Instalment?
Interest runs from each instalment date, not from the normal due date. HMRC charges 6.25% on underpaid quarterly instalments, a rate that has applied since 29 December 2025. If you overpay or pay early, HMRC pays you credit interest at 3.50% (GOV.UK, 2026).
Once you pass the normal due date without settling in full, the standard late-payment rate takes over at 7.75%, set at the Bank of England base rate of 3.75% plus 4% (GOV.UK, 2026). Interest accrues daily, so a large underpayment left across two or three instalment dates adds up quickly. The practical answer is to review your profit forecast at each instalment date and top up if the numbers have moved, rather than waiting for the return.
Frequently Asked Questions
Do quarterly instalments apply in my company's first year?
Only if taxable profits exceed £1.5 million, and even then the first-year grace usually protects you. You won't be treated as large in that first year provided profits stay under £10 million and you weren't large the year before. A brand-new company crossing £1.5 million in year one still gets the standard payment date, not instalments.
How do I estimate an instalment if I don't know my final profit?
Use your best forecast of the full-year liability and pay a quarter of it at each date. Review the estimate every quarter and adjust the next payment up or down. HMRC expects a reasonable estimate, not perfection, but a persistent shortfall attracts interest, so revisit the forecast whenever a large invoice or contract lands.
What if my profits drop back below £1.5 million?
You leave the instalment regime for that accounting period and return to the single payment date, nine months and one day after year-end. The test is applied period by period, so a company can move in and out of instalments as profits rise and fall. Associated company numbers can still keep you inside it, though.
Can HMRC charge interest before I've filed my return?
Interest is calculated once you've filed the return or HMRC has determined the liability, but it's backdated to each instalment date. Paying late during the year isn't ignored just because the return isn't in yet. This is why we treat instalment dates as hard deadlines, the same way we treat Self Assessment payments on account.
If your profits are climbing towards £1.5 million, your corporation tax payment date can move before you expect it. Talk to our team about your corporation tax position and we'll work out whether you fall into the instalment regime this year, factor in any associated companies, and map your due dates so nothing lands as a surprise.