How to prepare for your corporation tax payment

For many UK business owners, the end of summer brings more than just a return to routine, it brings the looming 1 October corporation tax payment deadline for companies with a 31 December year-end, as corporation tax is due nine months and one day after the end of the accounting period. Missing this deadline can result in penalties and interest, so it’s essential to plan ahead.

The first step in preparing for your corporation tax payment is understanding exactly when your tax is due. While 1 October is a common corporation tax deadline, it’s crucial to know your company’s specific accounting period end. Your corporation tax deadline will almost always be based on that date, and confirming it early ensures you avoid any confusion or missed deadlines. Please take extra care in establishing the due date for corporation tax in a company’s first period after incorporation or where there has been a change of period end as in these circumstances liabilities will be due by alternative dates.

Once you’ve established your due date, the next priority is to finalise your statutory accounts. These include your profit and loss statement (alternatively known as an Income Statement), balance sheet (also called a Statement of Financial Position), any additional primary financial statements required according to the reporting standard being followed and accompanying notes, all of which are needed to calculate your corporation tax liability. Providing Moore South with all relevant financial information well in advance is vital. It’s a good idea to allow at least four to six weeks before the deadline so we have enough time to prepare and submit everything accurately.

With accounts in hand, the focus should then shift to arranging payment of your corporation tax bill. This allows you to budget properly and avoid cash flow surprises. The standard corporation tax rate is now 25% for companies with profits over £250,000, though businesses with lower profits may pay a marginal rate or 19% if they qualify for the small profits rate. Your accountant at Moore South will, if required, provide your tax computation based on your year-end figures and have made provision in the financial statements, so you can plan your payments accordingly. Separate requirements exist for companies with “Large” profits, although please be aware where there are “associated” companies this can mean a company with apparently small profits could actually mean a company is “Large”. In these circumstances tax liabilities fall due earlier and by instalments. Moore South can assess your position and explain when amounts will be due.  

As you prepare your return, it’s worth checking whether your company qualifies for any tax reliefs or allowances that could reduce your bill. For example, the Annual Investment Allowance (AIA) provides full tax relief in the period of expense on qualifying capital expenditure. Also, companies engaged in innovation or development may be eligible for Research and Development (R&D) tax credits.. If you’ve made a loss, your business may be able to offset that loss against previous or future profits. Taking advantage of these reliefs could make a significant difference to the amount you owe by carrying them out in the most tax-efficient way.

Once everything is finalised, approved by you and signed, Moore South will submit your corporation tax return and final year-end accounts. When it comes to paying the liability, make sure you use the correct 17-character, period-specific, payment reference so HMRC can allocate the payment to your account correctly. Payments can be made by bank transfer, BACS, Direct Debit, or corporate credit/debit card. Keep in mind that payments can take up to three working days to clear, so don’t leave it until the last minute.

If you think your business may struggle to pay the full amount on time, don’t ignore the issue. HMRC offers a Business Payment Support Service which may allow you to spread the cost through a Time to Pay arrangement. These agreements are more likely to be granted if you approach HMRC before the deadline rather than after it. While interest will still accrue, you could avoid further penalties by acting early and showing good faith.

Looking beyond this October (or other due date if you do not have a December period-end, consider making corporation tax planning a year-round planning process. Setting aside money monthly into a designated tax reserve account can ease pressure when the deadline approaches. You might also want to schedule quarterly reviews with your accountant at Moore (South) LLP to keep track of profits (and estimated year end corporation tax) and ensure no surprises occur at the year-end. Small habits like these can have a big impact when tax time rolls around.

In summary, preparing for your corporation tax payment isn’t just about avoiding penalties — it’s about staying in control of your business finances. By understanding your obligations, planning ahead, and seeking advice when needed, you’ll navigate the deadline with confidence and clarity.

If you haven’t already spoken to your accountant at Moore (South) LLP or reviewed your accounts, now is the time to act. The tax due date may feel far away, but in the world of business tax, proactive planning is everything.