How to successfully pay Corporation Tax

Corporation Tax is the key tax a limited company has to pay each year.

Our guide to paying Corporation Tax will help ensure you meet tax deadlines and show you the best way to pay

Paying Corporation Tax on any profits your small business makes if it's registered as a limited company is a legal requirement.

Profit is money your business made after all allowable expenses and costs, such as salaries.

There are also tax relief and allowances that can be applied to your company profits to lower you Corporation Tax liability.

Companies must pay nine months and one day after the Accounting Period (AP) ends (unless they are required to pay in quarterly instalments) but have 12 months after the AP end to file their return, so customers generally pay then file, as opposed to file then pay.

When does my small business have to pay Corporation Tax?

Depending on the profits your business makes, the deadline for paying Corporation Tax will be different.

If your taxable profits are less than £1.5mn, your business has nine months and one day after the end of the accounting period to pay the Corporation Tax that's due.

The accounting period is usually the financial year of your business - start-ups can have two periods in the first year they were established.

If your taxable profits are above £1.5mn, then your business has to pay HMRC in instalments - usually every three months following the first instalment.

How do I pay Corporation Tax?

HMRC recommends that you pay your Corporation Tax electronically, as this is safe and secure.

If you miss a deadline, you'll be liable for interest payments on the outstanding amount.

In all cases, you'll need to quote your 17-digit Corporation Tax reference number for the accounting period you're paying for.

Remember that the payment reference number changes with each accounting period, so you need to use a different one each time you pay.

• Same day Corporation Tax payments - There are two same day payment methods, approving a payment through your online bank account and online by debit or corporate credit card  - most high street banks with online business accounts will support online same day transfers to HMRC. You'll either need to pay HMRC Cumbernauld or HMRC Shipley - your Corporation Tax payslip with tell you which one. If in doubt, pay HMRC Cumbernauld.
• Three working day Corporation Tax payments - BACS bank transfers typically take around three working days. The same length applies if you pay at a bank or building society. If you pay at the bank or building society, you'll need to take you Corporation Tax payslip HMRC sent.
• Five working day Corporation Tax payments - if you need to set up a Direct Debit for this and future Corporation Tax payments, it will take five days to process the first payment to HMRC.

How do I tell HMRC if there is no tax due?

If you've closed your accounts for the financial year and calculated that you don't owe Corporation Tax, you must tell HMRC that you've no tax to pay - don't assume that because you don't have anything to pay you don't have to do anything.

To let HMRC know, complete and return the 'nil to pay' form.

Completing the Nil To Pay form does not remove the requirement for you to file your CT return, only that HMRC will not send you payment reminders.

How do I know if HMRC got my tax payment?

Depending on your payment method, HMRC will update your account with your latest payments within a few days of you paying HMRC.

You can check your online HMRC account to see if your account has been updated with your payment.