What are the Benefits of Paying Corporation Tax Early?

When running a limited company in the UK, meeting your tax obligations is part and parcel of business life. But while most companies aim to pay by the deadline, some choose to pay corporation tax early—and there are some good reasons why. From interest benefits to improved cash flow management, this post explores the advantages of early payment and how it could work for your business.

What Is Corporation Tax?

If you run a limited company in the UK, you’re required to pay Corporation Tax on the profits your business makes. This includes money earned from normal trading activities (like selling goods or services), investment income, and the profits made from selling company assets such as property, equipment, or shares.

Corporation Tax is one of the key taxes for UK businesses, and unlike Income Tax, there’s no personal allowance—you start paying it on your first pound of profit.

Corporation Tax Rates for 2025/26

As of the 2025/26 tax year, the rates are structured as follows:

• Main rate – 25%: For companies with taxable profits over £250,000
• Small profits rate – 19%: For companies with profits of £50,000 or less
• Marginal relief: If your company’s profits fall between £50,001 and £250,000, you may qualify for marginal relief. This provides a gradual increase in the rate, rather than jumping straight to 25%.

It’s important to note that these thresholds may be reduced if your company has associated companies (for example, subsidiaries or companies under common control), as the limits are split across all associated businesses.

Want to Learn More?

For more detailed guidance on how Corporation Tax works and how to calculate your company’s liability, visit the official HMRC Corporation Tax page.

When Is Corporation Tax Due?

Corporation tax is due nine months and one day after the end of your company’s accounting period. For example, if your accounting period ends on 31 December, your payment is due by 1 October the following year.

Even though the deadline seems generous, there can be benefits to making your payment earlier.

Why Pay Corporation Tax Early?

Earn Interest from HMRC

HMRC may pay you credit interest if you pay your corporation tax before it’s due. The rate of interest (as of April 2025) is 0.5% below the Bank of England base rate, currently equating to around 2.25%. While it’s not huge, it’s better than letting your money sit in a zero-interest account.

Learn more about HMRC’s interest rates

Avoid Last-Minute Issues

Leaving your payment to the deadline can expose you to technical errors, missed transactions, or banking delays. Early payment gives you peace of mind and eliminates the risk of late penalties.

Improve Your Financial Planning

Paying early can help smooth your cash flow if you prefer to deal with tax bills while you have the funds available, rather than risk tighter budgets later in the year.

Positive Relationship with HMRC

Consistent early payments may support a more positive perception of your business with HMRC, especially useful if you’re undergoing compliance checks or applying for things like Time to Pay arrangements.

Simplify Your Admin

If you pay early and tick it off the to-do list, you can focus on running your business without the looming reminder of an upcoming tax bill. It also helps when preparing year-end accounts, giving your accountant one less thing to chase.