Quarterly instalment payments for large companies

Q: Are there any exceptions?

There are two, both in regulation 3: Small liability. A company is not large or very large for a period in which its total liability does not exceed £10,000 (scaled down for a short period). First year as a large company. A company whose profits do not exceed £10 million (as adjusted for associated companies) is not treated as large if it was not large in the previous 12 months, or did not exist or have an accounting period in that time. It pays the full liability on the normal due date instead. The first year exception does not apply to very large companies. HMRC's guidance says there is no period of grace when a company becomes very large: a company is very large even if it was not very large in the 12 months immediately before.

Q: What does a shortfall look like in practice?

Illustration only. A standalone company with a year ending 31 March 2027 expects a liability of £400,000 and pays £100,000 on each of 14 October 2026, 14 January 2027, 14 April 2027 and 14 July 2027. When the accounts are finalised the liability is £480,000, so each instalment should have been £120,000. From 14 October 2026 the company is £20,000 short; from 14 January 2027, £40,000; from 14 April 2027, £60,000; and from 14 July 2027, £80,000. If the £80,000 balance is paid on the normal due date of 1 January 2028, debit interest runs on each cumulative shortfall at the instalment rate and nothing more is due. If it is paid later, ordinary late payment interest applies from 1 January 2028 until payment. A top up payment as soon as the higher figure was known would have stopped the interest running on the shortfall from that date.

Q: What mistakes come up most often?

Ignoring associated companies. A company with modest profits can still be large because the £1.5 million is divided by the number of associated companies plus one. Assuming the first year exception applies to a very large company. It does not. Treating payslips as the trigger. The obligation exists whether or not HMRC sends a reminder. Using last year's liability without review. The test is the liability for the current period, so estimates need updating as results come in. Forgetting the year of a short period. Thresholds are scaled down, so a short period can make a company large unexpectedly. For the wider picture of how profits are taxed and the rates that feed into the liability, see corporation tax explained. If HMRC opens a check into your return, tax investigation insurance pays your accountant's fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

A company pays corporation tax in quarterly instalments when its profits for an accounting period exceed £1.5 million, divided by the number of associated companies plus one, and its liability is at least £10,000. A large company pays in months 7, 10, 13 and 16 counted from the start of a 12 month period, while a very large company with profits over £20 million pays everything inside the period itself, in months 3, 6, 9 and 12. Underpaid instalments attract debit interest from each due date, at a rate set below the ordinary late payment rate.

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Which companies have to pay by instalments?

The rules are in the Corporation Tax (Instalment Payments) Regulations 1998 (SI 1998/3175). Regulation 3 defines a large company as one whose profits for the accounting period exceed £1.5 million but do not exceed £20 million, and a very large company as one whose profits exceed £20 million. Most companies never reach these levels and simply pay their tax nine months and one day after the end of the accounting period, the normal due date explained in our guide to corporation tax deadlines.

Two adjustments make the thresholds lower than they first appear:

Associated companies. For accounting periods beginning on or after 1 April 2023, the £1.5 million and £20 million thresholds (and the £10 million figure used for the first year exception) are divided by the number of associated companies plus the company itself. HMRC’s own example is a company with five associated companies, whose threshold becomes £1.5 million divided by 6, or £250,000. The same counting rules are used for the main rate of corporation tax, covered in our page on associated companies. Between 1 April 2015 and 31 March 2023 a narrower test of related 51% group companies applied instead.
Short accounting periods. Where the accounting period is less than 12 months, each threshold, including the £10,000 liability limit, is reduced proportionately.

Are there any exceptions?

There are two, both in regulation 3:

Small liability. A company is not large or very large for a period in which its total liability does not exceed £10,000 (scaled down for a short period).
First year as a large company. A company whose profits do not exceed £10 million (as adjusted for associated companies) is not treated as large if it was not large in the previous 12 months, or did not exist or have an accounting period in that time. It pays the full liability on the normal due date instead.

The first year exception does not apply to very large companies. HMRC’s guidance says there is no period of grace when a company becomes very large: a company is very large even if it was not very large in the 12 months immediately before.

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When are the instalments due?

For a large company with a 12 month accounting period, HMRC’s guidance sets out four equal instalments due:

6 months and 13 days after the first day of the accounting period;
3 months after the first instalment;
3 months after the second instalment, which is 14 days after the end of the period;
3 months and 14 days after the last day of the accounting period.

For a very large company the four instalments fall 2 months and 13 days after the start of the period and then every 3 months, which is the 14th day of months 3, 6, 9 and 12. All of the tax is therefore paid before the year end.

Year ending 31 March 2027	Large company	Very large company
First instalment	14 October 2026	14 June 2026
Second instalment	14 January 2027	14 September 2026
Third instalment	14 April 2027	14 December 2026
Final instalment	14 July 2027	14 March 2027

For a short accounting period the large company’s last instalment is still due 3 months and 14 days after the period ends. Instalments before that are each the total liability divided by the number of months in the period, multiplied by 3, with the balance paid at the end. A period of 3 months or less needs a single payment.

How is each instalment worked out?

The company must estimate its total liability for the period, including tax on loans to participators in a close company (see close company rules) and any controlled foreign company charge, after reliefs and set offs. Each instalment for a 12 month period is a quarter of that estimate. The estimate should be revised as the year goes on, using management accounts and forecasts, with top up payments made if the expected liability rises. HMRC’s manual at CTM92550 is clear that companies must decide for themselves whether they are in the regime and pay without prompting. Payslips HMRC sends are a courtesy only, and the company must indicate on its CT600 whether it is a large or very large instalment payer.

If the liability looks likely to fall, the company can claim repayment of instalments already paid under regulation 6, stating the amount and the change in circumstances that justifies it. Groups can also use a Group Payment Arrangement, where one nominated company pays instalments for the whole group, and can surrender overpaid instalments between members.

What interest is charged on underpaid instalments?

Interest on a late or short instalment runs from that instalment’s due date. HMRC calls it debit interest. Under CTM92660 it is charged at the reference rate plus 2.5 per cent, which is lower than ordinary late payment interest, and this lower rate applies only up to the normal due date. After that, any tax still unpaid carries the full late payment rate. HMRC’s published table shows debit interest on underpaid instalments of 6.25% from 29 December 2025, while ordinary corporation tax late payment interest was 7.75% from 9 January 2026. Rates move with the Bank of England base rate, so check the current table; our page on HMRC late payment interest explains how those rates are set.

Two points soften the cost. Debit interest is deductible in computing profits for corporation tax. It is also only calculated once the normal due date has passed and the return has been filed, so a company that pays early or overpays receives credit interest instead, at the reference rate minus 0.25 per cent under CTM92670 (3.50% from 29 December 2025 in HMRC’s table). Credit interest is taxable.

Can HMRC charge a penalty as well as interest?

Yes, but only in limited circumstances. Regulation 13 allows a penalty of up to twice the interest charged where the company, or someone acting for it, deliberately or recklessly fails to pay an instalment, or fraudulently or negligently claims a repayment under regulation 6. A genuine estimate that turns out too low attracts interest, not a penalty. HMRC can also, after the filing date, issue a notice under regulation 10 asking how instalments were computed or why they were not paid, giving at least 30 days to reply. CTM92770 confirms this is not the opening of a return enquiry.

What does a shortfall look like in practice?

Illustration only. A standalone company with a year ending 31 March 2027 expects a liability of £400,000 and pays £100,000 on each of 14 October 2026, 14 January 2027, 14 April 2027 and 14 July 2027. When the accounts are finalised the liability is £480,000, so each instalment should have been £120,000.

From 14 October 2026 the company is £20,000 short; from 14 January 2027, £40,000; from 14 April 2027, £60,000; and from 14 July 2027, £80,000.
If the £80,000 balance is paid on the normal due date of 1 January 2028, debit interest runs on each cumulative shortfall at the instalment rate and nothing more is due.
If it is paid later, ordinary late payment interest applies from 1 January 2028 until payment.

A top up payment as soon as the higher figure was known would have stopped the interest running on the shortfall from that date.

What mistakes come up most often?

Ignoring associated companies. A company with modest profits can still be large because the £1.5 million is divided by the number of associated companies plus one.
Assuming the first year exception applies to a very large company. It does not.
Treating payslips as the trigger. The obligation exists whether or not HMRC sends a reminder.
Using last year’s liability without review. The test is the liability for the current period, so estimates need updating as results come in.
Forgetting the year of a short period. Thresholds are scaled down, so a short period can make a company large unexpectedly.

For the wider picture of how profits are taxed and the rates that feed into the liability, see corporation tax explained.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.