Staring at a Corporation Tax bill that’s bigger than your current bank balance is a rite of passage for many UK entrepreneurs. It’s that specific stomach-drop moment where you check your cash flow forecast and realise the math isn't mathing.
You aren't alone in this. Cash flow crunches happen to the best of us. But before you start panic-Googling high-interest loans, you need to know exactly where you stand with HMRC.
Here is the straight talk on paying your tax bill in chunks, rather than one painful lump sum.
Will HMRC let you pay in installments?
The short answer? Yes, but usually only if you are struggling.
It sounds contradictory, but the rules are entirely different depending on how much profit your company makes.
| Company Type | Profit Threshold | Payment Requirement |
| Large Companies | Over £1.5m | Must pay in installments through the Quarterly Instalment Payments (QIPs) system. |
| Small Companies | Under £1.5m | Full amount due 9 months and 1 day after the accounting period ends. |
However, if you are a small business owner who literally cannot pay the bill on time, HMRC can agree to a payment plan. This is called a Time to Pay arrangement. They won't offer this automatically-you have to ask for it.
Snapshot: Do I have to pay in installments?
| Company Size | Profit Threshold | Payment Rule | Can I pay later? |
| Small Company | Under £1.5 million | Pay in full (9 months + 1 day after year-end) | Only via "Time to Pay" arrangement |
| Large Company | Over £1.5 million | Mandatory 4 quarterly installments | Mandatory system |
Can you have a payment plan for Corporation Tax?
If you are a small business (like most of our clients) and you missed the deadline or know you're going to miss it, you can set up a Time to Pay.
This is essentially a debt repayment plan agreed upon with HMRC. It allows you to spread the cost of your tax bill over a period of time usually between 3 to 6 months, though sometimes longer depending on your circumstances.
How to get a Time to Pay arrangement
You need to contact HMRC before your payment deadline passes. If you leave it until you get a nasty letter, they are far less likely to be lenient.
When you call them, have these details ready:
- Your Corporation Tax reference number.
- The amount you owe.
- A clear reason why you can't pay.
- A realistic proposal of how much you can pay upfront and how much you can pay monthly.
Pro tip: Be honest. HMRC wants their money, and they usually prefer getting it slowly rather than forcing you into insolvency.
What happens if I can't pay my Corporation Tax on time?
If you miss the deadline and haven't set up a plan, three things happen, and none of them are fun:
- Interest kicks in immediately: As of late 2024, interest rates on late payments are high (linked to the Bank of England base rate). Interest is charged daily from the day the payment was due.
- Penalties might apply: While financial penalties are usually triggered by filing your return late, failing to settle your bill can eventually lead to debt collection action.
- Debt Collection: HMRC has the power to use debt collection agencies or even take money directly from your bank account or monthly earnings.
It is also important to prepare for the upcoming changes to the penalty system. From April 2026, HMRC is introducing a points-based system for late submissions and new percentage-based penalties for late payments. This is part of the move toward Making Tax Digital (MTD), designed to be fairer for those who occasionally slip up while penalising persistent lateness.
Under these new rules, here is how the late payment penalties will be structured:
| Time Late | Penalty |
| 1 Day Late | £100 penalty |
| 3 Months Late | Additional £100 penalty |
| 6 Months Late | HMRC estimates the tax due and adds a 10% penalty |
| 12 Months Late | Another 10% penalty applied to the unpaid tax |
| Three Consecutive Delays | The £100 penalties can increase to £500 each for persistent late filings |
Key Takeaway
If you are a profitable large company, paying in installments is the law. If you are a small business, paying in installments is a lifeline for when cash is tight.
- Small businesses usually pay in one lump sum, 9 months after their year-end.
- Large businesses (profits >£1.5m) must pay in quarterly installments.
- If you can't afford your bill, call HMRC immediately to set up a Time to Pay plan.
- Never ignore the deadline-interest charges accrue daily.
How Debitam can help you
We can't pay the bill for you, but we can stop the bill from being a surprise.
The worst financial stress comes from not knowing your numbers until the last minute. At Debitam, we focus on getting your Corporation Tax Return filed early and accurately.
By sorting your accounts months in advance of the deadline, we give you the most valuable asset of all: time. Time to save, time to plan your cash flow, or time to arrange a plan with HMRC without the panic.
Need to get your numbers straight? Check our Corporate Tax Filing Services and let's get you organised.
