Quarterly Corporation Tax Payments – Are You Affected?

For many businesses, Corporation Tax payments are usually a once-a-year consideration.

However, for companies experiencing a period of significant growth, their corporation tax payment profile can change very quickly without much warning.

Given the increased rate of UK corporation tax and the pressure felt by many businesses on their cash flow resulting from the recent changes to the Employer National Insurance rules, it’s vital that businesses stay on top of their tax responsibilities and identify when the Quarterly Instalment Payments (QIPs) regime may apply.

What is the Quarterly Instalment Payments regime?

The large company QIPs regime applies to companies with annual taxable profits of between £1.5 million and £20 million.

If your business is part of a group or has associated companies, these thresholds are divided by the number of companies involved.

For example, if you take a company with four associates, the £1.5 million threshold becomes £300,000 for each affected company, which is far more easily exceeded.

Companies within the large company QIPs regime must pay their Corporation Tax in four instalments as opposed to a single lump sum nine months after the year-end. Two of these payments are usually due before the accounting period has ended with the final two payable after the end of the period.

It is worth noting that the regime has a ‘year of grace’ which means that a company will not generally be required to pay QIPs in the first year it becomes large but will be required to do so if it remains large for a second year.

The very large company QIPs regime applies to companies with annual taxable profits of more than £20m.

The rules for determining whether or not a company is very large are broadly the same as those applicable to the large company regime but there are two major differences; a very large company will need to make QIPs as soon as it becomes very large (i.e. there is no ‘year of grace’) and all four payments are due within the accounting period.

For some businesses the QIPs regime can result in a significant cash flow adjustment, particularly if not planned for in advance.

Why is this becoming a bigger issue?

There are several factors driving the increased need for vigilance surrounding Corporation Tax payments, including inflation-driven profit increases.

As businesses raise prices to keep pace with inflation, many are seeing stronger profit margins. In some cases, this alone is enough to push them into the QIPs regime.

At the same time, there can be limited awareness within finance teams and among directors that they have crossed the threshold.

Many only realise after missing a payment, by which point HM Revenue & Customs (HMRC) has already applied interest charges.

With a high late payment interest fee of up to 6.5 per cent as of 18 August 2025, missed payments can become costly very quickly.

It is the combination of these factors that require businesses to monitor their tax position closely and plan proactively as profits grow.

What should you be doing to monitor your tax position?

There are several steps you can take to ensure you do not fall unexpectedly into the QIP regime or face unnecessary interest charges:

• Monitor profitability throughout the year – Do not wait until your year-end to review your position. Keeping a close eye on your rolling profit figures will help you to forecast your tax position more accurately and understand if your corporation tax payment profile may need to change. Corporation tax is calculated on taxable profit so you may need to make some adjustments to your accounting data to determine this position.
• Review your group structure and associated entities – If you operate multiple entities, check how many are associated for tax purposes. Associated companies dilute the £1.5 million threshold so you may fall into the QIPs regime quicker than anticipated
• Budget for payments proactively – Unlike the traditional post-year-end Corporation Tax deadline, large company QIPs require tax payments to begin just six months into the financial year and the very large company regime starts even sooner. Build these payments into your cash flow forecasts so that the funds are available when needed.

If you’re feeling uncertain about where your business stands or overwhelmed by the prospect of quarterly payments, seek professional advice as soon as possible.

By gaining a clear understanding of your tax position, you can identify simple changes that can prevent costly mistakes and help you to manage cash flow more effectively.

While some situations require detailed planning, every successful approach starts with an informed conversation, one we’re ready to have whenever you’re ready to talk.

If you’re unsure whether your business may be affected or if you’ve had a strong trading year and want to review your Corporation Tax position, contact us today.

Stephanie Hurst