Corporation tax paid late attracts interest rather than a penalty, which is the first thing worth knowing because it changes what the company should do. There is no fixed charge to avoid by a day, and no escalating scale to race. There is a daily cost that starts the moment the deadline passes and stops the moment the money reaches HMRC.
Interest, not a penalty
Late payment interest runs from the day after the due date until the tax is paid. It is charged at a rate HMRC sets and changes, and it is deductible for the company as a non-trading loan relationship debit, which softens the cost slightly. Because it is daily and proportionate rather than a fixed penalty, paying part of the liability on time reduces the cost proportionately: there is no threshold below which paying something is pointless.
The dates that matter
For taxable profits up to £1.5 million the due date is nine months and one day after the end of the accounting period. Above that, each quarterly instalment has its own due date and interest runs from each of them separately, which is why an underestimated first instalment costs more than a late final payment of the same size. Where a period straddles a change of circumstances, HMRC computes interest by reference to what should have been paid at each date rather than to the final figure alone.
What to do if the money is not there
Contact HMRC before the due date and ask for a Time to Pay arrangement. Interest continues to run for the whole of any arrangement, so it is not a way of reducing the cost; what it stops is enforcement. HMRC decides case by case on the company's ability to pay, and an approach made before the debt is overdue, by a company with its returns filed, is materially more likely to succeed than the same proposal made three months later.
Questions people ask about late payment of corporation tax
Is there a penalty for paying corporation tax late?
No fixed penalty. Late payment attracts interest, charged daily from the day after the due date until the tax is paid, at a rate HMRC sets.
Is late payment interest deductible?
Yes, as a non-trading loan relationship debit in the company's computation, which reduces its effective cost.
Does paying part of the bill help?
Yes. Interest is proportionate to the amount outstanding, so paying what the company has on time reduces the cost of the rest.