Quarterly instalment payments are what replaces the nine months and one day rule once a company is large enough. GOV.UK is direct about the trigger: taxable profits of more than £1.5 million means you must pay your Corporation Tax in instalments. What surprises companies is not the rule but the arithmetic underneath it, because the first instalment is due while the accounting period is still running.
When each instalment falls due
For a company in the £1.5 million to £20 million band with a twelve-month accounting period, the four instalments fall on the fourteenth day of the seventh, tenth, thirteenth and sixteenth months measured from the start of the period. Two of those dates arrive before the period has ended. That means the first two payments are made on a forecast of the year's profit, and the company carries the risk of that forecast: pay too little and interest runs, pay too much and the overpayment sits with HMRC until the return is filed, earning credit interest at a lower rate than the debit rate.
The threshold is divided, like every other threshold
The £1.5 million limit is reduced by the number of associated companies, in the same way the marginal relief thresholds are. A company with three associates enters the instalment regime at £375,000 of profit rather than £1.5 million. There is also a transitional protection: a company that exceeds the limit for the first time is generally not required to pay by instalments for that period unless its profits exceed £10 million, or unless it was above the limit in the previous period too. That rule is what stops a single good year from imposing an instalment schedule retrospectively.
The very large regime is earlier again
Above £20 million of taxable profits, again divided by the number of associated companies, a different schedule applies. Instalments fall in the third, sixth, ninth and twelfth months of the accounting period, so every payment is made before the year end and the whole liability is settled by the last day of the period it relates to. A company crossing the £20 million line therefore faces an acceleration of cash outflow in the transition year that is much larger than the increase in its tax bill, and it is worth modelling before the year in which it happens.
Questions people ask about quarterly corporation tax payments
Who has to pay corporation tax quarterly?
Companies with taxable profits over £1.5 million, with that threshold divided by the number of associated companies. Above £20 million a different and earlier instalment schedule applies.
When are corporation tax instalments due?
For the £1.5 million to £20 million band with a twelve-month period, on the fourteenth day of months seven, ten, thirteen and sixteen from the start of the period. Two of the four fall before the period ends.
What happens if I underestimate an instalment?
Interest runs on the shortfall from the date the instalment was due. HMRC pays credit interest on overpaid instalments, but at a lower rate than it charges, so the cost is asymmetric.