Corporation Tax is the tax levied on the profits of limited companies. This includes foreign companies with a UK branch office. The current rate is set between 19-25% for the 2025/26 and 2026/27 tax year.

A UK-based company pays Corporation Tax on its UK and worldwide profits, while a foreign company with a UK branch office only pays Corporation Tax on the profits it makes from its UK operations.

If a company makes a loss, or isn’t trading, it’ll pay no Corporation Tax. However, the accounting records will still need to be kept for preparing the annual accounts and any tax records needed. A company tax return is only needed if the company is trading. Read our handy article for full details on what you have to file, and when, as a limited company director. 

Should I pay Corporation Tax early?

It’s a question we hear a lot as online accountants. In truth, paying your Corporation Tax early can make sense if your company has enough funds available and you’re confident about how much you’ll likely owe. However, it’s not necessarily the right choice for every business.

Before weighing up the benefits, though, there are a few things that could affect your decision. It comes down to cash flow, how much Corporation Tax you’re expecting to pay, and whether the money could be put to better use elsewhere before the payment deadline. As a general rule, paying early could make sense if you have spare money and want to earn interest from HMRC, because after all, why not earn a little interest back?

However, if your business usually experiences things like seasonal fluctuations, it might be more wise to keep the funds in the business as a safeguard. Before making the decision, you should always consult your accountant to discuss the pros and cons of making an early Corporation Tax payment.

Benefits of paying Corporation Tax early

HMRC pays you interest (the current rate is 2.75%) known as ‘credit interest’ for paying your Corporation Tax early. HMRC will usually pay interest from the date you pay your Corporation Tax to the payment deadline. The earliest HMRC will pay interest is six months and 13 days after the start of your accounting period.

As an example, if your accounting period starts on 1st January 2025 and ends on 31st December 2025, you can pay your Corporation Tax any time between 13th July 2025 (which is six months and 13th days after the start of your accounting period) and 1st October 2026 (which is HMRC’s deadline for payment).

HMRC may pay you interest for the period 14th July 2025 to 1st October 2026 at the applicable annual rate. The amount of Corporation Tax you paid would, of course, be an estimate as your company year was still in progress.

Please note the interest income needs to be included in your company accounts and is therefore taxable.

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So, is paying early actually worth it?

This is where things get a little more interesting. The fact that HMRC pays interest for early payment doesn’t automatically mean paying as early as possible is the best option for your company. For example, if you have a large Corporation Tax bill and plenty of cash sitting in your business account that you don’t need in the short term, earning interest from HMRC could be a useful bonus.

But if that same money could be used to cover an upcoming business expense, improve your cash flow or generate a better return elsewhere, keeping hold of it may make more sense. The key question is not just whether you can pay your Corporation Tax early, but whether your business is better off doing so.

What if I think there’s been a mistake?

HMRC are notoriously hard to get hold of when they’re busy, so if you need to inform HMRC of an error in your Corporation Tax, it’s best to get in contact with them as early as possible. In the (hopefully) unlikely scenario that something goes wrong, you’ll want as much time as possible to fix the issue, lest you receive a dreaded HMRC fine. 

There’s further information on the Gov.uk website about interest and refunds of Corporation Tax.

What are the disadvantages of paying Corporation Tax early?

The main downside to paying your Corporation Tax early is the loss of cash flow and the opportunity of investing the funds back into your business, or even missing out on potentially higher returns elsewhere. So it’s not going to make you rich or really help your company grow, but maybe you’ll get a warm feeling inside from knowing that your tax affairs are all in order.

It’s best to speak to an accountant who can give you advice based on your situation, if you’re a Crunch client you’ve got unlimited access to your client manager and our team of accountants who can help you with any questions you might have. If you’re not yet a client, then why not get in touch to see how we could help your business? Alternatively, if you're a business owner looking for guidance, familiarise yourself with some of our handy resources, including our guide on paying corporation tax as a limited company.

Other examples of where paying your Corporation Tax bill early might be a disadvantage to your business include:

• Replacing equipment.
• Hiring someone.
• Investing in marketing. 
• Making other planned purchases or investments.

Or perhaps you know that your business tends to have quieter periods in the year, and you’ll need to keep more funds available to see you through. For any of these options, keeping the money in your business might actually be more valuable than any interest you’d receive from HMRC. 

So, should I pay early?

There is no one-size-fits-all answer. We might recommend some clients pay early to earn interest from HMRC. For others, we might advise them to use the funds towards planned purchases or investments which could potentially reduce their Corporation Tax bill. The most important thing either way is to make sure the money is available when HMRC needs it. 

It’s best to speak to an accountant who can give you advice based on your situation, if you’re a Crunch client you’ve got unlimited access to your client manager and our team of accountants who can help you with any questions you might have. If you’re not yet a client, then why not get in touch to see how we could help your business? 

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