Corporation Tax can take a larger share of this year’s available cash even when the tax rate has not changed. Moving into quarterly instalments brings payments forward and can leave a company funding the current period’s tax while the previous period’s bill is still outstanding.
That transition deserves attention while the budget is being prepared. By the time the year-end computation is ready, an instalment may already have fallen due.
The threshold may be lower than expected
For current accounting periods, the starting annual profit threshold for large-company instalments is £1.5 million. It is reduced for short periods and divided by the company plus its associated companies. The test is company-specific, not a comparison with consolidated group profit.
For example, a company with three associated companies has a £375,000 threshold for a 12-month period: £1.5 million divided by four. Being below £1.5 million in its own accounts therefore does not settle the question.
The assessment uses profits calculated for instalment-payment purposes. Tax adjustments and certain exempt distributions can make that figure different from accounting profit. It helps to see the threshold assessment separately from the forecast tax liability.
An acquisition, disposal or ownership change can alter the assessment. Confirm which companies count, including overseas companies where relevant, rather than relying on the number of entities in the UK reporting pack.
Does an exception give the company more time?
Crossing the profit threshold does not always mean instalments start immediately. Two exceptions need separate consideration.
A low-liability exception applies where the tax liability is below £10,000 for a full year, with an equivalent annual-rate test for a shorter period.
A first-period exception can apply where profits do not exceed the adjusted £10 million ceiling and the company meets the previous-12-month conditions. It is not an automatic grace period for every company crossing the threshold.
The £10 million ceiling is also reduced for associated companies and short accounting periods. In the four-company example, its 12-month equivalent is £2.5 million.
For the earlier-period test, HMRC’s guidance covers a company that did not exist or had no accounting period during the previous 12 months. It also covers a company with an accounting period ending in that time whose annual profit rate did not exceed the relevant large-company threshold, or whose annual tax liability rate did not exceed £10,000.
The tax adviser’s assessment should identify which condition applies and show the adjusted limits. That gives finance a defensible payment date to use in the cash forecast. The full conditions are in the HMRC guidance linked below.
Put the dates into the cash forecast
For a standard 12-month calendar-year accounting period, a company within the large-company regime normally pays on 14 July and 14 October in that year, then 14 January and 14 April in the following year.
Very large companies use an earlier timetable. The starting annual profit threshold is above £20 million, adjusted for associated companies and short periods. For a calendar-year period, instalments normally fall on 14 March, 14 June, 14 September and 14 December of that year. The large-company first-period exception should not be carried across to this regime.
These examples assume ordinary Corporation Tax rules and a full 12-month period. Different period lengths and special regimes need a separate calculation.
The transition can bring two tax periods into one cash forecast
Suppose a company is moving from normal payment dates into quarterly instalments. Build a schedule showing the previous period’s remaining liability alongside the current period’s instalments. Label each amount by accounting period so the same liability is neither omitted nor counted twice.
The pressure becomes clearer when those payments are placed alongside the trading cycle. An October instalment, for example, may coincide with seasonal stock purchases or a slow collection month. Annual profit can look comfortable while the cash available on that date is tight.
Present the timing effect separately from an increase in the underlying tax charge. That distinction helps the board understand whether it is funding higher profits, an earlier payment timetable or both.
Keep the estimate current
A single schedule connecting forecast profits, estimated Corporation Tax, payments made and the next due date gives finance and the tax adviser a common starting point.
Trading changes need to reach that schedule promptly. Instalments are based on estimates, and underpayments can attract interest even where the original forecast appeared reasonable.
Agree who will refresh the estimate and when finance needs the payment figure. The useful deadline is the next instalment date, not the date the year-end computation will be completed.
Reviewed 21 October 2026. General guidance on ordinary Corporation Tax instalments; the applicable thresholds, exceptions and payment dates depend on the company’s circumstances.
Sources and further guidance
HMRC: Corporation Tax instalments for large companies
HMRC: Corporation Tax instalments for very large companies
HMRC CTM92520: large-company instalment thresholds