Company Corporation Tax arrears
Corporation Tax is normally due 9 months and 1 day after the end of your accounting period, and if it is not paid on time HMRC charges late payment interest from the due date, at 7.75% a year as of 9 January 2026 (Bank of England base rate plus 4 percentage points). There is no separate penalty just for paying Corporation Tax late, but interest runs daily and late filing of the return carries its own penalties. If the company cannot pay, the worst response is silence: HMRC escalates through reminders, debt collection agencies and enforcement, and it presents more winding-up petitions than any other UK creditor. The practical opening is a Time to Pay arrangement, an instalment plan HMRC agrees where the numbers are realistic and the company keeps up with new tax as it falls due. Corporation Tax arrears alongside VAT or PAYE arrears is a strong signal the company needs advice, not just a payment plan. HMRC, gov.uk: pay your Corporation Tax bill
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- When it is due
- 9 months and 1 day after the accounting period ends (profits up to £1.5m)
- Late payment interest
- 7.75% a year from 9 January 2026 (base rate plus 4 points)
- Penalty for late payment
- None as such: interest only, but late filing has separate penalties
- The opening
- A realistic Time to Pay arrangement, agreed with HMRC
- Red flag
- Corporation Tax arrears on top of VAT or PAYE arrears
What happens if you do not pay
Interest starts on the day after the due date and runs until payment. The rate is set at the Bank of England base rate plus 4 percentage points (a margin in force since 6 April 2025), which made it 7.75% from 9 January 2026, per the official HMRC interest rate table. If the debt stays unpaid, HMRC follows a published enforcement ladder: contact and reminders first, then debt collection agencies, then enforcement powers including taking control of goods (after a formal £75 notice of enforcement), county court action, and, for debts of £1,000 or more, direct recovery from the company bank account. Winding up the company through the court is HMRC's last resort, but it uses it more than any other creditor. The ladder is set out in HMRC's guidance What will happen if you do not pay your tax bill (updated 17 June 2026).
Do not confuse late payment with late filing
Paying late costs interest. Filing the Company Tax Return late costs penalties on top: £200 the day after the deadline, another £200 at 3 months, then 10% of the unpaid tax at 6 months and a further 10% at 12 months, with the flat penalties rising to £1,000 each if the return is late 3 times in a row (gov.uk, checked July 2026). At 6 months HMRC also issues a tax determination, an estimated bill you cannot appeal. So even if you cannot pay, file the return on time.
Time to Pay for Corporation Tax
HMRC would usually rather agree a realistic instalment plan than enforce. A Time to Pay arrangement for Corporation Tax is agreed with HMRC based on what the company can genuinely afford, and interest still accrues while the plan runs. Work out a sustainable monthly figure with our Time to Pay affordability calculator before you contact them, and be ready to show the company can also meet new tax as it falls due.
When arrears mean something bigger
Corporation Tax is charged on profits the company has already made, so genuine inability to pay it usually means the cash generated by those profits has gone somewhere: losses since the year end, an overdrawn director loan account, or other creditors absorbing the cash. If Corporation Tax arrears sit alongside VAT or PAYE arrears, apply the insolvency tests and take advice, because a payment plan cannot fix a structurally insolvent position.
The numbers behind this
See the live official figures on our HMRC tax debt tracker. The scale of tax debt owed to HMRC, Corporation Tax included, and Time to Pay volumes. All figures come from named official sources on our UK business distress data hub.
Common questions
Can I pay Corporation Tax in instalments?
Not by default for most companies (only very large companies pay by statutory instalments), but if you cannot pay on time HMRC will often agree a Time to Pay arrangement to spread the arrears, provided the plan is realistic and you keep up with new tax.
What happens if I cannot pay my Corporation Tax at all?
Interest accrues and HMRC escalates: reminder letters, debt collection agencies, then enforcement such as taking control of goods, county court action or direct recovery from the bank account, and ultimately a winding-up petition. Engaging early, before enforcement starts, keeps the most options open.
Is there a penalty for paying Corporation Tax late?
There is no separate late payment penalty for Corporation Tax; HMRC charges interest instead, at 7.75% a year as of 9 January 2026. Late filing of the return is different and does carry penalties, starting at £200.
Can HMRC wind up my company for Corporation Tax debt?
Yes. HMRC treats winding up as a last resort, but it presents more winding-up petitions than any other creditor, and Corporation Tax arrears count like any other tax debt. A petition usually follows ignored demands, so do not go silent.
Does HMRC charge interest during a Time to Pay arrangement?
Yes. Late payment interest continues to accrue on the outstanding balance while a Time to Pay arrangement runs. The plan stops enforcement, not interest.
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