Company tax payments: how to plan cash so you’re not caught short when Corporation Tax is due
If you run a limited company, you’ve probably had that familiar moment: the business is trading well, the bank balance looks healthy, and then you remember Corporation Tax is coming up. That’s when “profit” stops being a number on a report and turns into an actual payment that has to leave your account.
The good news is you don’t need a complicated finance function to stay on top of it. You just need a simple process you can stick to, backed by accurate numbers and a bit of forward planning.
1) Get clear on the deadlines (so you’re planning the right date)
For most small and medium limited companies, Corporation Tax is due 9 months and 1 day after the end of your accounting period. Your Company Tax Return is usually due later (typically 12 months after the end of the period), which is why directors can get caught out—payment can land before everything feels “final”.
If you’re not fully sure what your year end is (or you’ve changed it), it’s worth confirming it early when you’re preparing your annual statutory accounts and getting your company tax returns lined up. Once you know the date, you can treat the tax bill like any other major liability—planned, not guessed.
2) Know your likely Corporation Tax rate (so your “tax pot” is realistic)
Corporation Tax rates can feel a bit abstract until you translate them into cash. At the moment, the key starting points are:
- 19% if your taxable profits are £50,000 or less
- 25% if your taxable profits are over £250,000
- Between £50,000 and £250,000, marginal relief applies (so the effective rate gradually increases)
If you want a plain-English breakdown, our guide on the corporation tax small profits rate explains what changed and why it matters.
One important “watch out”: if you have associated companies, those profit limits can effectively be shared, which can change the rate you land on. This is exactly why it’s worth forecasting during the year rather than waiting for the final accounts.
3) Build a “tax pot” and treat it like it’s not yours
Most directors don’t fail to pay Corporation Tax because they’re careless. They get caught because the tax cash gets used for other things—stock, marketing, a new hire, or simply a busy month where outgoings pile up.
A straightforward fix is to ring-fence the money:
- Set up a separate savings account or pot.
- Move money into it monthly (or each time you take dividends).
- Treat it as untouchable.
If your profits are fairly steady, this can be as simple as transferring a consistent percentage. If your income is lumpy, tie the transfer to when invoices are paid.
The trick is accuracy. A tax pot only works if your numbers are up to date—otherwise you’re saving based on hope. Staying on top of this is much easier when your records are current through bookkeeping or a structured setup like Xero bookkeeping.
4) Don’t confuse profit with cash (it’s the quickest way to get caught short)
You can be profitable and still struggle to pay Corporation Tax on time. Common reasons include:
- Customers paying late (or paying in stages)
- Buying stock or equipment ahead of busy periods
- A spike in costs that hasn’t shown up in your “mental maths”
- VAT landing around the same time as other bills
VAT is a big one. The UK VAT registration threshold is £90,000 taxable turnover on a rolling 12-month basis, and once you’re registered, VAT becomes another regular cash obligation to plan around. If VAT is part of your world, having your VAT return services handled properly (and on time) helps keep your cashflow predictable.
5) Forecast it like a bill, not a surprise
Corporation Tax is one of those payments that shouldn’t ever feel “sudden”. The easiest way to make it feel normal is to forecast it the same way you’d forecast rent, salaries, or loan repayments.
A practical routine that works well for most limited companies:
- Keep bookkeeping updated regularly (weekly or monthly)
- Review profit trend and likely taxable profit
- Adjust your monthly tax pot transfer based on the latest numbers
- Maintain a simple 3–6 month forward view of major commitments (VAT, PAYE, suppliers, Corporation Tax)
If you want a more structured approach, building a proper cashflow forecast takes the stress out of big payments. That’s exactly what we focus on within our cashflow forecasting support—so you can see pressure points before they become problems.
6) Be careful with dividends (this is where most directors trip up)
Dividends feel like the reward for a strong year—but they’re also the most common reason directors end up short of tax cash. The issue is simple: money leaves the business before the full picture is clear.
Before you pay dividends, you want confidence on:
- Profit to date (based on up-to-date records)
- Other liabilities due soon (VAT, PAYE, supplier bills)
- A realistic estimate of Corporation Tax for the year
- Any year-end adjustments that could move the profit figure
If you’re doing this properly, dividend paperwork and company admin should also be tidy and consistent. That’s where company secretarial services can be a helpful “keep it all straight” layer—especially as the business grows.
7) Use automation and regular reporting to stay ahead
You don’t need to stare at spreadsheets all day to stay in control. In fact, the businesses that handle tax best usually do the opposite: they use simple systems and consistent habits.
If you’re on Xero, a few smart automations can reduce the admin load and help you keep numbers current without thinking about it constantly. Our guide to automations in Xero is a good place to start.
And if you want someone to keep a closer eye on the numbers with you—bookkeeping, reporting, cashflow, payroll, the lot—then an outsourced finance department can give you that ongoing support without the cost of building an in-house team.
FAQs
When do you have to pay Corporation Tax?
For most companies, it’s due 9 months and 1 day after the end of your accounting period. If your company is larger (with higher profits), different rules can apply, but most owner-managed businesses fall into the standard deadline.
What’s the difference between the payment deadline and the return deadline?
The tax payment is typically due earlier. Your Company Tax Return is usually filed later (often within 12 months of the period end), which is why you can end up paying before you feel “ready”.
How much should you set aside each month?
It depends on your profit level and which Corporation Tax rate applies, but the key is having a consistent “tax pot” habit and updating the estimate as the year progresses. If your bookkeeping is behind, your estimate will be too.
Why does your bank balance look healthy but the tax bill still hurts?
Because profit isn’t the same as cash. Late-paying customers, stock purchases, VAT, and timing differences can all create a gap between “good trading” and “cash available”.
What’s the VAT threshold in the UK?
The VAT registration threshold is £90,000 of taxable turnover across a rolling 12-month period. If you’re near that line, VAT planning should sit alongside Corporation Tax planning so both bills are covered.
What’s the simplest way to stop getting caught short?
Keep your records up to date, ring-fence tax cash, and forecast your liabilities ahead of time. Simple processes beat last-minute panic every time.
Want to make Corporation Tax feel straightforward?
If you’d like a calmer, more predictable approach to Corporation Tax—one where you always know what’s coming and you’re setting cash aside with confidence—get in touch with us. Book a chat via our contact page and we’ll help you put a simple, workable plan in place.
I lead FHP Accounting, an accountancy practice specialising in Commercial and Residential Property Accounting. Our goal is to make the administration of running property portfolios easier for landlords, managers, and investors — allowing you to focus on what you do best, while we take care of everything behind the scenes.
