How to Pay Corporation Tax: A Step-by-step Instructions

You finally made a profit, time to celebrate, right? But wait, before you start the celebration, there’s one more thing to handle: HMRC wants its share. Yep, it’s time to talk about Corporation Tax. It’s not the fun part of running a business, but it’s super important if you want to stay out of trouble. In this blog, we’ll explain what Corporation Tax is, How to Pay Corporation Tax step by step, share three ways to reduce your tax bill, what to do if you owe nothing, and how to check if His Majesty’s Revenue and Customs (HMRC) received your payment.

Table of Contents

1) What is Corporation Tax?

2) Step-by-step Instructions for How to Pay Corporation Tax

3) Top 3 Ways to Reduce Your Corporation Tax Bill

4) How to Notify HMRC If No Tax is Due?

5) How do I Know if HMRC got my Tax Payment?

6) Conclusion

What is Corporation Tax?

Corporation Tax is a type of tax that your company pays on the money it earns. If your business makes a profit, you must give a part of that money to the UK government.

You pay this tax on:

1) Money made from selling products or services

2) Interest from savings or investments

3) Profit from selling things like property or equipment

There’s no tax-free amount; you pay tax on all your profits. Most businesses pay between 19% and 25%, depending on how much they earn.

To pay Corporation Tax, you need to:

1) Work out how much profit your business made

2) Fill in a form called CT600

3) Send the form to HMRC

4) Pay the tax by the deadline

You must do this every year. If you don’t, your company could get a fine.

Step-by-step Instructions for How to Pay Corporation Tax

Paying Corporation Tax might sound difficult, but it can be easy if you keep following the steps in order. Here's a simple guide to help you through the process:

1) Know Your Corporation Tax Deadline

You must pay Corporation Tax 9 months and 1 day after your company’s accounting year ends.

If you pay late, HMRC will charge you:

1) £100 fine if up to 3 months late

2) £10 per day if 3 to 6 months late (up to £900)

3) 5% of your tax (or £300) if 6 to 12 months late

4) Another 5% if more than 12 months late

So always check your deadline and pay on time.

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2) Calculate the Amount you owe

First, work out how much profit your company made during the year.

To do this:

1) Add up all the money your company earned

2) Take away all the business expenses (like rent, wages, or supplies)

The amount left is your profit, and that’s what you pay tax on.

3) Prepare Your Corporation Tax Return

You must fill in a form called CT600 to tell HMRC about your profits.

To do this, you need to:

1) Register for Corporation Tax (if you haven’t already)

2) Use HMRC’s online service or accounting software

3) Be very careful and honest when filling out the form

Mistakes can lead to fines or more taxes later.

4) Calculate Your Tax Liability

After you send your tax return, HMRC will tell you how much tax you need to pay. This is called your tax liability.

They will send you a payslip showing:

1) How much to pay

2) When to pay it

Keep this payslip safe and check it carefully.

5) Submit Your Corporation Tax Payment

Once you know how much to pay, choose how you want to pay for it. You can:

1) Set up a Direct Debit (HMRC will take it from your bank on the right day)

2) Pay using your online banking

3) Use CHAPS or BACS for big payments

4) Use a debit or credit card on HMRC’s website

Always use your 17-digit reference so HMRC knows the payment is from your company.

6) Update Your Records

After you pay, make sure to keep a copy of everything:

1) Your CT600 tax return

2) Your payment receipt or bank record

3) The HMRC payslip

4) Any documents you used to work out your profits

This helps you stay ready if HMRC asks questions and makes things easier next year.

7) Liaise with a Professional Accountant

If you’re unsure about any step, it’s best to speak to an accountant.

A good accountant can help you:

1) Fill out your tax return correctly

2) Pay the right amount

3) Claim all the tax reliefs you’re allowed

4) Avoid fines or mistakes

5) Plan better for the next year

This saves you time, money, and stress.

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Top Three Ways to Reduce Your Corporation Tax Bill

Running a business means looking for smart and legal ways to pay less tax. Here are three simple ways to reduce your Corporation Tax bill:

1) Make Employer Pension Contributions

Putting money into a pension for yourself or your employee counts as a business expense. It lowers your company’s profit, so you pay less Corporation Tax.

Examples of Pension Contributions:

1) Director’s pension

2) Staff workplace pensions

3) Approved company pension schemes

2) Claim for Every Business Expense Possible

Business expenses reduce your profit, which means you pay less tax. Always record your spending and keep receipts.

Examples of Business Expenses:

1) Office rent and utility bills

2) Staff wages and bonuses

3) Travel, fuel, and parking

4) Internet, phone, and software

3) Donate to Charitable Organisations

Donating to a registered charity is a business cost that reduces your taxable profit. This helps lower your Corporation Tax bill.

Examples of Donations:

1) Gift Aid donations

2) Charity sponsorships

3) One-off company donations

How to Notify HMRC If No Tax is Due?

Even if your company doesn’t owe any tax, you must still tell HMRC.

Here’s how:

1) File your CT600 tax return as normal, showing £0 tax due

2) Tick the box saying no tax is owed

3) Submit it before the deadline

If you miss this, HMRC can still fine you, even if you owe nothing.

How do I Know if HMRC got my Tax Payment?

After you send your payment:

1) HMRC usually shows your payment in your online account within a few days

2) Log in to your HMRC account to check

3) Go to the “Payments” or “Statement” section

4) If you don’t see the payment after a few days, contact HMRC for help

Tip: Use the correct reference number and save the payment proof.

Conclusion

Understanding How to Pay Corporation Tax is an important part of running a business in the UK. By understanding your deadlines, keeping clear records, and following each step carefully, you can avoid mistakes and stay on the right side of HMRC. With good planning and support, paying Corporation Tax becomes simple and stress-free, helping you focus on growing your business smoothly.

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