Statutory Interest on Late Corporation Tax: Calculate & Cut Your Bill

Who This Affects

If you run a limited company, corporation tax is your responsibility — not something handled through PAYE or Self Assessment. Miss the payment deadline and HMRC will charge statutory interest on the unpaid amount from the day after the due date. For most small companies, that deadline is nine months and one day after your accounting period ends. So if your year-end is 31 March 2026, payment is due by 1 January 2027.

The Current Interest Rate

HMRC's late payment interest rate is set at the Bank of England base rate plus 2.5 percentage points. As of 6 July 2026, with the base rate at 4.25%, the late payment interest rate stands at 6.75%. This rate is reviewed whenever the base rate changes, so always check HMRC's published rate before making assumptions. Importantly, this interest is not tax-deductible for corporation tax purposes, making it more painful than it first appears.

How HMRC Calculates the Charge

Interest accrues daily on a simple (not compound) basis. The formula is straightforward:

• Daily interest = Unpaid tax × (annual rate ÷ 365)
• Total charge = Daily interest × number of days late

For example, if your company owes £15,000 in corporation tax and pays 60 days late at a 6.75% rate: daily interest = £15,000 × (0.0675 ÷ 365) = £2.77 per day. Over 60 days, that is £166.44 in interest. On larger tax bills or longer delays, this escalates rapidly.

Large Companies: Quarterly Instalment Payments

If your company has annual taxable profits exceeding £1.5 million (or £375,000 if there are associated companies), you fall into the quarterly instalment payment (QIP) regime. Instalments are due in months 7, 10, 13, and 16 of your accounting period. Interest runs from each instalment due date, meaning a late or underpaid instalment starts accruing interest much earlier than the standard nine-month deadline. Directors of growing companies should monitor profit forecasts closely to avoid surprise QIP liabilities.

Five Practical Ways to Minimise the Charge

• Set aside tax monthly. Transfer a percentage of revenue — typically 19% to 25% depending on your profit level — into a dedicated tax savings account each month. This removes the cash flow shock when the deadline arrives.
• File your accounts and tax return early. You cannot pay accurately until you know your liability. Aim to finalise your corporation tax computation well before the nine-month deadline, not after.
• Make a payment on account if uncertain. If your figures are not yet finalised, pay your best estimate before the deadline. HMRC will refund any overpayment with repayment interest (currently 3.25%), which at least partially offsets the risk of underpayment interest.
• Check for Time to Pay arrangements early. If you genuinely cannot pay in full, contact HMRC's Business Payment Support Service before the deadline, not after. A Time to Pay agreement can halt or reduce surcharges, though interest will still accrue.
• Review associated company rules. The £1.5 million QIP threshold is divided by the number of associated companies. If your group structure has changed, you may have inadvertently entered the QIP regime without realising it.

Can You Appeal the Interest?

Statutory interest on late corporation tax is not appealable in the same way a penalty might be. It is an automatic consequence of late payment and HMRC has no discretion to waive it. Your only recourse is to pay promptly and, where possible, make advance payments to stop the clock. If you believe the interest has been calculated incorrectly, you can request a review through HMRC's corporation tax team with supporting figures.

The Bottom Line

Late payment interest on corporation tax is avoidable with proper planning. Build tax savings into your monthly cash flow, engage your accountant early, and never wait until the deadline to discover you have a problem. A few minutes of planning now is far cheaper than 6.75% on an unpaid bill.