Statutory Interest on Late Corporation Tax: Calculate It First

Who This Affects

This article is for limited company directors. Sole traders and freelancers operating as individuals pay income tax, not corporation tax — so statutory late payment interest works differently for them. If your company is subject to corporation tax (as almost all UK limited companies are), read on.

When Does Interest Start Running?

Corporation tax for most small companies is due nine months and one day after the end of your accounting period. So if your company's year ends on 31 March 2026, payment is due by 1 January 2027. Miss that date by even a single day and HMRC begins charging interest automatically — there is no grace period.

Larger companies paying by quarterly instalments face different deadlines, and interest can accrue on underpaid instalments even before the main due date. If your company's profits exceed £1.5 million (or lower thresholds apply when you have associated companies), check your instalment obligations carefully.

What Rate Does HMRC Charge?

HMRC charges late payment interest at the Bank of England base rate plus 2.5 percentage points. As of August 2026, with the base rate at 4.25%, the current late payment rate is 6.75% per annum. This rate changes whenever the Bank of England adjusts the base rate, so always verify the current figure on the HMRC website before finalising your calculation.

Interest is calculated on a daily basis, not annually. The daily rate is the annual rate divided by 365.

How to Calculate the Interest Yourself

The formula is straightforward:

• Interest = Tax Owed × (Annual Rate ÷ 365) × Number of Days Late

For example, suppose your company owes £18,000 in corporation tax, due on 1 January 2027, but you pay on 1 April 2027 — 90 days late. Using a rate of 6.75%:

• Daily rate: 6.75% ÷ 365 = 0.018493%
• Interest per day: £18,000 × 0.00018493 = £3.33
• Total interest for 90 days: £3.33 × 90 = £299.59

That is a meaningful but manageable sum. However, if the tax owed is larger or the delay stretches longer, interest compounds quickly. On a £60,000 liability paid six months late, you are looking at roughly £2,000 in interest charges.

Interest Is Not a Penalty — But Penalties Can Stack On Top

Statutory interest is separate from late filing penalties. If you also filed your Company Tax Return late, HMRC will charge filing penalties on top of the interest. A return filed up to three months late incurs a £100 fixed penalty; beyond that, penalties escalate significantly. Paying your tax late while also filing late is an expensive combination to avoid.

Can You Reduce or Dispute the Interest?

Unlike some penalties, statutory interest cannot be appealed simply on grounds of reasonable excuse. It is a legal consequence of late payment, not a discretionary charge. Your only way to reduce it is to pay as much as possible as early as possible. Partial payments reduce the outstanding balance and therefore slow the interest accrual from that point forward.

Practical Steps to Take Now

• Identify your corporation tax due date as soon as your accounting period ends — do not wait for your accountant to remind you.
• Use HMRC's online account or your accounting software to estimate the liability early, even before your return is finalised.
• If you cannot pay in full, consider HMRC's Time to Pay arrangement. Agreeing a payment plan before the due date stops further late payment interest from accruing on agreed amounts.
• Check the current HMRC interest rate before calculating, as it moves with the base rate.

The Bottom Line

Statutory interest on late corporation tax is predictable and preventable. Calculate what you owe before HMRC does, act early, and explore Time to Pay if cash flow is tight. Staying ahead of the numbers keeps your company in control — and out of unnecessary correspondence with HMRC.