• Swindon & Wiltshire Experts
• Thursday October 23 2025
• Author Name: Michael Blaken

Could you fall into the quarterly corporation tax payments regime?

Businesses need to be vigilant about their tax position, warns Michael Blaken of Optimum Professional Services

For many businesses, the settling of their annual corporation tax liability has been a predictable, once-a-year event.

However, a combination of economic changes and business growth means this is no longer the case for a growing number of UK companies.

The significant increase in the corporation tax rate, coupled with cash flow pressures from other recent tax changes (such as those to Employer National Insurance), makes it essential for businesses to understand when they might be required to switch to a more frequent payment schedule – the Quarterly Instalment Payments (QIPs) regime.

The QIPs regime mandates that certain companies pay their corporation tax in four instalments throughout the year, rather than as a single lump sum nine months after the financial year-end.

This system applies to two main categories of companies:

• Large Companies: This regime affects companies with annual taxable profits between £1.5 million and £20 million. A crucial point to remember is that these thresholds are adjusted for businesses that are part of a larger group or have associated companies. For example, a company with four associated entities will see its £1.5 million threshold reduced to a mere £300,000. A key feature for large companies is the ‘year of grace’, which means they are not required to pay QIPs in the first year they become large, only if they remain so in the following year.
• Very Large Companies: Companies with annual taxable profits exceeding £20 million fall into this category. The QIPs rules applying to company which is ‘very large’ are similar, but with two significant differences: there is no ‘year of grace’, and all four instalment payments are due within the accounting period itself.

For companies not prepared for this change, the shift to quarterly payments can create a significant and sudden impact on cash flow.

The need for businesses to be vigilant about their tax position is increasing for several reasons:

• Inflation’s Impact: As businesses adjust their pricing to keep pace with inflation, many are experiencing a natural rise in profit margins. This increase alone can be enough to push them across the QIPs threshold.
• Lack of Awareness: Many finance teams and company directors are not tracking their profitability closely enough to anticipate this change. They may only discover they’ve crossed the threshold after missing a payment, at which point HMRC has already levied interest charges.
• High Interest Rates: With late payment interest rates currently as high as 8.0 per cent (as of 27 August 2025), a missed payment can quickly become a very costly error.

The confluence of these factors makes proactive monitoring of your tax position absolutely critical.

To avoid an unwelcome surprise from HMRC, companies should take the following steps:

• Continuous Profit Monitoring: Don’t wait until the year-end to assess your financial health. Regularly review your rolling profit figures to forecast your tax liability and anticipate if your payment schedule will need to change. Remember that Corporation Tax is based on taxable profit, which may require adjustments to your standard accounting figures.
• Evaluate Your Group Structure: If your business has multiple entities, be sure to understand how many are considered ‘associated’ for tax purposes. This can dramatically lower the QIPs thresholds and bring your company into the regime sooner than you might expect.
• Integrate Payments into Your Budget: Unlike the single annual payment, QIPs for large companies begin just six months into the financial year. For very large companies, payments start even earlier. Incorporate these quarterly payments into your cash flow forecasts to ensure the necessary funds are always available.

Michael Blaken is accounts director at Optimum Professional Services