Tax year: 2026/27 | Last reviewed: 2 October 2026
Most small companies pay their corporation tax on the deadline, nine months and one day after the year end. But if the company has spare cash, paying early can earn interest from HMRC, and it takes a large bill off the worry list months in advance. One of our IT clients did exactly this and used the interest towards the staff Christmas party.
How early payment interest works
HMRC pays credit interest on corporation tax paid before the normal due date. For a company that is not a large quarterly instalment payer:
- Interest can run from six months and 13 days after the start of the accounting period (the earliest date HMRC treats as eligible)
- until the normal due date, nine months and one day after the period ends
- at HMRC’s credit interest rate, currently around 2.75% a year at the time of writing, which moves with the Bank of England base rate
The interest is taxable income of the company, so the net benefit is reduced by corporation tax.
Worked example
A company has a year end of 31 March 2026 and a corporation tax bill of £20,000, due on 1 January 2027. The accounts are finished in May and the company pays on 1 June 2026.
- Early by seven months
- Interest at 2.75%: about £320
- After 19% corporation tax: about £260
Not life-changing, but compared with an instant access business account it is often competitive, and the money is certain. When base rates were higher, the same client earned over £600.
The bigger benefits
- Certainty: the bill is paid while the cash is definitely there.
- Planning: early accounts mean early dividend and pension decisions before the tax year ends.
- No late payment interest: HMRC currently charges 7.75% on late corporation tax.
- Lending: up to date accounts help with mortgages and finance. See how early accounts saved one director nearly £6,900.
When not to pay early
- If the company needs the cash for working capital or VAT and PAYE bills
- If the accounts are not final and the figure may change
- If the company has borrowing costing more than the interest earned
An alternative is to put the money aside in a separate business savings account each month, so the cash is ring-fenced either way.
How to pay
Pay by bank transfer, Direct Debit or debit card using the company’s 17-character corporation tax payment reference for that accounting period. Using the wrong reference is the most common reason a payment is allocated to the wrong year. See corporation tax rates for 2026/27.
FAQs
Can I pay corporation tax before my accounts are filed?
Yes. You can pay at any time using the correct reference. Any overpayment is refunded once the return is processed.
Is HMRC interest taxable?
Yes, for a company it is taxable as a non-trading loan relationship credit.
Talk it through with Digivolve
We finish accounts early and tell you the exact corporation tax figure, so early payment is an easy decision rather than a guess.
This article is general information based on the rules for the 2026/27 tax year as at October 2026. It is not personal tax advice. Rates and thresholds can change, so please speak to us before acting.