Most companies pay corporation tax nine months and a day after their year end. Cross £1.5 million of profits and the rules invert: you become "large", and the tax is due in quarterly instalments that start before the accounting period has even finished — two payments in-year, two after. Cross £20 million and all four instalments land inside the year, the first less than three months in, which means paying tax on profits you are still in the middle of earning, estimated from forecasts. Getting the transition wrong is one of the most common — and most avoidable — sources of HMRC interest charges in corporate tax.
The three payment regimes
With corporation tax itself at 25% (19% below £50,000, marginal relief to £250,000), the payment schedule depends on augmented profits — taxable profits plus most dividends received:
- Under £1.5 million: one payment, nine months and one day after period end;
- £1.5 million to £20 million ("large"): four equal instalments for a 12-month period, due 6 months + 13 days after the period starts, then every three months — so months 7 and 10 of the year, and months 1 and 4 after it;
- Over £20 million ("very large"): four instalments entirely in-year — the 14th day of months 3, 6, 9 and 12 of the period. The first payment falls when management accounts barely cover a quarter.
Each instalment is a quarter of the estimated liability for the whole period, revised as the year develops — quarterly forecasting is not optional at this size, it is the payment mechanism.
The divisor trap: associated companies
The thresholds are divided by the number of associated companies plus one — companies under common control, counted worldwide, including the dormant-ish entities nobody thinks about. A group of five associated companies has a large-company threshold of £300,000 each, not £1.5 million: perfectly ordinary businesses land in QIPs because of their group structure rather than their size. Since 2023 this uses the broad "associated companies" test (common control, including through individuals) rather than the old 51% group rule, so brother-sister companies owned by the same person count against each other. Every group restructure, acquisition and incorporation changes the divisor — and the payment deadlines with it. This single mechanic causes more accidental QIPs entries than profit growth does.
The graces and the edges
Two reliefs stop the regime ambushing growing companies. The year-one grace: no instalments in the first period a company is large, provided profits do not exceed £10 million (divided by associates, again) — so a company growing organically through £1.5 million gets a year's warning before QIPs start. And companies whose total liability is under £10,000 never pay by instalments regardless. There is no equivalent grace at the £20 million very-large boundary — crossing it moves the first payment forward by four months with no transition year, which deserves a line in any forecast showing profits approaching that level.
Short accounting periods compress the schedule (a period of three months or less collapses to a single payment), and the thresholds pro-rate — another reason period-end changes need the tax calendar checked before, not after.
Interest: the real cost of guessing badly
Underpaid instalments currently accrue interest at 6.25%, while overpayments earn just 3.50% — an asymmetry that prices estimation risk. Systematic under-payers fund HMRC at credit-card-adjacent rates; systematic over-payers make HMRC an involuntary low-yield deposit. The working discipline for large companies: a genuine quarterly re-forecast before each instalment, top-up payments when the year improves (interest runs instalment by instalment, so catching up early caps the charge), and documentation of the estimates — because a company that can show its instalments tracked reasonable contemporaneous forecasts is in a different conversation with HMRC than one that guessed low and shrugged. Deliberate or reckless underestimation can attract penalties beyond interest; honest forecasting error just costs the interest.
Managing the transition year
The companies that handle QIPs well treat entry as a project with a cash-flow cliff: in the transition year a company can face its final nine-month payment for last year and the first instalments for the current year within months of each other — near double tax outflow in one financial year, entirely predictable and routinely unbudgeted. The checklist: confirm the associated-company count (and re-confirm after any structural change); model the transition-year cash stack; set the quarterly forecast rhythm; and diarise the 13th/14th-of-the-month deadlines, which do not align with VAT or payroll dates and are missed for exactly that reason.
Acumon manages the QIPs cycle for large and very large companies — threshold monitoring, associated-company counts, instalment calculations and the forecast discipline behind them — through our corporation tax and tax compliance teams. If your profits or your group chart are heading toward £1.5 million divided by anything, the time to map the payment calendar is this year's forecast, not next year's interest notice.