- What Are Quarterly Instalment Payments (QIPs)?
- How Do Quarterly Payments Work for Corporation Tax?
- How Do You Calculate Quarterly Instalment Payments for Corporation Tax?
- Who Is Required to Make Quarterly Instalment Payments?
- What are the benefits of making quarterly installment payments?
- Special Circumstances and Exceptions
- Tips for Managing Quarterly Instalment Payments
- FAQs: Frequently Asked Questions
- Getting Help with Your Quarterly Installment Payments
Large UK companies do not pay corporation tax once a year after their year end. Under Quarterly Instalment Payments (QIPs), they pay in four instalments, and the first one is often due before the accounting period has even ended. A company is treated as large when its profits are over £1.5 million a year, a limit that is shared with associated companies.
QIPs can provide unexpected cash flow pressure in firms with growth, fluctuating profits, or complex group structures if they are not well planned. HMRC may assess interest for missed or underpaid payments, even if the entire tax liability is paid in full. This guide explains what Quarterly Instalment Payments are, which companies must follow the QIP regime, how payments are calculated, and how to manage them without hurting cash flow.
What Are Quarterly Instalment Payments (QIPs)?
Quarterly Instalment Payments (QIPs) are a UK Corporation Tax system under Corporation Tax Self-Assessment (CTSA) that requires eligible companies to pay their estimated tax in four instalments rather than one lump sum at the end of the year. Payments begin during the accounting period and are based on estimated profits, and interest may be charged if instalments are underpaid or late.
How Do Quarterly Payments Work for Corporation Tax?
- Eligibility: Quarterly Instalment Payments (QIPs) apply to “large” UK companies, meaning those with profits of more than £1.5 million a year. The limit is divided by one plus the number of associated companies, so a company with one associated company is large above £750,000. “Very large” companies, with profits over £20 million (divided in the same way), follow an accelerated schedule.
- Estimated Profits: Businesses must estimate their annual taxable profits at the start of each accounting period.
Instalment Schedule for Large and Very Large Companies (12 Month Period)
For a 12 month accounting period, the four instalments fall on these dates. The example dates are for a period running from 1 April to 31 March.
| Instalment | Large company (profits over £1.5m, up to £20m) | Very large company (profits over £20m) |
| 1st | 6 months and 13 days after the period starts (14 October) | 2 months and 13 days after the period starts (14 June) |
| 2nd | 9 months and 13 days after the period starts (14 January) | 5 months and 13 days after the period starts (14 September) |
| 3rd | 14 days after the period ends (14 April) | 8 months and 13 days after the period starts (14 December) |
| 4th | 3 months and 14 days after the period ends (14 July) | 11 months and 13 days after the period starts (14 March) |
| When payments fall | Two inside the period, two after it | All four inside the period |
The profit limits are divided by one plus the number of associated companies. Shorter accounting periods have different instalment dates and reduced limits.
- Split Payments: The total projected Corporation Tax liability is split into four instalments
- Payment Timing: Instalments are paid at regular three month intervals. For large companies, the first payment is due before the accounting period ends.
- Adjustments Allowed: If profits rise or fall over the year, instalment amounts can be adjusted to reflect fresh projections.
- Interest Charges: HMRC charges interest on late or underpaid instalments, even if the full Corporation Tax is paid later. Interest on underpaid instalments uses its own rate, which is lower than standard late payment interest. It is currently 6.25% and rises to 6.50% from 16 November 2026. It runs from each instalment due date until the normal due date, 9 months and 1 day after the period ends.
- Cash Flow Planning: Accurate forecasting and regular financial evaluations are critical for avoiding cash flow problems and interest charges.
How Do You Calculate Quarterly Instalment Payments for Corporation Tax?
- Estimate annual taxable profits: To calculate QIPs, begin with forecasting your company’s taxable income for the accounting period.
- Apply the Corporation Tax rate: Calculate your projected Corporation Tax liability using the current UK Corporation Tax rate. (19% on profits £0-£50k; marginal 26.5% £50k-£250k; 25% over £250k for FY2026).
- Check QIP thresholds: Confirm that your company falls under the Quarterly Instalment Payments scheme based on profit levels or group membership.
- Divide the tax into instalments: Divide the expected total corporation tax liability into four equal instalments and pay them on the dates in the schedule above.
- Adjust as needed: Review profit predictions on a regular basis and adjust instalments as profits rise or fall during the year.
- Reconcile after year-end: Once the final accounting is completed, pay any shortfalls or request a refund/offset if too much tax was paid.
Who Is Required to Make Quarterly Instalment Payments?
Quarterly Instalment Payments (QIPs) are mandatory for large UK companies. In general, a company must follow the QIP regime if its profits are over £1.5 million in a 12 month accounting period.
For business groups, this limit is divided by one plus the number of associated companies, which means that even smaller individual organisations may be subject to QIPs if they are part of a larger group structure. A company is not required to pay by instalments if it was not large in the previous 12 months and its profits are no more than £10 million (also divided by one plus the number of associated companies). This often applies to new companies in their first accounting period. It does not apply to very large companies.
If a corporation meets these criteria, it must pay Corporation Tax in quarterly installments rather than a single payment at the end of the year.
How to Check If Your Company Is Large
- Work out your profits. Use your company’s profits for the accounting period (taxable profits plus certain exempt distributions, which HMRC calls augmented profits). If the period is shorter than 12 months, the limits are reduced in proportion.
- Count your associated companies. Divide £1.5 million by one plus that number. With two associated companies, the limit is £500,000. Divide the £20 million and £10 million limits in the same way.
- Compare your profits with the limit. Profits over the limit make you a large company. Profits over the divided £20 million figure make you a very large company.
- Check the £10,000 exemption. If your total corporation tax for the period is £10,000 or less, you do not pay by instalments, even if your profits are over the limit.
- Check the first year rule. If you were not large in the previous 12 months and your profits are no more than the divided £10 million figure, you are not required to pay by instalments. This does not apply to very large companies.
What are the benefits of making quarterly installment payments?
- Improved cash flow planning: Paying Corporation Tax in installments distributes the cost across the year, making huge tax bills more manageable.
- Avoids last-minute tax pressure: Regular payments lessen the possibility of receiving a large lump sum payment at the end of the year.
- Better financial visibility: Quarterly payments promote more accurate profit projections and regular financial reviews.
- Reduces interest exposure: Timely and precise installments help to reduce HMRC’s interest rates on unpaid taxes.
- Supports growing businesses: As profits rise, QIPs assist businesses in progressively adjusting to rising tax liabilities.
- Aligns tax with earnings: Paying taxes closer to the time revenues are made results in a more balanced and predictable tax process.
However, QIPs require earlier payments than small companies pay (9 months +1 day post-period), which might not always be a benefit for cash flow.
Special Circumstances and Exceptions
While many large and expanding organisations use Quarterly Instalment Payments (QIPs), there are several cases when the requirements differ or exemptions apply.
- First-year companies: Unless they are part of an existing corporate group, newly created companies usually do not have to make QIPs in their first accounting period.
- Small tax liability: A company does not need to pay by instalments if its total corporation tax liability for the period is £10,000 or less, even if its profits are over £1.5 million.
- Short accounting periods: If a company’s accounting period is less than 12 months, the QIP requirements are proportionally reduced (instalments adjusted).
- Fluctuating profits: Companies with fluctuating revenues can vary payment amounts throughout the year if estimates change.
- Overpayments and underpayments: Overpayments can be refunded or canceled, (or carried forward), while underpayments may result in HMRC interest.
- Very Large Companies (£20m+ profits): Accelerated schedule starts earlier (first payment ~2 months 13 days); you may also be able to use a Group Payment Arrangement (GPA)
Tips for Managing Quarterly Instalment Payments
- Forecast profits accurately: Calculate installments using realistic and periodically updated earnings predictions to avoid under or overpayments.
- Review figures quarterly: Reassess your predicted profits before each installment to ensure that payments reflect your most recent financial status.
- Plan cash flow in advance: Set aside funds throughout the year to guarantee that payments are paid on time without compromising operating capital.
- Adjust instalments when needed: If profits increase or decrease, make adjustments to future payments rather than waiting until the end of the year.
- Monitor interest exposure: Keep track of payment dates to avoid HMRC interest costs for late or insufficient installments.
- Get professional support: Working with a tax professional or accountant can help ensure that QIPs are computed appropriately and maintained efficiently.
FAQs: Frequently Asked Questions
What are Quarterly Instalment Payments (QIPs) and how do they relate to quarterly tax payments for businesses?
Quarterly Instalment Payments (QIPs) are a UK Corporation Tax scheme that requires qualified corporations to pay their estimated tax burden in four instalments over the accounting period rather than in one large sum at year-end. They primarily apply to larger or rapidly developing enterprises and assist match tax payments with when profits are produced, while also requiring accurate profit forecasts to be HMRC compliant.
Who is required to make quarterly payments for taxes?
Large companies, meaning those with profits over £1.5 million a year, must pay corporation tax by quarterly instalments. Very large companies, with profits over £20 million, follow an accelerated schedule. Both limits are divided by one plus the number of associated companies. A company that was not large in the previous 12 months is not required to pay by instalments if its profits are no more than £10 million.
What Happens If You Get It Wrong?
If Quarterly Instalment Payments are late or underpaid, HMRC charges interest on the difference, even if the full Corporation Tax is paid by the normal due date. While this interest is not a penalty, it can raise the total tax bill. Interest on underpaid instalments is charged at a separate rate, currently 6.25% and rising to 6.50% from 16 November 2026, and it runs daily from each instalment due date. If you overpay, HMRC pays interest on the overpayment, at a lower rate.
Can Small Businesses Avoid Quarterly Instalment Payments?
Yes. Most small firms are not required to make Quarterly Instalment Payments because their taxable profits are less than HMRC’s standards. They normally pay Corporation Tax in a single amount after year-end, but expanding businesses should keep track of profits in case QIPs apply in the future.
How Can I Manage Quarterly Instalment Payments Effectively?
Quarterly Instalment Payments can be properly managed by forecasting profits accurately, examining data before each instalment, and adjusting payments as profits change. Planning cash flow ahead of time and seeking professional tax guidance can also help to prevent HMRC interest costs.
What if my company is very large (£20m+ profits)?
Very large companies follow an accelerated QIPs schedule with earlier first payment. The thresholds are divided by one plus the number of associated companies. Very large companies also have the option of a Group Payment Arrangement, so ask HMRC or your adviser whether it suits your group.
Getting Help with Your Quarterly Installment Payments
Managing quarterly instalments Payments can be difficult, especially if revenues rise and predictions fluctuate during the year. Incorrect calculations can cause cash flow problems or unwarranted HMRC interest costs. With the correct help, QIPs may be managed smoothly and confidently.
Working with skilled tax professionals guarantees that your profit estimates are correct, payments are adjusted on schedule, and your Corporation Tax responsibilities are fully compliant. This allows you to focus on running and expanding your business while knowing your quarterly payments are under control and in line with your overall tax strategy.
Disclaimer: Kindly note this blog provides general information and should not be considered financial advice. We recommend consulting a qualified financial advisor for personalised guidance. We are not responsible for any actions taken based on this content.
