Pay your tax early!

Nathan Bowden
Nathan Bowden, Manager for Lovewell Blake

For many companies the idea of paying tax is unpleasant let alone paying tax before it is due, however doing so could mean that you actually receive a payment from the Government by way of interest.

Nathan Bowden, Manager for Lovewell Blake

As much as the high level of interest is currently costing money, this does mean that the level of interest you would earn on paying your Corporation Tax bill early sits at 4.25% (5% for those paying tax by quarterly instalments).

Of course, this is HMRC and nothing is ever as good as it seems so they will only look to pay interest after they know the Corporation Tax amount due (usually once the tax return is submitted) and only 6 months and 13 days after the start of your accounting period.

For example, if your year end was 31 March 2024, HMRC would only pay interest from as early as 13 October 2023. For larger companies paying quarterly instalments, interest may be calculated from the earlier of the first instalment date.

It is also worth noting that due to the high levels of interest, late payment interest charged by HMRC is currently 7.75% (6.25% for those paying tax by quarterly instalments) so we highly recommend paying your liabilities on time.

HMRC’s interest rates are linked to the Bank of England base rate so as this changes you can expect late payment interest rates to be 2.5% above the base rate, and repayment rates to be the base rate minus 1% (with a minimum limit of 0.5%).

Please note Corporation Tax interest is taxable so you will be subject to Corporation Tax on any amounts earned or paid somewhere between 19% and 25% depending on your taxable profits.

In order to qualify for the early repayment and avoid late payment interest, it is important to get your accounts and tax return completed as soon as possible once your year end passes to plan for your future outgoings and look at alternative options for surplus cash.

Our team can help you complete your filings earlier and help plan for your future.


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