Can I Pay My Tax Bill Early?

Yes, you can pay your tax bill well before the deadline, and in lots of cases you can make advance payments towards it all year round (and then sorting out any balances once you send your tax return).

In this article, we dive into the pros and cons of paying Corporation Tax and Income Tax sooner rather than later, explore the benefits of doing so, and some important factors to consider.

Paying your Corporation Tax bill

The amount of Corporation Tax a business owes is calculated when it submits its Company Tax Return.
 

Who pays Corporation Tax and when?

Corporation Tax is paid by limited companies trading in the UK. It also applies to any foreign businesses that have a branch office in the UK.

• A foreign business will only need to pay Corporation Tax on profits it makes through its UK arm
• Businesses based in the UK, on the other hand, must pay tax on all their profits – both UK and worldwide

To work out how much Corporation Tax it owes, the business must calculate its profit and loss figures, and report this information on its Company Tax Return. Any business which receives a ‘notice to deliver a Company Tax Return’ from HMRC must submit one.

• The submission deadline for a Company Tax Return is 12 months after the end of the accounting period which it relates to
• The payment deadline for Corporation Tax is 9 months and one day after the end of the accounting period

The company won’t pay Corporation Tax if it makes a loss or isn’t trading, but you will need to submit a Company Tax Return to HMRC anyway. Otherwise, they won’t know what’s going on, and you may receive a penalty!

Should I pay my Corporation Tax bill early?

Although limited companies have 9 months and one day after the close of the accounting period to settle their Corporation Tax bill, there are some benefits to doing it early. But, like every business decision you face, there are potential drawbacks, too.

The pros of paying Corporation Tax early

The overriding benefit of paying early is to receive credit interest – something which HMRC offer on advance Corporation Tax bill payments. The current rate of credit interest is 0.5%.

HMRC will pay this interest from whenever you pay your bill, up to the standard payment deadline (9 months and one day after the end of the accounting period). They’ll only start paying credit interest from six months and 13 days after the start of the accounting period it relates to though.

Another more general reason for companies paying their tax bill early is simply to get it out the way, and avoid any penalties. However, there are also some things to consider if you do plan to settle your bill early.

The downsides of paying Corporation Tax early

The main factor to take into consideration if you do plan on paying your Corporation Tax bill ahead of time is how this will impact your cash flow. Once you dedicate the cash to paying your tax bill, it’s no longer available for use in other parts of the business.

That’s why it’s so important to pick your timing carefully. With 9 months and one day to pay what you owe, make sure you aren’t leaving yourself short within that period.

If you’re not sure, take a look at your cash flow forecast (yes, we love financial reports!) or ask your accountant. They’ll be able to advise whether paying your Corporation Tax early is a wise move.

It’s also worth noting that while businesses are eligible to receive credit interest if they pay their tax bill early, this interest counts as income and is therefore subject to tax! You’ll need to record it as such on your company accounts.

Paying your Self Assessment income tax bill

You’ll normally need to send a a Self Assessment tax return to report any income you get which hasn’t already been taxed. For example, the wages you get from your employer will normally be taxed by the time they reach you, but sole trader profits or dividends won’t be.

Other forms of income are also subject to tax, such as:

• Some benefits (including some employment benefits)
• Some types of grants
• Most pensions
• Rental income – for example if you’re a landlord
• Untaxed income over £2,500 (e.g., tips)

Income tax allowances

The good news is there are several tax allowances available that can help reduce the amount of tax that you pay.

• Personal Allowance: You won’t pay tax on the first £12,570 of your earnings in a tax year
• Trading Allowance: You won’t need to pay tax (or even tell HMRC about it) if your income from self-employment is less than £1,000
• Dividend Allowance: The tax-free dividend allowance is £500

The really good news is you can use more than one of these allowances in the same year. For instance, you could earn £12,570 in wages and receive a £500 dividend payment, and not pay tax on either.

When do I need to pay my income tax bill?

The deadline to pay your Self Assessment tax bill is 31st January, although the deadline to submit your return depends on how you send it:

• 31st October if you submit a paper form through the post
• 31st January for online returns

For example, a sole trader filing a paper tax return for the 2025/26 tax year would need to submit by 31st October 2026 but they’ll still have until 31st January 2027 to pay any tax they owe by. The deadline for filing your Self Assessment tax return online is 31st January 2027, so you get a bit more time to sort things out!

Making payments on account

Payments on account are an advance payment some taxpayers need to make if they submit a Self Assessment tax return and their bill for Income Tax and Class 4 NI is over £1,000.

It means you’ll need to pay all of your tax bill by the usual deadline, and then by the same deadline make an advance payment of half that amount again towards the following year’s bill. The remaining half of these advance payments is due by 31st July.

How do I know if HMRC have received my tax bill?

You can check HMRC have received your payments by signing into your online tax account. You’ll be able to view a list of payments, along with payment and submission deadlines.

The pros and cons of paying your income tax bill early

You can normally submit your Self Assessment tax return as soon as the tax year it relates to ends, and there are positives and negatives to doing so, but you can also make payments towards it at any time.

The benefits of paying your income tax bill early

• You can avoid the dreaded late payment penalty. The most obvious benefit to paying any tax bill early is that you can be sure to dodge any fines from HMRC.
• You won’t be tempted to spend the money. Settle your tax bill ahead of time, and you won’t spend the money on anything else pre-deadline.
• More time for questions. As the deadline approaches, HMRC are notoriously busy. So, if you think you might need some support from HMRC, it pays to catch them at a much quieter time.
• You’ll receive any tax refunds sooner. If you’ve overpaid tax during the year, you’ll get your refund sooner if you file earlier.
• You won’t start the new calendar year with a hefty bill. Leaving your tax bill payment until the January 31st deadline means you’ll have it looming over you after the festive period. For that simple reason, some individuals prefer to get it out of the way beforehand.

The disadvantages of paying income tax early

When it comes to paying your income tax bill, there aren’t many cons to ticking it off your to-do list early. However, here are a few things you might wish to consider:

• Don’t rush! Once you read the benefits, it can be tempting to get your tax return and bill sorted as soon as possible. That said, it’s crucial not to rush the process as you could make unnecessary mistakes and miss potential tax relief opportunities.
• Consult your cash flow first. If you’re planning on tying up cash with an early payment, it’s essential to make sure that you can afford it. If there’s something that needs investment more urgently before the payment deadline, you might need to revisit your priorities.

Tax can be complex – that’s why it’s so helpful to chat with someone who knows their stuff. Find out more about our online accounting services for businesses by calling 020 3355 4047 or get an instant quote online.