January Corporation Tax bills: the pattern

Every January, the same thing happens. Limited companies with a 31 March year-end have a Corporation Tax bill due 1 January (nine months and a day after the period end). It lands in the worst possible week of the trading calendar. Post-Christmas, pre-payday for many staff, after a December that for most consumer-facing businesses involved bonuses, an extra rent payment, and a quarter of the year's electricity bill arriving in one go.

Why this keeps happening

The 31 March year-end is the most common in UK private business. It aligns with the personal tax year, it suits seasonal businesses that close winter trading, and it is the default that accountants recommend more often than not. The result is that several hundred thousand UK limited companies share a CT due date in early January.

For a profitable year, the CT bill is material. A business that did £400k of taxable profit at the small profits rate has a £76k liability landing on 1 January. The same business in a strong year with £800k of profit has a £200k bill at the main rate (after marginal relief eases the transition). Neither sum is the kind of cheque most owner-managed businesses keep ready in the current account through Christmas.

What we see across the broker book

December and the first half of January are our highest-volume weeks for CT loan enquiries. The pattern is consistent year to year: accountants finalise the CT600 in October or November, the bill lands in the FD's inbox in December, and by week two of January the cash position is clearer than it was a fortnight earlier. The decision to fund usually crystallises between 5 and 12 January.

Most of these bills go onto a 9 or 12-month loan, repaid against the spring trading season for consumer-facing businesses or against the summer billing cycle for B2B firms. The point is that the cash the business has earned is not yet in the bank, and the gap is fundable. Lender appetite for established limited companies on clean filed accounts is good, pricing is competitive, and decisions move quickly.

The funding shapes that actually fix it

For most cases we see in January, three options work in declining order of preference:

• A 9 or 12-month CT loan against the bill, settled direct to HMRC. Predictable monthly repayment, no impact on bank facility, decision quickly, no personal guarantees on most established cases below around £250k.
• A Time to Pay arrangement with HMRC. Free of finance cost, but interest still accrues at 8.25%, and a TTP shows on the compliance record, which can affect future borrowing if it is missed or extended. Best for shorter gaps and smaller amounts.
• A flexible business overdraft or revolving facility, used short-term. Works if you already have headroom; less efficient if you are taking on new bank debt cold for the purpose, since banks tend to be slower than specialist lenders on a time-bound HMRC bill.

The take

January CT is not a sign of distress; it is a calendar artefact of having a 31 March year-end and a profitable year. Plan for it from October. If you know in advance that the cash will not be there on 1 January, getting the decision lined up in November buys you certainty and often sharper pricing than scrambling on 28 December. The bill is not going away; the window for sensible funding is.