Business cash is king…but there are options to make it work for you
16 October 2026Cash flow is of course the lifeblood of business and keeping this under control, accessible and hopefully earning interest is part of a business owner’s remit (as if there is not enough to do already!). Keeping in contact with your accountant to look at forward cost positions is usually vital in being in control of cash, whilst also extracting the most value from any cash held within the business. There are currently some reasonable business deposit savings rates available to help earn some interest, and business owners should have a hunt around for suitable options. However, all may not be lost (in many cases) if you pay your Corporation Tax early.
For many small limited companies, Corporation Tax is normally due nine months and one day after the end of your company's accounting period. For many who have a trading year end of 31 March, this might mean the tax cost falls between the Christmas and New Year period, with some paying before Christmas to ensure all is received in good time and to avoid any late payment costs.
You might have found that you receive a small amount of interest for paying your Corporation Tax early and it is this point that I want to focus on.
We have a Budget on 28 October, and many await the outcome of the announcements. Legislation can change and may well evolve after this time.
It should also be noted that we have the next Bank of England (BoE) base rate decision on 05 November. You will be aware that with the current rate of inflation running at around 3.1% (CPI / August – target remains 2.0%), there is pressure on the BoE to increase base rates, which in turn may see deposit interest rates rise.
Around this time, savings rates may vary (likely upwards / not guaranteed), and there are currently some competitive business savings rates available for those companies holding cash, perhaps ready to pay their Corporation Tax bill, whilst keeping the flexibility of access to cash.
What’s the current position?
Based on current legislation, HMRC credit/repayment interest is typically set at the Bank of England base rate minus 1%, noting that there is a minimum ‘floor’ of 0.5%. With the current base rate set at 3.75%, this means a current rate of interest paid on early repayment of 2.75%. As you might expect, it should be noted that any interest you receive from HMRC is classed as taxable income and must be included in your company accounts.
Interest is paid from the date you make the early payment up to the normal due date of the tax. However, please bear in mind that HMRC will only start paying credit interest six months and 13 days after the start of your accounting period. Therefore, any payment made before that date will not earn interest from the start and you might want to plan accordingly.
As you might expect, the rules are quite exact so please compare alternative savings terms and also check in with your accountant to see what might work for you and your vital business cashflow.
More information can be found here: https://www.gov.uk/government/publications/rates-and-allowances-hmrc-interest-rates-for-late-and-early-payments/rates-and-allowances-hmrc-interest-rates
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Is it worthwhile?
Looking at savings options for your business cash is important, especially with some reasonable savings options currently available. As suggested, paying Corporation Tax early needs to be considered carefully from a business cash flow perspective, and perhaps only when surplus. Once paid, in part or in whole, you won’t get it back. A business with no access to cash is not likely to run well, so check your position carefully, think / plan forward, and talk to your accountants about the options available to ensure your cash is working nearly as hard as you are.
No individual advice is contained within this blog.
Keith Churchouse FPFS
Director
CFP Chartered FCSI
Chartered Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.
