Paying Corp Tax Early? Navigate CRA & HMRC Interest Rules in 2025

How overpayments earn—or erode—interest on both sides of the Atlantic.

Overpay your corporate tax and you might think you’re getting a free loan—think again.

CRA (Canada Revenue Agency) and HMRC (UK’s His Majesty’s Revenue and Customs) both tack on or hand out interest, but at very different rates and timings.

Here’s the side-by-side cheat sheet to make the smartest move before your next instalment.

1. Why Early Payments Matter (and When They Don’t)

• Avoid instalment interest: Under-paying Canada’s quarterly remittances triggers an 8% p.a. instalment interest charge, compounded daily.
  
  

• Lock in refund interest: Over-pays with CRA earn 4% p.a., compounded daily, from the date of overpayment until refund or application.
  
  

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2. CRA’s Overpayment (Refund) Interest Rules

• Rate: 4% annually on corporate overpayments for Q1 2025
  
  

• Timing: Interest accrues daily from the later of:
  
  

  • The day after your remittance was due, or
    
    

  • The day you actually over-paid.
    
    

• Application: Automatically applied when CRA refunds or applies the credit—no need to file a request.
  
  

Related: CRA corporate tax payment due dates

3. CRA’s Instalment & Arrears Interest Charges

• Under-payments: 8% p.a., compounded daily, on overdue or insufficient instalments
  

• Grace: No “interest-free” buffer; every dollar late costs you
  

• Remedy: Adjust your next instalment by the shortfall plus accrued interest—CRA calculates it for you
  
  

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4. HMRC’s Repayment vs. Late-Payment Rates

As of 28 May 2025, the applicable interest rates are:

• Late-payment interest is 8.25%.

• Repayment interest is 3.25%.

• Start date: Repayment interest kicks in 6 months + 1 day after your accounting period’s first day
  

• Overlap: If you overpay before that window, you won’t earn interest until that threshold hits
  
  

Reference: HMRC interest rates for corporation tax

5. Corporation-Tax-Specific HMRC Restitution Interest

• Quarterly instalment over-pays (QIPs) earn Bank of England base rate minus 0.25% (≈ 4.25% today)
  

• Other over-payments earn BoE base rate minus 1% (≈ 3.5% today)
  
  

  Strategy: Time your over-payment to align with instalment deadlines if you want the higher “QIP” rate
  

Final Tips for 2025 Tax Optimization

Don’t assume all early payments help—timing and type of overpayment matter

Use CRA’s My Business Account and HMRC’s CT online portal to track payment applications and interest credited

Overpaid corporate taxes can help with cash flow smoothing—but only if done strategically

Don’t ignore e-commerce’s £10k digital threshold—see your obligations laid out!