New late payment penalties have been introduced for VAT and income tax Self Assessment following the 2025 Spring statement.
Chancellor Rachel Reeves revealed plans to increase late payment charges for taxpayers signed up to Making Tax Digital from April 2025.
This table highlights how much late payment penalties have increased:
| Tax payment | Previous penalties | New penalties (From 1 April 2025) |
| Within 15 days | No penalty | No penalty |
| Within 16 to 30 days | 2 per cent of tax owed at day 15 | 3 per cent of tax owed at day 15 |
| 31 days or more | A first and second late payment penalty applies (2 per cent of tax owed at day 15 plus 2 per cent of tax owed at day 30).
From day 31, penalties are calculated at a daily rate of 4 per cent a year on the balance due. |
A first and second late payment penalty applies (3 per cent of tax owed at day 15 plus 3 per cent of tax owed at day 30).
From day 31, penalties are calculated at a daily rate of 10 per cent a year on the balance due. |
Why might you get an HMRC tax penalty?
It’s important to understand the common mistakes that can lead to a penalty. Reasons HMRC might issue a penalty include:
- inaccuracies or errors on your return
- filing a late tax return
- late payment
- failing to keep adequate records
Key types of HMRC penalties
There are a range of different types of penalties, based on what kind of tax you’re supposed to be paying, how much, and how late you are.
You can calculate how much HMRC interest, tax, and penalties you might have to pay using this interactive form.
HMRC late filing penalty
If you miss the tax filing deadline then you may have to pay a penalty.
|
How long since the deadline? |
Penalty |
|---|---|
|
One day |
£100 |
|
Three months |
£10 for each additional day, up to 90 days – plus the previous penalty |
|
Six months |
Whichever is higher of £300 or 5 per cent of the tax you owe – plus the previous penalties |
|
12 months |
An additional £300 or 5 per cent of the tax you owe – or, in some circumstances, 100 per cent of the tax you owe |
It’s worth noting that the way that HMRC applies penalties changed to a points-based system in April 2023. This change only applies to VAT customers initially, but will apply to some Self Assessment taxpayers from April 2026 or 2027 (depending on how much your annual income is from your property or business).
Self Assessment
HMRC issues Self Assessment late payment penalties, plus interest, if you pay your tax bill late. If you miss a deadline you must contact HMRC as soon as possible.
The UK government website has a tool that helps you estimate your penalty for late payment, including the likely HMRC interest on late payment.
If you’ve signed up to Making Tax Digital for Self Assessment early, then new late submission penalties and late payment penalties will apply to you. But you won’t be charged a penalty via Making Tax Digital until you’ve had the chance to test the service and HMRC has migrated your records to the new system.
Corporation Tax
If you’re a limited company, your corporation tax return is due 12 months after the end of the accounting period it covers, and the deadline to pay your corporation tax bill is usually nine months and one day after the end of your accounting period.
This table shows the corporation tax late filing penalties, based on how long after the deadline you file:
|
How long since the deadline? |
Penalty |
|---|---|
|
One day |
£100 |
|
Three months |
Another £100 |
|
Six months |
HMRC’s estimate of your corporation tax bill plus 10 per cent of the unpaid tax |
|
12 months |
Another 10 per cent of any unpaid tax |
VAT
Businesses pay a penalty for paying their VAT bill late.
- 15 to 30 days overdue – a first late payment penalty is due
- 31 days overdue – first late payment and second late payment penalty is due, plus a daily rate for every day the tax bill remains unpaid
These late payment penalties for VAT apply from 1 April 2025.
How will late payment penalties work for businesses that don’t pay VAT on time?
The first late payment penalty is three per cent on the VAT owed at day 15. This is the penalty for VAT between 16 and 30 days overdue.
The second late payment penalty is calculated at three per cent of VAT outstanding at day 30, and then a daily rate of 10 per cent a year on the VAT balance left to pay.
It’s possible to use HMRC’s Time to Pay service if you’re struggling to pay on time.
Undeclared income
If you’ve failed to declare income that you owe tax on, HMRC can issue penalties and charge interest on the amount you owe. This is called a ‘failure to notify’ penalty.
For example, this could be related to a new source of taxable income or you sell an asset and fail to declare the capital gain that you’ll owe tax on.
The penalty will depend on the amount of unpaid tax as a result of failure to notify. You may be able to reduce a penalty if you tell HMRC about the failure.
Inaccuracies: what happens if you make a mistake on your tax return?
If you make a mistake on your tax return, it’s possible to amend it after filing (within a certain time frame). However HMRC does issue penalties for inaccuracies as a result of carelessness, or if you try to conceal your tax liability deliberately.