HMRC penalties in the UK apply when you file or pay tax late, submit inaccurate information, or fail to tell HMRC about a new tax liability, and the amount depends on the tax involved, how late or serious the breach is, and whether HMRC sees it as careless or deliberate. For UK small business owners, freelancers, limited company directors, and accountants managing compliance, these rules matter because penalties and interest can build quickly even where little or no tax is due. For Self Assessment in 2025/26, a return filed just one day late triggers an automatic £100 penalty, even if no tax is owed.
Quick answers
- Late filing penalties for Self Assessment: The penalty structure for late Self Assessment tax returns in 2025/26 is as follows.
- Late payment penalties for Self Assessment: Late payment penalties are separate from filing penalties and apply to any unpaid tax after the 31 January deadline.
- Late payment penalties for VAT: The new VAT penalty regime, which also changed in April 2023 and was further updated in April 2025, works differently to the Self Assessment system.
- Late filing penalties for Corporation Tax: Corporation Tax returns must be filed within 12 months of the end of the accounting period.
- Inaccuracy penalties: If a tax return contains errors that result in underpaid tax, HMRC can charge an inaccuracy penalty based on the seriousness of the mistake and the extra tax or potential lost revenue caused by the error.
- Can HMRC cancel a penalty: HMRC can cancel or reduce a penalty if you have a reasonable excuse, but that depends on your particular circumstances.
This guide explains the main HMRC penalty rules across Self Assessment late filing and late payment, VAT, Corporation Tax, inaccuracies, and failure-to-notify cases, along with practical ways to reduce or challenge a penalty. Important from April 2026: A new points-based penalty system applies to MTD ITSA taxpayers with income over £50,000. Under this system, each missed quarterly submission earns one penalty point. A financial penalty of £200 is triggered when four points accumulate. The existing monetary system continues for all other taxpayers.
Late filing penalties for Self Assessment
The penalty structure for late Self Assessment tax returns in 2025/26 is as follows. Penalties escalate the longer a return remains outstanding.
| Delay | Penalty | Notes |
|---|---|---|
| 1 day late | £100 | Automatic. Applies even if no tax is owed. |
| 3 months late | £10 per day (up to 90 days) | Maximum additional £900 in daily charges. |
| 6 months late | Greater of £300 or 5% of tax owed | Added on top of earlier penalties. |
| 12 months late | Greater of £300 or 5% of tax owed | Can rise to 100% of tax due in deliberate cases. |
For a taxpayer with a moderately sized tax bill who files 12 months late, total filing penalties can reach £1,600 before interest and payment penalties are included.
Late payment penalties for Self Assessment
Late payment penalties are separate from filing penalties and apply to any unpaid tax after the 31 January deadline. The late payment regime tightened in April 2025.
| Delay | Penalty |
|---|---|
| 1 to 14 days | No penalty. Interest accrues from day 1. |
| 15 to 30 days | 3% of unpaid tax |
| 31 days | Further 3% (total 6% of unpaid tax) |
| Day 31 onwards | Additional 10% per annum, calculated daily on outstanding balance |
Late payment interest is charged separately on top of penalties. As of May 2025, the interest rate is 8.25% per annum (Bank of England base rate plus 4%). This is calculated daily on the outstanding balance until payment is made in full.
Late payment penalties for VAT
The new VAT penalty regime, which also changed in April 2023 and was further updated in April 2025, works differently to the Self Assessment system. There is no penalty for the first late payment, provided it is paid within 30 days.
| Delay | Penalty |
|---|---|
| 1 to 14 days | No penalty |
| 15 to 30 days | 3% of VAT owed at day 15 |
| 30 days | Additional 3% of VAT owed at day 30 (total 6%) |
| Day 31 onwards | 10% per annum daily rate on outstanding balance |
Late filing penalties for Corporation Tax
Corporation Tax returns must be filed within 12 months of the end of the accounting period. Filing late attracts a separate set of penalties.
| Delay | Penalty |
|---|---|
| 1 day late | £100 |
| 3 months late | Additional £100 |
| 6 months late | 10% of unpaid Corporation Tax (HMRC estimate) |
| 12 months late | Further 10% of unpaid Corporation Tax |
The government confirmed in the Autumn Budget 2025 that it would double the penalty for submitting a Corporation Tax return late, effective from 1 April 2026. The first-stage penalty will increase from £100 to £200.
Inaccuracy penalties
If a tax return contains errors that result in underpaid tax, HMRC can charge an inaccuracy penalty based on the seriousness of the mistake and the extra tax or potential lost revenue caused by the error. The potential lost revenue is the amount of tax HMRC would have missed without correcting the error, and it can also include a repayment that is no longer due back to the taxpayer.
| Type of inaccuracy | Penalty range | Disclosure type |
|---|---|---|
| Careless | Up to 30% | Lower if unprompted disclosure |
| Deliberate | Up to 70% | Reduced for prompted disclosure |
| Deliberate and concealed | Up to 100% | Maximum for deliberate concealment |
Unprompted disclosures attract significantly lower penalty rates and mean telling HMRC before it starts an enquiry or gives notice of an inspection. If HMRC identifies the error first, the rates are higher. HMRC issues a penalty explanation letter with each penalty charged.
For a careless error, a penalty arises where you did not take reasonable care, though you can ask for a suspension agreement so the penalty is cancelled if the conditions are met during the suspension period.
Failure to notify penalties
Failure to notify HMRC of a new taxable source, such as becoming self-employed, receiving rental income, missing Self Assessment registration for a tax return, owing capital gains tax on a taxable disposal, or having undeclared offshore income, can trigger a failure to notify penalty, sometimes called a notify penalty, on top of the tax owed. It is usually based on the tax unpaid by the due date and can be reduced if you disclose the issue and cooperate with HMRC. Deliberately withholding information can lead to higher penalties.
The new points-based system from April 2026
From 6 April 2026, taxpayers who join Making Tax Digital for Income Tax Self Assessment (MTD ITSA) with income above £50,000 will move to a points-based penalty system for late submission of a Self Assessment tax return and quarterly updates.
Each missed quarterly update earns one penalty point.
HMRC issues a financial penalty of £200 once four points are reached.
Points reset to zero after 12 months of compliance.
A soft landing applies for the first year: no penalty points are issued for the first four missed quarterly updates in 2026/27.
The annual final declaration still carries normal penalties if missed.
The threshold will extend to incomes above £30,000 from April 2027, and above £20,000 from April 2028.
Can HMRC cancel a penalty?
HMRC can cancel or reduce a penalty if you have a reasonable excuse, but that depends on your particular circumstances. Acceptable reasons include serious illness, a bereavement immediately before the deadline, or a failure in HMRC's own systems. Not acceptable as excuses are relying on an accountant who failed to file on time, not having the money to pay, simply forgetting the deadline, or claiming you did not understand your tax obligations.
If a taxpayer was seriously ill, a case may be stronger where another person fails to handle their tax obligations correctly.
You have 30 days from the date on the penalty notice to appeal. You can also ask HMRC for an internal review of the tax decision before appealing further. For guidance on the appeals process, see our how to appeal an HMRC penalty guide. If the matter is not resolved, it can be taken to the First-tier Tribunal or tax tribunal.
How to reduce the impact of penalties
File your return as early as possible to avoid penalties, even if you cannot pay the tax immediately.
If you cannot pay by the deadline, contact HMRC and set up a Time to Pay arrangement. See how to arrange a payment plan. This may help prevent additional penalties, although interest can still accrue on the outstanding amount.
Make voluntary disclosure of inaccuracies before HMRC raises an enquiry. This attracts lower penalty rates.
Keep accurate records so that compliance checks can be resolved quickly and with minimal penalty exposure.