HMRC issues penalties for:

• Late payment of Self Assessment tax, VAT, and Corporation Tax
• Late filing of returns
• Mistakes on your tax return

You can also be charged interest on late payment if you miss your tax bill deadline.

---

Changes to Late Payment Penalties (Effective 1 April 2025)

Here’s how much the penalties have changed:

Payment Timing	Previous Penalty	Current Penalty (From 1 April 2025)
Within 15 days	No penalty	No penalty
16–30 days late	2% of tax owed at day 15	3% of tax owed at day 15
31+ days late	2% at day 15 + 2% at day 30 + daily 4%/year	3% at day 15 + 3% at day 30 + daily 10%/year

---

Why Might You Get an HMRC Penalty?

Common reasons include:

• Inaccuracies or errors on your return
• Filing a late tax return
• Paying your tax bill late
• Failing to keep proper records

---

Avoiding HMRC Penalties

• Register for Self Assessment by 5 October
• File your return:
  • Paper: by 31 October
  • Online: by 31 January
• Pay your bill: by 31 January
• You can set up a payment plan, but you’ll be charged interest.

---

Key Types of HMRC Penalties

Late Filing Penalty (Self-Assessment)

How Late?	Penalty
1 day	£100
3 months	£10/day up to 90 days (max £900) + £100 initial fine
6 months	Higher of £300 or 5% of tax due + all previous penalties
12 months	Additional £300 or 5% of tax due (up to 100% in serious cases)

HMRC moved to a points-based system for VAT from April 2023. This will apply to Self Assessment from April 2026 or 2027 depending on your income.

---

Late Payment Interest and Penalties (Self Assessment)

Penalties apply if you pay late. You can estimate your penalty using the HMRC late payment penalty calculator.

New penalties apply for users of Making Tax Digital, but you won’t be fined until your records are migrated and you’ve tested the new system.

---

Corporation Tax: Companies House Late Filing Penalties

How Late?	Penalty
1 day	£100
3 months	Additional £100
6 months	Estimated tax + 10% of unpaid tax
12 months	Additional 10% of unpaid tax

---

VAT Late Payment Penalty (From 1 April 2025)

Overdue Days	Penalty Details
15–30 days	First late payment penalty: 3% of VAT owed at day 15
31+ days	Second penalty: 3% of VAT owed at day 30 + daily 10%/year interest

If you’re struggling to pay, consider using HMRC’s Time to Pay service.

---

HMRC Penalties for Undeclared Income

This is known as a ‘failure to notify’ penalty. Examples include:

• Not declaring a new source of income
• Failing to report a capital gain from selling an asset

Penalties depend on the unpaid tax. You may reduce the penalty by informing HMRC voluntarily.

---

HMRC Penalties for Inaccuracies

If you make a mistake, you can amend your return within the correction window. Penalties apply for:

• Careless errors
• Deliberate concealment

---

Using an HMRC Penalty Calculator

You can estimate your penalty for late filing or payment using HMRC’s penalty calculator.

---

Reasonable Excuses for Filing Late

You may appeal a penalty if you had a valid reason. HMRC accepts:

• Bereavement of a close relative
• Serious or life-threatening illness
• Software or system failure near the deadline
• HMRC technical issues
• Fire, flood, or theft
• Disability-related delays

Each case is reviewed individually. Evidence of reasonable care is required.

---

How to Appeal an HMRC Penalty

Self Assessment

1. File your return or declare you don’t need to.
2. Appeal via the online portal (for penalties from 2016–17 onward)
3. For earlier years or postal appeals, use form SA370

Corporation Tax or VAT

• Use your HMRC online account
• Specific forms are available for reasons such as software failure

PAYE Penalties

• Appeal through the PAYE for Employers portal on HMRC’s website.

---

What Happens After You Appeal?

• An independent HMRC officer reviews your appeal.
• For VAT or excise duty, you can appeal to the Tax Tribunal.
• If you disagree with HMRC’s decision, you can take it further:

Options:

• Request a review by HMRC
• Appeal to the Tax Tribunal
• Apply for Alternative Dispute Resolution (ADR) if communication has broken down

---

Alternative Dispute Resolution (ADR)

ADR uses an impartial mediator to help resolve disputes with HMRC. It’s useful when:

• You dispute the facts
• Communication with HMRC has broken down

Note: ADR is not available for fixed penalties or payment deadline disputes.

---

Article Courtesy: Simply Business