HMRC's penalty framework has become more complex over the past five years, with different mechanics applying across the major taxes. Late filing and late payment now operate as separate regimes for most taxes, and the points-based system for periodic returns has reshaped the landscape further. This guide consolidates the rules across Self Assessment, VAT, PAYE and Corporation Tax as they apply in 2026.
Self Assessment
Late filing follows the long-standing pattern:
- 1 day late: £100 fixed penalty, regardless of whether tax is owed.
- 3 months late: daily penalties of £10 per day, capped at £900.
- 6 months late: additional penalty of the greater of £300 or 5% of tax due.
- 12 months late: another £300 or 5%, with higher rates (up to 100%) for deliberate withholding of information.
Late payment for Self Assessment in 2026:
- 30 days late: 5% surcharge on unpaid tax.
- 6 months late: further 5%.
- 12 months late: further 5%.
- Interest accrues daily from the original due date at the prevailing rate (base rate plus 2.5%).
From April 2026, Self Assessment late payment will move closer to the VAT-style harmonised regime under the broader MTD reform programme, with first and second late payment penalties replacing the surcharge structure.
VAT (points and percentages)
VAT operates the points-based regime for late filing:
- One point per late return.
- Threshold for a financial penalty: 4 points (quarterly), 5 (monthly), 2 (annual).
- £200 fixed penalty on reaching the threshold and on each subsequent late return.
For late payment of VAT:
- Days 1 to 15: no penalty if paid or Time to Pay agreed.
- Days 16 to 30: 2% of unpaid VAT.
- Day 31+: further 2% plus second penalty at 4% per annum accruing daily.
Interest accrues from day 1 at base rate plus 2.5%.
PAYE
PAYE has its own quirks:
- Late filing of Real Time Information (RTI) returns: penalties for the second and subsequent late returns in a tax year, scaling from £100 to £400 per occurrence depending on number of employees.
- Late payment: percentage penalties based on the number of late payments in the tax year, rising from 1% to 4% for repeated lateness.
- The first late filing or payment in a tax year is generally not penalised — but reliance on this "freebie" is risky for employers running tight cashflow.
Our payroll service includes automated reminders and direct submission to HMRC to eliminate the most common failure modes.
Corporation Tax
Late filing of the CT600:
- 1 day late: £100.
- 3 months late: £200.
- 6 months late: 10% of unpaid tax (HMRC will estimate if no return filed).
- 12 months late: a further 10% of unpaid tax.
For a company that is repeatedly late (three or more times within four years), the early-stage penalties rise to £500 and £1,000.
Late payment of Corporation Tax attracts interest from day 1 at base rate plus 2.5%. There is no separate surcharge in the way Self Assessment has one — but the late filing penalties listed above use unpaid tax as the calculation base, so paying late doubles up with filing late if the return is also not filed.
Special situations
- Reasonable excuse: a successful claim removes the penalty. Standard accepted excuses include serious illness, bereavement, technology outages on HMRC's side, and natural disasters.
- Time to Pay: agreeing a payment plan before the due date avoids late payment penalties (interest still accrues).
- First-time offence considerations: HMRC's published guidance signals leniency for first failures across most regimes, but this is not statutory.
- Suspension of penalties (Self Assessment careless inaccuracies): HMRC can suspend a penalty for up to two years subject to compliance conditions. We see this used in around 30% of careless inaccuracy cases where the taxpayer engages constructively.
Appeals
You can appeal a penalty by writing to HMRC within 30 days of issue. If the case officer's response is unsatisfactory, you can request an internal review (typically dealt with within 45 days) and then appeal to the First-tier Tribunal. Appeals are free at the tribunal level. We see appeal success rates around 35% in tribunal cases where the taxpayer is represented and has documented evidence.
Interest rates
HMRC's late payment interest is set at Bank of England base rate plus 2.5%. Repayment interest (where HMRC owes you) is base plus 1%. The 1.5% spread is a quietly painful aspect of the system: holding a refund overpayment costs you more than HMRC's borrowing rate would.
Strategy: avoiding penalties in the first place
- Direct debit for VAT — eliminates the late payment risk.
- Calendar all key deadlines across all taxes 60 days ahead, with a 14-day soft alert.
- File even when you cannot pay: filing protects against the filing penalty even where the tax is unpaid.
- Contact HMRC early for Time to Pay if a payment will be missed. The agency is materially more cooperative when contacted in advance.
- Use professional bookkeeping to ensure quarterly and annual returns are ready well before deadline. Our bookkeeping team typically files five working days before the deadline.
If you have already missed a deadline, the cost of acting fast is small compared to the cost of letting penalties compound. Book a 20-minute call for an urgent review, or message via the contact page. We also run an annual compliance health check that maps all your filing and payment obligations across HMRC and Companies House and flags any structural gaps.