HMRC Penalties Guide (2026/27)

A complete reference to UK HMRC penalty regimes for 2026/27 - covering Self Assessment, VAT, PAYE, Corporation Tax, Schedule 24 inaccuracy penalties, information-notice failures, reasonable-excuse case law, the statutory review and tribunal appeal process, and the new points-based regime arriving with Making Tax Digital. Every figure traces back to a primary gov.uk source. This page is editorial guidance, not tax advice - check the original HMRC notice on your case and, for anything material, consult a Chartered Tax Adviser or accountant.

1. Overview: how HMRC penalties work

HMRC describes its penalty system as designed to encourage compliance rather than to punish. In practice the regimes share three structural ideas. First, automatic fixed penalties (£100 for missing a Self Assessment deadline, £100 for missing a Corporation Tax filing deadline) catch every late filer regardless of size or sophistication, with no discretion at the automated stage. Second, escalating surcharges and daily penalties exist to make prolonged non-compliance progressively more expensive than the underlying tax. Third, behaviour-based penalties for inaccuracies (Schedule 24 Finance Act 2007) and failure to notify (Schedule 41) reward voluntary disclosure and cooperation while penalising deliberate concealment severely.

All of the above is overlaid by a statutory appeal framework - free internal review followed by First-tier Tribunal - so any penalty notice you receive is not the last word. The HMRC penalties overview for agents and advisers is the canonical summary, updated regularly. The practical reality is that most penalties are upheld at automatic-issue stage because most are well-founded - but a meaningful minority are reduced or cancelled at statutory review or tribunal, often on reasonable-excuse grounds. Knowing the regime is the difference between paying without question and identifying the route to challenge.

The figures throughout this page are current as of 22 May 2026 and apply to the 2026/27 tax year and the 2026 calendar year for VAT, Corporation Tax and PAYE. Anything more than a year old should be cross-checked against the relevant gov.uk page - penalty regimes have been changing more frequently than headline tax rates, with the VAT switch in 2023 and the MTD ITSA migration starting April 2026.

2. Self Assessment late filing

The Self Assessment late-filing penalty regime has four escalating layers, set out in Schedule 55 Finance Act 2009 and summarised on the gov.uk Self Assessment penalties page. They run in parallel - hitting a later threshold does not replace the earlier ones, the totals compound.

Trigger	Penalty
1 day late (any time after deadline)	£100 fixed
3 months late: daily penalties begin	£10/day, up to £900 (max 90 days)
6 months late	£300 or 5% of tax due (greater)
12 months late	£300 or 5% of tax due (greater)

The £100 initial penalty applies even if you owe no tax for the year - it is a fixed amount under paragraph 3 of Schedule 55, not a percentage of tax due. The daily £10 penalty only starts three months after the deadline, so for the standard 31 January 2027 online deadline the £10/day clock starts on 1 May 2027 and stops once the return is filed or once 90 days have elapsed (whichever comes first), reaching £900 on 29 July 2027.

The 6-month and 12-month tax-geared surcharges are the £300 or 5%-of-tax-owed elements. They apply on a strict liability basis: missing the date triggers them automatically, with the £300 floor catching returns where the tax owed is small. For a taxpayer with significant tax owed (say £20,000 of self-employed profits and no payments on account), each 5% surcharge is £1,000. The 12-month penalty can rise to 70% or 100% of tax due where HMRC determines the late filing was deliberate or deliberate-and-concealed (paragraph 6 of Schedule 55), aligning with the inaccuracy bands discussed below.

Worked example. A sole trader misses the 31 January 2027 online deadline, files on 5 February 2028 (one year and 5 days late) with £12,000 of tax owed. Penalties: £100 (initial) + £900 (daily, full cap) + £600 (5% of £12,000 at 6 months) + £600 (5% at 12 months) = £2,200 in pure filing penalties, before any late-payment penalties or interest. The paper deadline (31 October 2026 for the 2025/26 return) applies only to paper returns: if you miss it, you can still file online by 31 January 2027 without a late-filing penalty (see the gov.uk deadlines page). See our self-employed calculator to model the underlying tax that would be at stake.

Reasonable excuse is the only statutory defence to these penalties (see section 10). HMRC publish the full Self Assessment penalty schedule with appeal links. Penalties retrieved on 2026-05-22.

3. Self Assessment late payment

Late payment is a separate regime from late filing. Even if you file the return on time, missing the payment deadline triggers its own escalator. Set out in Schedule 56 Finance Act 2009 and governed alongside HMRC's late-payment interest publication.

Days late	Penalty
30 days late	5% of unpaid tax
6 months late	further 5% of unpaid tax
12 months late	further 5% of unpaid tax

Daily interest runs alongside, on top of the three 5% surcharges. The current statutory formula is Bank of England base rate plus 4 percentage points (raised from base + 2.5% on 6 April 2025 by Autumn Budget 2024 / Finance Act 2025; regulations under Section 103 Finance Act 2009). With Bank Rate at 3.75%, the late-payment interest rate is 7.75% per annum from 9 January 2026, charged daily from the day after the payment due date until the tax is paid. Interest accrues even during agreed Time-to-Pay arrangements - it is penalties that pause, not interest.

Worked example. A taxpayer owes £8,000 in balancing payment due 31 January 2027, pays in full on 20 August 2027 (just over 6 months late). Penalties: £400 at 30 days + £400 at 6 months = £800. Interest at 7.75% on £8,000 for approximately 200 days = £340. Total cost above the tax: £1,140. Had the same taxpayer also filed late, the filing penalties from section 2 would stack on top.

Time to Pay (TTP). The escape valve. For Self Assessment debts up to £30,000 you can set up TTP within 60 days of the 31 January deadline through your gov.uk Self Assessment account; over £30,000 needs a phone call to HMRC Debt Management on 0300 200 3835. An agreed TTP suspends the 5% surcharges for periods within the plan - but interest still runs. The plan typically runs up to 12 months, though longer arrangements are possible for hardship cases. Default on the plan and the suspended penalties become payable retrospectively. TTP does not affect the filing penalty - file first, then call.

Payments on account use the same late-payment regime: missing the 31 July second payment on account triggers the same 30-day, 6-month and 12-month 5% surcharges (each calculated on the unpaid portion of the payment on account, not on the eventual annual liability). Penalties retrieved on 2026-05-22.

4. VAT - points-based system (from January 2023)

VAT switched from the old default-surcharge regime to a points-based system for return periods starting on or after 1 January 2023. The full schedule sits in the VAT penalties and interest collection on gov.uk. Two separate sub-regimes apply: one for late submission of the return, one for late payment of the VAT due.

Late submission - the points

Each VAT return missed earns one point. Points accumulate until you hit a threshold determined by your return frequency. Hitting threshold triggers a £200 fixed penalty. After that, every further missed return triggers an additional £200 penalty until you reset the points by submitting on time for a period of compliance.

Return frequency	Points threshold	Compliance period
Annual	2 points	24 months
Quarterly	4 points	12 months
Monthly	5 points	6 months

Points expire individually after two years if you stay below threshold. Once at threshold, all points reset to zero only after the full compliance period of on-time returns plus submission of all overdue returns from the prior two years. The practical effect: occasional first-time late filers face no penalty (just a point), while persistent offenders face £200 every quarter for as long as they stay non-compliant.

Late payment of VAT

The late-payment regime is separate and escalating:

• Up to 15 days late - no penalty if you pay or arrange Time to Pay within 15 days.
• 16 to 30 days late - 3% of the unpaid VAT at day 15.
• 31+ days late - additional 3% of what was outstanding at day 30 (cumulative 6%), plus a second daily penalty calculated at 10% per annum on the outstanding balance.

Late-payment interest separately runs at Bank of England base rate plus 4 percentage points from day 1 of lateness on top of the 10% second-stage daily penalty rate. The increased percentages (from 2%/2%/4% to 3%/3%/10%) took effect from 1 April 2025 and remain in force for 2026/27. For VAT-registered businesses the practical reminder is that the 15-day window gives a genuine grace period that did not exist under the old surcharge system. Model your VAT position with the VAT calculator. Source: gov.uk/guidance/how-late-payment-penalties-work-if-you-pay-vat-late, retrieved 2026-05-23.

5. PAYE late filing

PAYE penalties apply to Real Time Information (RTI) reporting failures - missing the Full Payment Submission (FPS) on or before the date employees are paid, or missing the Employer Payment Summary (EPS). The HMRC guidance at PAYE FPS/EPS information messages sets out the regime. Late-filing penalties operate on a per-month basis with bands by employer size.

Employer size	Monthly penalty
1 to 9 employees	£100
10 to 49 employees	£200
50 to 249 employees	£300
250+ employees	£400

HMRC operate a 3-day soft-touch concession: an FPS up to 3 days late attracts only a warning, not a penalty (this is published policy, not legislation, and can be withdrawn for persistent offenders). The first late submission in a tax year is also excused if the employer has no history of lateness. Beyond that, every month with a late FPS attracts the band penalty.

PAYE late payment. Separate from filing penalties. PAYE is due to HMRC by the 22nd of the following month (electronic) or the 19th (cheque). After the first late payment in a year, subsequent late payments attract escalating penalties: 1% of the late amount for 2-4 defaults, 2% for 5-7 defaults, 3% for 8-10 defaults, 4% for 11+ defaults in the same year. On top, after 6 months of non-payment, a 5% additional penalty applies; another 5% at 12 months.

Construction Industry Scheme (CIS) returns operate under a similar but distinct regime: £100 fixed for 1 day late, £200 at 2 months, £300 or 5% of CIS deductions at 6 months, another £300 or 5% at 12 months, with the deliberate / concealed escalator applying to repeated failures. Model CIS deductions with the CIS calculator. Penalties retrieved on 2026-05-22.

6. Corporation Tax penalties

Corporation Tax returns (CT600) are due 12 months after the accounting period end. Penalties for late filing run on a fixed-then-escalating schedule, with an additional escalator for repeat offending companies.

Trigger	Penalty
1 day late	£100 fixed
3 months late	additional £100 (£200 total)
6 months late	10% of estimated unpaid CT
12 months late	additional 10% of unpaid CT

Companies that file late three times in a row have the fixed penalties raised from £100 / £100 to £500 / £500 (so £1,000 flat-rate before the percentage surcharges kick in). The 6 and 12 month percentage penalties are computed by HMRC against their best estimate of CT due if the return is still missing then revised once the actual return is filed. This produces a compelling incentive to file even if you cannot pay - the filing penalty itself is fixed, the percentage surcharges flow from the underlying tax liability.

Corporation Tax late-payment interest runs at base rate plus 4% (same formula as Self Assessment, raised from base + 2.5% on 6 April 2025 per Autumn Budget 2024) from the payment due date (9 months and 1 day after period-end for small companies, with quarterly instalments for large companies). Model your CT bill including potential late charges with the Corporation Tax calculator. Penalties retrieved on 2026-05-22.

7. Inaccuracy penalties - Schedule 24 FA 2007

The biggest behaviour-based penalty regime in UK tax law. Schedule 24 Finance Act 2007 applies to inaccuracies in any return, document or notification submitted to HMRC if the inaccuracy leads to an understatement of tax. The penalty is a percentage of the additional tax (the Potential Lost Revenue, or PLR) and depends on three factors: the taxpayer's behaviour, whether the disclosure was prompted or unprompted, and the quality of cooperation with HMRC's enquiry.

Behaviour	Unprompted disclosure	Prompted disclosure
Reasonable care taken	0%	0%
Careless	0% to 30%	15% to 30%
Deliberate (not concealed)	20% to 70%	35% to 70%
Deliberate and concealed	30% to 100%	50% to 100%

The three disclosure reductions. Within each band, the actual rate depends on the quality of disclosure across three dimensions, each worth a portion of the range between floor and ceiling.

• Telling - admitting the inaccuracy, explaining how and why it happened. Up to 30% of the available reduction.
• Helping - quantifying the inaccuracy, providing supporting evidence and computations. Up to 40% of the available reduction.
• Giving access - allowing HMRC to inspect records, accounts and documents. Up to 30% of the available reduction.

Combined, full cooperation can collapse the penalty to the floor of the band. Unprompted disclosure means you came forward before HMRC had any reason to believe an inaccuracy existed - the gold standard. Prompted means you only disclosed after HMRC opened an enquiry or otherwise indicated they were looking. The difference is material: 0% floor unprompted vs 15% floor prompted for careless errors; 20% vs 35% for deliberate; 30% vs 50% for concealed.

Reasonable care is the statutory defence. If you took reasonable care (typically defined as the conduct of a reasonable taxpayer in your circumstances, including following professional advice from a competent adviser), no penalty applies even if the return was wrong. This is why agent involvement matters - reliance on a properly instructed adviser is generally reasonable care, though not always - you are still expected to check the return before signing it.

Offshore matters. Inaccuracies relating to offshore income or gains attract higher penalties under Schedule 24 paragraphs 4 and 4A (the territory categories were added by Finance Act 2010 from 6 April 2011 and extended by Finance Act 2015): the maximum is 200% of PLR for a deliberate and concealed inaccuracy involving a category 3 territory. The Worldwide Disclosure Facility (WDF) provides a structured route for voluntary offshore disclosure with reduced penalty bands. Anyone with undisclosed offshore matters should take specialist advice before contacting HMRC - the disclosure framework is technical and time-bound. See HMRC's inaccuracies in returns or documents publication for the full schedule. Retrieved on 2026-05-22.

8. Suspended penalties

For careless inaccuracy penalties only, HMRC has discretion under paragraph 14 of Schedule 24 to suspend the penalty for up to 24 months. Suspension comes with specific conditions designed to prevent the error from recurring (eg using bookkeeping software for a sole trader who hand-wrote accounts, having an accountant review the next year's return, implementing internal controls for a company). If you meet all conditions during the suspension period, the penalty is cancelled entirely. Breach the conditions, or commit another careless inaccuracy in the suspension period, and the suspended penalty becomes payable plus the penalty for the new error.

Suspension is not available for deliberate or deliberate-and-concealed penalties - the behaviour is too culpable for the policy rationale to apply. It is also not available for one-off errors that cannot be prevented by any reasonable condition (a non-recurring transaction that simply went wrong). When HMRC declines suspension on those grounds the decision is appealable to the First-tier Tribunal, which will consider whether realistic conditions could have been set.

Practically, if you receive a careless inaccuracy penalty, always ask HMRC in writing whether suspension is being offered and on what conditions. A high proportion of first-time careless penalties for ordinary errors are suspended on reasonable terms when the taxpayer requests it - HMRC's Compliance Handbook (CH83100 onwards) encourages officers to consider suspension actively.

9. Information notices and failure to comply

Schedule 36 Finance Act 2008 gives HMRC the power to issue information notices requiring taxpayers (or third parties) to produce documents or information needed to check tax position. The CCFS10 compliance checks factsheet sets out the penalty regime for non-compliance.

Failure	Penalty
Initial non-compliance with notice	£300
Continuing non-compliance	£60/day
Tax-related (where HMRC estimates underdeclaration)	percentage of additional tax

For sustained refusal, HMRC can apply to the First-tier Tribunal for a tax-related penalty - effectively a substantial uplift tied to HMRC's best estimate of the tax at stake. This is the heavy weapon of the compliance toolkit, used rarely but effective at concentrating minds. Information notices that have been issued without prior tribunal approval can be appealed to the First-tier Tribunal within 30 days; an appealed notice cannot give rise to penalties until the appeal is determined.

Reasonable excuse defences (section 10) apply to information notice penalties the same way they apply elsewhere. Retrieved on 2026-05-22.

10. Reasonable excuse - what works

Reasonable excuse is the universal statutory defence against fixed and tax-geared penalties in Self Assessment, PAYE, VAT, Corporation Tax and information-notice regimes. The test is twofold: an unexpected event outside your control that prevented compliance, plus prompt remediation once the obstacle passed. HMRC's reasonable excuses guidance sets out the position they take at automatic-issue stage.

Excuses that typically succeed

• Serious illness requiring hospitalisation or sustained incapacity over the deadline period. Medical evidence required.
• Bereavement of a close family member shortly before the deadline.
• Fire, flood or theft of records before the deadline.
• HMRC system outage on the filing day itself, documented by the official @HMRCcustomers status updates.
• Postal disruption at the critical period (eg Royal Mail strike action, severe weather affecting deliveries).
• Agent failure unknown to the taxpayer where the taxpayer reasonably believed the agent was filing on time and only learned of the failure afterwards - subject to the taxpayer not having ignored warning signs.
• Software / IT failure on filing day if documented contemporaneously, especially where HMRC's own gateway was affected.

Excuses that typically fail

• "I forgot the deadline" - the obligation to file is well-publicised and presumed known.
• "I didn't know I had to" - ignorance of the law is not reasonable excuse, though it can sometimes establish reasonable care for inaccuracy purposes.
• "I couldn't afford to pay" - an insufficiency of funds is not a reasonable excuse unless attributable to events outside the taxpayer's control (FA 2009 Sch 56 para 16(2)(a) for late payment; Sch 55 para 23(2)(a) for late filing).
• "My accountant didn't file it" without showing you took reasonable steps to check - the taxpayer remains primarily responsible.
• "The form was confusing / online system difficult" - rejected unless the difficulty was attributable to a defect in HMRC's system.

Perrin v HMRC [2018] UKUT 156 (TCC) is the leading Upper Tribunal authority on reasonable excuse, setting out a structured four-step test: establish the facts the taxpayer relies on, decide which of them are proven, decide whether those proven facts objectively amount to a reasonable excuse, and consider whether the taxpayer remedied the failure without unreasonable delay. The facts can include what the taxpayer believed, but the test is objective: a genuine belief helps only if, viewed objectively and taking account of the taxpayer's experience and situation, it amounts to a reasonable excuse. HMRC's Compliance Handbook sets out the Perrin approach at CH160950.

11. Appeal mechanism

HMRC penalties are appealable through a structured statutory process. The full route to the Court of Appeal is theoretically available, but in practice 95%+ of penalty disputes are resolved at statutory review or First-tier Tribunal level.

Stage 1: Statutory review (free, 30 day deadline)

Request a statutory review within 30 days of the penalty decision. Use the form referenced in the penalty notice (eg SA370 for Self Assessment, WT2 for VAT) or write directly to the address on the notice. A different HMRC officer not previously involved reviews the case afresh and issues a conclusion letter within 45 days (extendable by mutual agreement to 75 days). The review can uphold, vary or cancel the original decision. Statutory review costs nothing and does not prejudice your right to appeal further - the FTT clock restarts on the date of the review conclusion.

Stage 2: First-tier Tribunal (Tax Chamber)

Appeal to the First-tier Tribunal within 30 days of the original decision (if you bypass statutory review) or within 30 days of the review conclusion. Use the Notice of Appeal (T240 form) available from HMCTS. The tribunal categorises appeals as default paper, basic, standard or complex - most penalty appeals are default paper or basic, decided on documents alone or after a short telephone hearing. No tribunal fee applies to tax appeals (unlike civil money claims). Self-representation is the norm; the FTT website provides guidance for unrepresented appellants. Typical timeline: 4 to 8 months for default paper, 8 to 12 months for basic, longer for standard or complex. The HMRC page gov.uk/tax-appeals links the whole process end to end.

Stage 3: Upper Tribunal (point of law)

Appeal to the Upper Tribunal (Tax and Chancery Chamber) within 56 days of the FTT decision, on a point of law only - errors of fact are not appealable. Permission must be granted by the FTT or, if refused, by the Upper Tribunal directly. Upper Tribunal hearings are public, formal and usually involve counsel; representation is recommended though not mandatory.

Stage 4 and beyond

Court of Appeal (with permission), then Supreme Court (with further permission), both on point of law. In practice these stages involve significant legal costs and rare leave; only genuinely novel points of UK tax law reach the higher courts. For most penalty disputes, the FTT decision is the practical end of the road.

Postponing payment during appeal. Filing an appeal does not by itself suspend the obligation to pay. Separately apply to HMRC under section 55 Taxes Management Act 1970 (for direct taxes) or Section 84 VATA 1994 (for VAT) for a postponement of collection pending appeal. HMRC normally grants postponement for the disputed amount if the case has reasonable prospects.

12. Alternative Dispute Resolution (ADR)

Alternative Dispute Resolution is mediation between the taxpayer and HMRC, facilitated by a trained HMRC mediator who has not previously worked on the case. Available alongside or instead of statutory review for many penalty and substantive tax disputes. Apply through the gov.uk ADR application page.

The mediator does not make a binding decision - they help both sides communicate, identify the real points in dispute, and explore settlement options. Typical timeline is 60 to 120 days from acceptance to outcome. While ADR is running, the appeal deadline to the First-tier Tribunal is suspended (this only applies if you have already lodged the appeal or are in the 30-day window).

ADR has high reported settlement rates (HMRC publishes annual figures, typically 70 to 80% of accepted cases settling in part or in full). It is most useful where the dispute is factual or technical rather than legal, where HMRC and the taxpayer have talked past each other, or where the underlying relationship has broken down such that direct correspondence is unproductive. ADR is not suitable where HMRC and the taxpayer disagree on a clear point of law - in those cases the Tribunal route gives the answer faster.

13. MTD penalty migration

The Self Assessment penalty regime is being replaced for taxpayers within Making Tax Digital for Income Tax (MTD ITSA) by a points-based system modelled on the one used for VAT. The migration is driven by the broader move to quarterly digital updates and runs alongside the MTD ITSA mandation timeline.

The new penalties apply from the tax year you join MTD for Income Tax. Earlier years stay on the current rules: if you joined on 6 April 2026, your 2025/26 return due 31 January 2027 is still under the existing Self Assessment penalties. Joining dates, per HMRC's eligibility guidance:

• 6 April 2026 - qualifying income over £50,000 in 2024/25.
• 6 April 2027 - qualifying income over £30,000 in 2025/26.
• 6 April 2028 - qualifying income over £20,000 in 2026/27.

Late submission. There are no penalties for missing a quarterly update deadline for the 2026/27 tax year, although the updates must still be sent before the tax return. From 2027/28, each missed quarterly update deadline or tax return deadline earns one point (only one per deadline, however many businesses you have). At 4 points you get a £200 penalty, and another £200 for each further missed deadline. Below the threshold, each point expires 24 months after the missed deadline. At the threshold, all points are removed only once you have sent every update and return on time for 12 months and cleared anything outstanding from the previous 24 months. MTD points are separate from any VAT points.

Late payment. Late-payment penalties apply to balancing payments and amounts due after an amendment or assessment, not to payments on account. For 2026/27: nothing if paid within 15 days; 3% of the tax owed at day 15 if paid between day 16 and day 30; and from day 31, 3% at day 15 plus 3% of what is still owed at day 30, plus a daily charge at 10% a year on the outstanding amount for up to 2 years. For 2027/28 the two fixed elements rise to 4% each. In your first year under the new rules you have 30 days (not 15) before penalties start. Late-payment interest runs from the first day either way.

HMRC also says that from April 2027 the new penalties will apply to everyone who submits a personal Self Assessment return; someone exempt from MTD from 2027/28 has a 2-point threshold instead of 4. The full rules are on the gov.uk MTD for Income Tax penalties page (retrieved 2026-09-30). See our MTD ITSA 2026 guide for the software-vendor landscape, exemptions and quarterly update mechanics.

Related explainers and tools

• UK tax deadlines for 2026/27
• Self-employed take-home calculator
• PAYE vs Self Assessment decision tree
• VAT calculator
• How UK tax works (primer)
• UK tax glossary A to Z
• Corporation Tax calculator
• CIS deductions calculator
• MTD ITSA 2026 timeline
• SalaryTax methodology and sources

This page is editorial guidance based on HMRC publications retrieved 22 May 2026. It is not tax advice. Penalty regimes change frequently - always verify the current position on the relevant gov.uk page before relying on these figures, and consult a Chartered Tax Adviser or accountant for material decisions. Where this guide differs from a primary HMRC source, the HMRC source governs.