HMRC Penalties Guide (2026/27)

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.

The £100 initial penalty applies even if you owe no tax for the year - the duty to file is independent of liability. This catches around 800,000 filers each year (the rough number of late online returns each cycle). 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 by 30 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) triggers the same automatic £100 if you intended to file on paper and missed it, even if you then file online on time - so anyone starting on paper and switching must file online by 31 January to clear the position. 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.

Daily interest runs alongside, on top of the three 5% surcharges. The current statutory formula is Bank of England base rate plus 2.5 percentage points (set by Section 103 Finance Act 2009). With base at 4.0% in May 2026, the late-payment interest rate is 6.5% per annum, 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 6.5% on £8,000 for approximately 200 days = £285. Total cost above the tax: £1,085. 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 (April 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.

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 - 2% of the unpaid VAT at day 15.
• 31+ days late - additional 2% at day 30 (cumulative 4%), plus daily interest at 4% per annum on the outstanding balance.

Late-payment interest separately runs at Bank of England base rate plus 2.5 percentage points from day 1 of lateness on top of the 4% second-stage penalty rate. 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. Penalties retrieved on 2026-05-22.

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.

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.

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 2.5% (same formula as Self Assessment) 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.

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 (Hicks v HMRC made clear you cannot just blindly sign whatever an adviser puts in front of you).

Offshore matters. Inaccuracies relating to offshore income or gains attract enhanced penalties under Schedule 24A (introduced by Finance Act 2015): the penalty rates can be up to 200% of PLR for category 3 territories. 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. The Upper Tribunal in Eastman v HMRC [2016] UKUT 525 confirmed that the FTT may itself impose suspension conditions that HMRC had not offered, where the facts justify it.

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.

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. The Crystal Trustees v HMRC line of cases confirms that genuine inability to access documents (eg an overseas trustee with no UK records) can satisfy reasonable excuse, though only where the taxpayer has taken active steps to remedy. 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" - lack of funds is expressly excluded by paragraph 23(2) of Schedule 56 except where caused by an event outside the taxpayer's control.
• "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: identify the facts, decide which facts establish the excuse, assess whether those facts amount to reasonable excuse objectively, and consider whether the taxpayer remedied the failure without unreasonable delay. The Tribunal explicitly rejected the "honest belief" test - it is the objective reasonableness of the facts, not the taxpayer's subjective view of them, that matters. Christine Perrin remains the framework every FTT decision references and is cited in HMRC's internal compliance manual.

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 phased out for taxpayers within Making Tax Digital for Income Tax (MTD ITSA), replaced by the same points-based system already used for VAT. The migration is driven by the broader move to quarterly digital updates and runs alongside the MTD ITSA mandation timeline.

• 6 April 2026 - MTD ITSA mandatory for self-employed and landlords with combined business / property gross income over £50,000. Points-based late-submission penalties apply to their quarterly updates and final declaration from this date.
• 6 April 2027 - threshold drops to over £30,000.
• Future - extension to over £20,000 planned but unscheduled. PAYE-only employees and people with side income under the threshold remain on standard Self Assessment.

Under the new MTD ITSA penalty rules, each missed quarterly update earns a point. The threshold is 4 points (matching quarterly VAT filers). At threshold, a £200 penalty applies, with £200 more for each subsequent missed update. Points reset after a 24-month compliance period of all updates submitted on time plus any overdue submissions cleared.

Late payment of Income Tax under MTD ITSA continues to operate on a percentage / interest model close to the existing Self Assessment regime - the 30-day, 6-month and 12-month surcharges remain in structure, though the precise rates have been adjusted to align with the VAT late-payment template (2% / 4% / daily 4% pa). The full schedule sits in the MTD for Income Tax collection on gov.uk. See our MTD ITSA 2026 guide for the software-vendor landscape, exemptions and quarterly update mechanics. Retrieved on 2026-05-22.

14. Frequently asked questions

What's the maximum I can be fined for late Self Assessment?

There is no fixed cap. For a return filed more than 12 months after the deadline you face £100 initial penalty, up to £900 in daily £10 penalties (90 days), plus two separate 5% surcharges (each minimum £300) at the 6-month and 12-month marks. On top, late-payment penalties run independently: 5% of unpaid tax at 30 days, 6 months and 12 months. Daily interest at base rate plus 2.5% accrues from 1 February until paid. A return that is two years late with significant tax owed can easily generate £1,500 to £3,000 of pure penalty before interest. Deliberate-and-concealed inaccuracies under Schedule 24 FA 2007 can push penalties to 100% of the tax understated.

Can I get a penalty waived for reasonable excuse?

Yes if HMRC accepts the excuse meets the statutory test. Reasonable excuse must be an unexpected event outside your control that prevented compliance, and you must have remedied the failure without unreasonable delay once the obstacle passed. HMRC publish examples (serious illness, bereavement of a close relative, unexpected hospital stays, fire or flood, postal disruption, IT failure on the filing day itself). Excuses that almost always fail: forgetting the deadline, finding the online system difficult, agent failure where you did not check, or pleading lack of funds. The First-tier Tribunal applies an objective standard - what a reasonably prudent taxpayer in your position would have done.

How do I appeal an HMRC penalty?

Two stages, both free. First, request a statutory review within 30 days of the penalty notice by writing to HMRC at the address on the notice or submitting the SA370 form for Self Assessment penalties. A different HMRC officer reviews the case and issues a conclusion letter within 45 days. If still unhappy, appeal to the First-tier Tribunal (Tax Chamber) within 30 days of the review conclusion. Tribunal appeals carry no hearing fee for tax cases. Most penalty appeals are decided on papers or by short telephone hearing without lawyers. Time-to-pay arrangements and reasonable excuse are the two most common winning grounds at FTT.

Do daily £10 penalties stop if I file?

Yes. The £10/day Self Assessment filing penalty accrues only while the return remains outstanding, from the day three months after the deadline (so 1 May for an online return missing the 31 January deadline) up to a maximum of 90 days (£900). Once you file, the daily clock stops. The £100 initial penalty and the 6-month / 12-month surcharges still apply, but the daily element freezes at whatever total had accrued by the date HMRC received the return.

Does an inaccuracy penalty apply if HMRC find an error?

Yes, under Schedule 24 Finance Act 2007. If HMRC open an enquiry and discover an understatement, the penalty depends on your behaviour. Careless errors carry 0% to 30% of the additional tax (the 0% floor applies when disclosure is unprompted and HMRC accepts full cooperation). Deliberate but not concealed runs 20% to 70%. Deliberate and concealed (eg false invoices, hidden offshore accounts) runs 30% to 100%. Disclosure reductions in three areas (telling HMRC, helping with the enquiry, giving access to records) can collapse the band to the floor. Prompted disclosure - where HMRC have already started looking - attracts smaller reductions than unprompted.

What is a Statutory Review?

A free internal HMRC re-examination of a decision by an officer who was not involved in making it. Introduced by Finance Act 2009, available for most direct and indirect tax penalties. You must request the review within 30 days of the original decision. The reviewing officer has 45 days (extendable by agreement) to issue a conclusion: upheld, varied or cancelled. Statutory review preserves your right to appeal to the First-tier Tribunal afterwards - the 30-day FTT clock restarts from the review conclusion letter. Around 30% of statutory reviews result in the original decision being varied or cancelled, making it a low-cost first step before tribunal.

How long does the First-tier Tribunal take?

For straightforward penalty appeals (default paper category), typically 4 to 8 months from notice of appeal to decision. Basic-category appeals with a short hearing usually take 8 to 12 months. Standard and complex cases can run 12 to 24 months or longer, particularly if witnesses or expert evidence are involved. The Tribunal Service publishes performance statistics quarterly. For most reasonable-excuse and penalty-calculation disputes, default paper is suitable and faster. Filing an appeal does not by itself postpone payment - you must separately apply to HMRC to suspend collection pending the appeal.

Is HMRC interest tax-deductible?

For Self Assessment and PAYE, no - personal tax interest charges are not deductible against your Income Tax. For Corporation Tax, late-payment interest is also not deductible (it is excluded by statute from the loan-relationship rules). For VAT, late-payment interest is similarly non-deductible. The same applies to penalties themselves: HMRC penalties are never deductible for Income Tax or Corporation Tax purposes. Repayment interest received from HMRC is taxable as savings income for individuals (covered by the Personal Savings Allowance up to £1,000 for basic-rate, £500 for higher-rate), and as taxable income for companies.

Can I pay penalties in instalments?

Yes through a Time to Pay (TTP) arrangement with HMRC. For Self Assessment debts up to £30,000 you can set up TTP online through your gov.uk Self Assessment account within 60 days of the 31 January deadline. Larger debts and other taxes require a phone call to HMRC Debt Management. TTP plans typically run up to 12 months for personal tax debts. Interest still accrues during the plan, but late-payment penalties are paused for periods covered by an agreed TTP. Default on the plan and the suspended penalties become payable retrospectively. TTP does not pause filing penalties - the return must still be submitted.

What happens if HMRC don't get my Self Assessment paper return?

You bear the burden of proof of submission, not HMRC. If HMRC have no record of receiving a paper return by 31 October, they will issue a £100 late-filing penalty. Posting evidence (proof of postage from the Post Office, recorded delivery receipt) is your defence at appeal, and HMRC routinely accept it as reasonable excuse if presented. Without proof of postage, the appeal usually fails. Pragmatically: filing online by 31 January eliminates this category of risk entirely, and paper filing has declined to roughly 3% of returns. Anyone still filing paper should send by signed-for delivery and keep the receipt for at least four years.

Are VAT late-payment penalties the same as Self Assessment?

No - VAT switched to a points-based system from 1 January 2023 (returns starting on or after that date). Each missed return earns one point. Hitting the threshold (4 points for quarterly filers, 5 for monthly, 2 for annual) triggers a £200 penalty, with £200 more for each subsequent missed return until you reset by submitting on time for the relevant period. Late-payment runs separately: 2% of unpaid VAT at 15 days, an additional 2% at 30 days, then daily interest at 4% above base from day 31. The 2023 regime is meant to be lighter on occasional first-time offenders and harsher on persistent ones - the opposite of the old default-surcharge system.

When does the MTD penalty system apply?

Already in force for VAT (since April 2022 for all VAT-registered businesses regardless of turnover). For Income Tax Self Assessment, the points-based late-submission penalty regime applies to taxpayers within MTD ITSA - phase one from 6 April 2026 for combined business and property income over £50,000, phase two from 6 April 2027 for over £30,000. Quarterly updates each carry a separate submission deadline, and missing one earns a point. The thresholds and £200 penalty mirror the VAT regime. PAYE-only taxpayers and those outside MTD ITSA remain on the existing Self Assessment penalty system for now.

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.