How To File Company Accounts and Tax Returns 
8 July 2024

HMRC Late Payment Fines

Published: 9 July 2024

Nobody likes forking out for a penalty, especially when it could have been easily avoided in the first place. Understanding potential tax penalties can go a long way in making sure you never find yourself caught up in having to pay them. We’ve created this blog to give you the lowdown on HMRC fines for late payment so you can make sure to stay one step ahead of the important deadlines. 

Why do HMRC late penalties exist?

For starters, the penalties work as a deterrent to anyone who might not be upkeeping legal practices within the business. It’s a way of ensuring companies stay compliant under UK tax law. Failure to meet tax obligations could put your business under scrutiny leading to further inspections and audits.  

Late filing and payment also have a negative knock-on effect on your daily operations as you have to press pause on your usual tasks to complete your paperwork at double speed and avoid incurring extra fines. Not to mention paying late means you’ll owe more money in the long run and you’ll be on the wrong side of HMRC.  

We’ve given you an overview below of potential late payment fines given out by HMRC.

Late filing penalties

Late filing self-assessment tax return

Missing the submission deadline without prior notification is an automatic £100 penalty. This can grow into several additional penalties over time and gets bigger the longer the return remains outstanding: 

Late by Liable to pay 
Up to 3 months One-time penalty of £100 
3 – 6 months £10 per day 
6 – 12 months Either 5% of the due tax or £300 (whichever is greater) 
More than 12 months A further 5% of the unpaid tax or £300 (whichever is greater) 

VAT returns submitted or paid late

Late submissions for VAT work on a point-based system so for each return you submit late, you’ll receive a penalty point until you reach your penalty threshold.  

Once you reach the threshold, you’ll be given a £200 penalty and a further £200 penalty for each subsequent late submission while still at the threshold.  

Thresholds are set by your accounting period, you can find out more directly on HMRC’s website.  

Inaccuracies in tax return

Whether it’s unpaid, understated, over-claimed or under-assessed, it’s a punishable offence. You may be surprised to hear the same goes regardless of if it’s a genuine error or deliberate misreporting. However, the penalties imposed do differ between the two and take into account the severity of inaccuracy. A genuine error is likely to incur a percentage based fine on tax owed while a deliberate error could lead to criminal prosecution cases.  

How HMRC calculates the inaccuracy penalty: 

  • a penalty arises because of a lack of reasonable care, the penalty will be between 0% and 30% of the extra tax due 
  • the error is deliberate, the penalty will be between 20 and 70% of the extra tax due 
  • the error is deliberate and concealed, the penalty will be between 30 and 100% of the extra tax due 

If you find yourself in a bit of a pickle over a genuine mistake, your penalty can be reduced as long as you notify HMRC about the error. They may even make further reductions depending on the quality of the disclosure. Penalties can be reduced or in certain cases suspended by: 

  • telling HMRC about the errors 
  • helping HMRC work out what extra tax is due 
  • giving HMRC access to check the figures 

Failure to pay taxes on time

This results in penalties and interest charges so it’s essential payment deadlines are met. If your tax remains unpaid after a 15-day grace period, the first penalty is set at 2% of the outstanding tax and will continue to increase over time.  

Deliberate tax evasion

HMRC takes tax evasion very seriously and has the authority to impose severe penalties including hefty fines and criminal prosecution. In some cases, this could even lead to imprisonment. Complying with tax laws and maintaining accurate records is important to avoid such dire consequences.  

Our filing services

Handing over your accounts to professionals and tax experts is a sure way to minimise the risk of penalties. Not only do we guarantee to be efficient and accurate, but we’ll also keep an eye on the deadlines so that you don’t have to. You can find everything you need to know on our accounts filing page here

Left things a little too close to the wire? That’s okay, we’re well-equipped to handle that too. We offer a late filing service which is an express service with a 48-hour turnaround. We’ll make sure you’re compliant, organised, and filed in time to save you forking out on any unwanted fines. 

Sound good? We thought it might. Check out our late filing page here for more info. 

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