Late payment penalties
Late payment is separate from late submission. You can send every quarterly update and your tax return on time and still get a late payment penalty if the tax itself is paid after the due date.
What counts as a late payment
Under HMRC's new rules, late payment penalties can apply to a balancing payment and to extra tax due after an amendment or assessment. They do not apply to payments on account. HMRC also charges late payment interest from the first day a payment is late until it is paid in full. From 6 April 2025, the interest rate is linked to the Bank of England base rate and is set at base rate plus 4% (HMRC can change this over time).
First year under the new penalties
In your first year under the new late payment penalties, HMRC gives you 30 days from the due date to pay in full or contact HMRC to set up a payment plan. After your first year, that window reduces to 15 days.
How the percentage charges work
| If tax is still unpaid | 2026 to 2027 | 2027 to 2028 onwards |
|---|---|---|
| Up to day 15 | No penalty | No penalty |
| Day 16 to 30 (after your first year) | 3% of unpaid at day 15 | 4% of unpaid at day 15 |
| Day 31 onwards | 3% at day 15 + 3% at day 30, then daily charge at 10% a year | 4% at day 15 + 4% at day 30, then daily charge at 10% a year |
In your first year under the new penalties, you have 30 days from the due date to pay in full or agree a payment plan before percentage penalties apply. Interest runs from day 1 in all cases.
The daily charge at 10% a year starts from day 31 and can run until the tax is paid, or for up to 2 years. Paying part of the bill before day 15 or day 30 reduces the amount the percentage is based on.
Payment plans
If you cannot pay on time, contact HMRC as soon as possible. If HMRC agrees a payment plan and you keep to it, penalties are paused from the date you contacted HMRC.
Plain-English definitions
- A payment on accountis an advance payment towards next year's tax bill. HMRC usually asks for two, due on 31 January and 31 July.
- A balancing payment is the amount still left to pay after HMRC takes account of payments on account and other tax already collected.
Worked examples
Using HMRC's published percentages, a £1,000 amount still unpaid after day 30 for a 2026 to 2027 liability would create a first late payment penalty of £60 (3% + 3%), plus the daily charge from day 31. For a 2027 to 2028 liability, the same amount would create a first penalty of £80 (4% + 4%), plus the daily charge. Interest sits on top and can change if HMRC updates the rate.
See also: Payments on account.
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