Quickfire Guide to HMRC Tax Penalties: What they are and how to avoid them

Quickfire Guide to HMRC Tax Penalties: What they are and how to avoid them

Paying tax is an integral part of running a business. In the UK, companies and self-employed individuals are responsible for different taxes, including VAT, Corporation Tax, Income Tax, and PAYE. Missing deadlines, filing inaccurately, or failing to notify HMRC of changes can trigger fines that quickly add up.

If your cash flow is under pressure, a tax loan or flexible business loan can help you stay compliant while protecting working capital.

In this guide, we’ll cover:

  • How to manage tax filing and payment deadlines

  • The different types of HMRC tax penalties

  • How to avoid HMRC penalties effectively

What Are HMRC Tax Penalties?

HMRC (HM Revenue & Customs) can issue penalties against businesses and individuals that fail to meet their tax responsibilities. These include:

  • Late filing penalties – for missing submission deadlines

  • Late payment penalties – for not paying tax bills on time

  • Penalties for inaccurate returns – covering miscalculations or reporting errors

  • Failure to notify penalties – for not informing HMRC of changes such as business status or accounting period

In more serious cases, HMRC can pursue fraud or tax evasion charges, which may lead to criminal prosecution.

Key Tax Deadlines and Penalty Thresholds for Businesses

There are various tax deadlines companies need to be aware of for filing returns and making payments, each with thresholds for late or inaccurate tax returns and payments, and non-compliance. 

 

Here’s an overview of the key HMRC tax return deadlines and penalties businesses should know: 

 

Corporation Tax
Deadlines for Corporation Tax 
  • 12 months after the end of your accounting period

     AND

  • If you have taxable profits of up to £1.5 million, your Corporation Tax payment is due 9 months and 1 day after the end of your accounting period. 

Larger companies with taxable profits of between £1.5 million – £20 million must pay Corporation Tax quarterly.  
Late filing penalties for Corporation Tax 
  • 1 day late: £100 fine
  • 3 months late: Additional £100 
  • 6 months late: HMRC estimates the tax due and adds a penalty of 10% of the unpaid tax 
  • 12 months late: An additional 10% of any unpaid tax 

 If the tax return is late three times in a row, the initial £100 penalties increase to £500 each. 
Late payment penalties for Corporation Tax   Interest on any unpaid amounts accrues daily from the day after the tax payment was due. The rate is usually the BoE base rate + 2.5%. 
Penalties for Inaccuracies with Corporation Tax  The level of care taken and any suspected deliberate errors or concealment will be analysed by HMRC, who then levy an additional percentage charge atop the extra tax due. 

For any errors or concealment deemed deliberate, this charge could be from 20 – 100% of the remaining tax due.  

 

Self Assessment 
Deadlines for Self Assessment   Sole traders and those in a partnership don’t pay Corporation Tax. Instead, you submit a Self Assessment return, which is due on the 31st October, or the 31st January for digital submissions. 

Payments are made in two instalments, a larger one by the 31st January, and a first ‘payment on account’ by 31st July. This is set to change from April 2026, as those who earn over £30,000 will switch to Making Tax Digital for Income Assessment. 
Late filing penalties for Self Assessment  
  • Initial fixed £100 fine for missing the filing deadline
  • After 3 months, companies receive additional daily penalties of £10 per day, up to a maximum of £900
  • After 6 months, there is a further penalty of 5% of the tax due or £300 – whichever is greater
  • After 12 months, an additional 5% of the tax due or £300 is issued (whichever is greater)
Late payment penalties for Self Assessment   5% of the unpaid tax is charged at 30 days, 6 months and 12 months. Interest is also charged on any outstanding tax paid late. 

Late payment interest is set at the BoE base rate plus 2.5%, repayment interest at the base rate minus 1%, with a lower limit of 0.5% (known as the ‘minimum floor’).
Penalties for Inaccuracies with Self-Assessment  The same penalty framework as Corporation Tax filing inaccuracies will apply. See above.  

 

VAT
Deadlines for VAT 
  • VAT returns must be submitted to HMRC every three months* within your accounting period. 
  • The usual deadline for each quarterly return is a calendar month and 7 days after each quarter. 
  • VAT bill payments are due by your VAT return due dates, with the support of the Government’s Making Tax Digital for VAT regime.
Late filing penalties for VAT If you miss the deadline for submitting your return, HMRC will send you an assessment telling you how much VAT they think you owe. You’ll get a penalty point for each VAT Return you send late. Once you reach your penalty point threshold (set by your accounting period), you’ll receive a £200 penalty. A further £200 penalty is issued for each subsequent late submission. Filing penalties apply even if you have no VAT to declare and no tax is due.
Late payment penalties for VAT  
  • Payments 16 to 30 days overdue: 2% penalty on VAT owed on day 15.
  • Payments 31 days or more overdue: A first penalty is calculated at 2% of what was outstanding on day 15, plus 2% of what remains on day 30. A second penalty is calculated at a daily rate of 4% per year on the outstanding balance. This is charged every day from day 31 until the outstanding balance is paid in full or before the end of a two-year assessment time limit.
Penalties for Inaccuracies with VAT The same penalty framework as Corporation Tax filing inaccuracies will apply. See above.  

 

PAYE
Deadlines for PAYE
  • If submitting PAYE to HMRC electronically, you must pay your bill by the 22nd of the next tax month if paying monthly.
  • If paying quarterly, the 22nd after the end of the quarter. 
  • Any businesses still paying by cheque must do so by the 19th of the next month. 

PAYE is calculated digitally through Real-Time Information RTI, with employees’ NI and other contributions deducted from pay packets during payroll.
Late filing penalties for PAYE If your Full Payment Submission (FPS) or Employee Payment Summary (EPS) is sent late, you’ll be charged monthly late PAYE filing penalties based on employee numbers: 

  • £100 for 1-9 employees 
  • £200 for 10-49 employees
  • £300 for 50-249 employees
  • £400 for 250 or more employees
Late payment penalties for PAYE  HMRC charges penalties on PAYE amounts not paid in full and on time. Penalties are a percentage of the amount owed, which escalate according to the number of defaults in a tax year* and daily interest will accrue. Here is the rundown of the default penalties:

  • 1 to 3 defaults: 1%
  • 4 to 6 defaults: 2%
  • 7 to 9 defaults: 3%
  • 10 or more defaults: 4%

Additional penalties are issued if you pay less than what is due. Find out more about them here. 
Penalties for Inaccuracies with VAT The same penalty framework as Corporation Tax filing inaccuracies will apply. See above.  

 

Do HMRC Penalties Affect Your Business Credit Rating?

 Yes. Late filing can indirectly harm your credit score, while late payments directly reduce your business credit rating. This can affect access to finance, supplier relationships, and overall business reputation.

 

If you are late filing your return, your business credit rating may be indirectly affected, while any tax penalties for late payments will directly negatively affect your score. Late tax payments are often the result of missing key filing deadlines, highlighting the importance of keeping on top of all accounting and paperwork.

 

Avoid HMRC Penalties With a Business Loan

Meeting your tax obligations can put serious strain on your cash flow and essential business reserves. Using essential business funds to pay your bill can also lead to a ‘robbing Peter to pay Paul’ scenario, forcing you to prioritise certain expenses over others that are equally pressing and leading to serious stress. Instead of letting pressure and debt accumulate, you can opt for a business tax loan, which will allow you to spread the cost of any tax bills across more manageable, smaller payments. 

 

At White Oak UK, we have dedicated tax loan and VAT loan designed to help businesses with their tax burdens. Giving you the funds you need in as little as 24 hours (often less,) our products bring you peace of mind while still allowing you to pursue growth opportunities and oversee the day-to-day. 

 

Don’t struggle through another tax year – ease the pressure today.    

 

 

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