HMRC tax penalties: what filing or paying late costs a limited company

A penalty notice from HMRC lands for one of two reasons: your return went in late, or your payment did. They are charged separately, so the expensive month is the one where both slip, and if the money is not there, filing on time still saves you one of the two. What the rest costs depends on the tax and on how long it stays unpaid, and almost all of it grows to a timetable you can see coming.

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Which penalty you are looking at

Keeping on top of returns, payments, and the cash to cover them is a balancing act, and HMRC charges for three separate ways of dropping it: sending a return in late, paying late, and getting the figures wrong. Each tax has its own amounts and its own clock. Find your line first, then read the detail behind it.

Every figure on this page was checked against GOV.UK on 14 October 2026.

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Corporation Tax: £200 for filing late, interest for paying late

Corporation Tax is where the two-penalty rule is easiest to see. Your Company Tax Return is due 12 months after the end of the accounting period it covers. The payment is due three months earlier than that, nine months and one day after the period ends. Miss the filing date and HMRC charges a flat penalty; miss the Corporation Tax deadline for paying and it charges interest instead.

Filing late costs £200 the day after the deadline, and another £200 if the return is still outstanding at three months. That lands even when your company has no Corporation Tax to pay, which catches out dormant and loss-making companies every year. At six months HMRC adds 10% of the unpaid tax, and another 10% at 12 months. If the return is late three times in a row the fixed penalties rise to £1,000 each, so a third strike costs £2,000 by the three-month mark (Company Tax Returns: penalties for late filing). The £200 amounts apply to returns with a filing date on or after 1 April 2026; before that they were £100, and £500 for repeat late filers (Corporation Tax: increases to late filing penalties, 26 November 2025).

Once a return is six months late, HMRC stops waiting and estimates the Corporation Tax itself. That estimate is called a tax determination, and you cannot appeal it. To get rid of one you file the return and pay, and HMRC then recalculates on the real figures.

Paying late works differently. There is no fixed penalty at all. HMRC charges interest on what you owe, every day from the day after the deadline until the bill is cleared, at the Bank of England base rate plus 4%. That is 7.75% a year from 9 January 2026, with the base rate at 3.75%. On a £20,000 Corporation Tax bill paid 30 days late it comes to about £127.

The margin has been 4% since 6 April 2025, up from 2.5%, and the rate moves with the base rate, so check HMRC's published rate before you work out a figure of your own; the next decision is on 5 November 2026. The same 7.75% applies to late VAT and late PAYE, so one rate covers everything your company owes HMRC, and if you overpay the interest runs the other way at the base rate minus 1%, which is 2.75%.

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VAT is charged twice over: once for the return, once for the money

A late VAT return and a late VAT payment are two separate charges, and a single quarter can earn you both.

The return side runs on points. Every return you send late earns one penalty point, nil returns included, and when you reach your threshold HMRC charges £200. The threshold depends on how often you file: two points if you file annually, four if you file quarterly, five if you file monthly. Once you are sitting at the threshold, every further late return costs another £200. Points do clear, but it takes a run of returns filed on time and every outstanding return from the previous 24 months (penalty points and penalties if you submit your VAT Return late). The filing itself is covered in our guide to how to submit your VAT Return.

The payment side builds in stages, and the sooner you pay the less you are charged:

• Up to day 15. No penalty. Interest still runs from the first day the payment is overdue.
• Day 16 to day 30. A first penalty of 3% of the VAT you still owed at the end of day 15.
• Day 31 onwards. That 3%, plus another 3% of whatever was still outstanding at day 30, plus a second penalty charged daily at 10% a year until the balance is clear.

These rules cover VAT accounting periods starting on or after 1 January 2023, and the percentages went up on 10 July 2025 (how late payment penalties work if you pay VAT late). Our guide to how to pay your VAT bill sets out the payment methods and how long each one takes to reach HMRC.

The first fortnight matters more than anything else here. Ask HMRC for a Time to Pay arrangement within 15 days of the deadline and the penalties that start at day 16 do not apply at all. Ask by day 30 and you avoid the higher ones from day 31. Break the arrangement afterwards and HMRC charges both as though it had never existed.

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PAYE penalties climb with every month you are late

Your first late PAYE payment in a tax year does not count as a default, so one slip usually costs nothing. After that the penalty is a percentage of whatever is late in that tax month, and it rises with how many times you have been late: 1% for the first three defaults, 2% for the fourth to the sixth, 3% for the seventh to the ninth, and 4% beyond that.

Two further penalties sit outside that ladder, and they catch people who assume they have already paid the price. If a monthly or quarterly payment is still unpaid after six months, HMRC adds 5% of what is outstanding, and a further 5% after 12 months. Those two apply even if only one payment in the whole tax year was late (late payment penalties for PAYE and National Insurance). Daily interest runs on everything unpaid, at the same 7.75%.

Sending the payroll reports in late is penalised separately, by headcount, every month: £100 if you have one to nine employees, £200 for 10 to 49, £300 for 50 to 249, and £400 for 250 or more. The monthly dates and what a late payment costs in cash are in our guide to PAYE and National Insurance.

Three things stop that filing penalty. HMRC will not charge it if every payment on a late Full Payment Submission reached your employees within three days of payday, if you are a new employer whose first submission arrived within 30 days of paying someone, or if it is your first late report of the tax year (what happens if you do not report payroll information on time). Filing after payday every month, even inside those three days, can still get you a letter.

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Companies House fines late accounts, and it is not HMRC

Your annual accounts go to Companies House and your tax return goes to HMRC. Two filings, two deadlines, two organisations, and one late year-end can produce a penalty from each. Plenty of directors only find that out when the second letter arrives.

For a private limited company the Companies House penalty is £150 if the accounts are up to a month late, £375 between one and three months, £750 between three and six months, and £1,500 beyond six months. File late two years running and the penalty is doubled, and if the accounts never arrive the registrar can strike the company off the register altogether (penalties for late filing of annual accounts). What goes into them, and when, is in our guide to how to file your annual accounts with Companies House.

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Your own return is separate from the company's

Your company's penalties and your personal ones are two different things, and settling one does nothing about the other. If you file a Self Assessment return as a director, for dividends or any other income, filing it late costs:

• £100 straight away, even if you owe no tax
• £10 a day from three months, up to a maximum of £900
• 5% of the tax due or £300 at six months, whichever is greater
• another 5% or £300 at 12 months, whichever is greater

Paying your personal tax late is charged on top of that, at 5% of whatever is still unpaid at 30 days, at six months, and at 12 months, with interest running as well (Self Assessment tax returns: penalties).

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What it adds up to

Percentages are easy to read and hard to add up, so here is one bill in cash. A VAT bill of £15,000, paid at four different points after the deadline, with the penalty stages and interest at 7.75% applied to the full amount:

The cliff is at day 31, not at day 90. Between day 20 and day 45 the cost roughly doubles, because the second 3% lands and the daily second penalty starts running.

Ask for a Time to Pay arrangement inside the first 15 days instead, and the same £15,000 spread over six monthly payments costs about £339 in interest and no penalty at all. That is what those first two weeks are worth.

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What to do with the notice in front of you

Work through it in this order.

1. Check the figures. Compare the dates and the amount on the notice against your own records. A penalty worked out from HMRC's estimate of your tax, rather than from a return you actually filed, can be higher than it should be.
2. File anything still outstanding. You have to file the Company Tax Return before you can appeal the penalty for filing it late, and filing also replaces a tax determination.
3. Pay it, or appeal it, within 30 days. Corporation Tax penalties go through the usual pay your Corporation Tax bill routes, and PAYE penalties have a service of their own. A PAYE penalty paid within 30 days of the notice carries no interest.
4. Appeal if you had a reasonable excuse. You can ask HMRC to review the decision, and take it to an independent tax tribunal if the review goes against you (disagree with a tax decision or penalty).

HMRC publishes what it will accept. Serious illness, a bereavement close to the deadline, a fire or flood that destroyed your records, a failure of HMRC's own online service, and postal delays outside your control are all reasonable excuses. Not having the money, finding the online service difficult, not getting a reminder, and relying on someone else who let you down are not (reasonable excuses).

Whichever way you go, move inside the 30 days, put your evidence in with it – dates, correspondence, anything from a third party that backs up your reason – and say what you have changed so it does not happen again. That is what gives an appeal its best chance.

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If you cannot pay by the deadline, file anyway

Send the return in on time even when the money is not there, then speak to HMRC. Filing on time removes one of the two penalties outright, and on VAT a Time to Pay arrangement asked for within 15 days of the deadline means no late payment penalty at all.

A Time to Pay arrangement spreads what you owe into monthly instalments. HMRC agrees one only if it believes you can keep to it, so it will ask what the company earns and spends and what you can realistically pay each month. Interest keeps running on the balance at 7.75%, which is why clearing the plan early costs less. You cannot offset a penalty against a tax bill, but penalties you have already been charged, and the interest on them, can go into the same arrangement rather than being chased separately. Start with difficulties paying HMRC, or go straight to a VAT payment plan for a VAT bill. If the bill is already well overdue, financing tax arrears covers what happens next.

On interest alone, Time to Pay is usually the cheaper route, because 7.75% runs down with a falling balance. Borrowing answers a different question: not how to spread a bill you cannot pay, but how to pay one on time when your own money is simply arriving late. That is a timing problem rather than a shortfall, and it bites hardest on companies with seasonal income or customers on long payment terms, where a quarterly bill falls due in a month when very little comes in. If that is your position, an iwoca Flexi-Loan lets you pay the bill on time and repay early for free once your sales catch up.

Flexi-Loan in action: Dovetail & Slate

A seasonal dip put pressure on cash flow at Guy Walker's recruitment business, and he needed funding to cover VAT, salaries, and supplier bills until revenue picked up. He bridged the gap without committing to funding for longer than he needed, repaying as cash flow recovered. Read Guy's story.

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You cannot deduct the penalty, but you can deduct the interest

A penalty or a fine from HMRC is a disallowable expense, so it does not reduce your profits for Corporation Tax. It still goes through your accounts and onto your CT600, and it is then added back in the tax computation (penalties and fines in HMRC's Business Income Manual).

The interest is treated the other way round, and that is the part companies most often get wrong. Late payment interest on Corporation Tax counts as a loan relationship debit, so it is deductible, and interest HMRC pays you on an overpayment is taxable (Corporation Tax: interest charges). Pay Corporation Tax 30 days late and you can deduct the interest but not the penalty, and the two end up in different places in the computation. Interest and fees on a loan you took out to pay the bill are a different question again, covered in our guide to whether interest on a business loan is tax deductible.

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If the return was wrong rather than late

A return that turns out to be wrong is not automatically a penalty. If you took reasonable care and still got it wrong, there is no penalty at all, which is the part that rarely gets said out loud. HMRC names two things as evidence of reasonable care: keeping proper records, and asking HMRC or an adviser when you are not sure.

Beyond that, the penalty is a percentage of the extra tax, and two things decide it: whether the error was careless or deliberate, and whether you told HMRC before they found it.

Telling HMRC before you have any reason to think they have found the error, or are about to, is an unprompted disclosure, and it lowers the minimum you can be charged (compliance checks: penalties for inaccuracies in returns or documents). Deliberately hiding an inaccuracy is treated as a separate matter from getting something wrong, and HMRC can take it through the courts.

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HMRC penalty FAQs

Can I be made personally liable for my company's tax penalty?

Normally the company pays, not you. HMRC can move a National Insurance penalty onto a director personally through a personal liability notice, but only where the company's failure came down to that director's neglect or fraud, which is a narrow set of cases.

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Will an HMRC penalty show up on my company's credit report?

A penalty on its own is not reported to credit reference agencies. What can reach your file is a county court judgment, if HMRC takes the debt to court, and late accounts at Companies House, because the filing date sits on the public register for anyone to look up.

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Should I speak to an accountant?

An accountant can check whether a penalty has been worked out correctly, judge whether you have a reasonable excuse worth appealing, and tell you what a realistic Time to Pay offer looks like for your company.

Everything above is general information about the rules rather than tax advice, and your own circumstances may change the answer.