Penalties for late filing or late payment

Penalties for late filing of returns and paperwork or late payment differ according to which tax you are dealing with.

Income tax self-assessment (ITSA) tax return deadlines and penalties

Where an ITSA tax return is filed late a person can be charged:

• an initial penalty of £100 on the day after the return was due
• daily penalties of £10 per day for 90 days where the return is more than three months late
• a further penalty of the greater of £300 and 5% of the tax liability where the return is more than six months late
• a further tax-geared penalty of the greater of £300 and 5% of the tax liability where the return is more than 12 months late (this penalty can be charged at a higher percentage rate if the person withheld information).

In respect of a late partnership return, a late-filing penalty is payable by every partner.

The tax liability used to determine the six month and 12-month penalties is the amount of income tax, capital gains tax and National Insurance contributions which would have been shown in the return. HMRC can determine the amount of any penalty in advance of the submission of the outstanding return by estimating the person’s tax liability to the best of their information and belief. The penalty will then be adjusted when the return is filed.

Where a person is liable to both a six month and a 12-month penalty the total of those penalties cannot exceed 100% of the person’s tax liability. The combined penalties percentage is higher if the person withheld information relating to an offshore matter or an offshore transfer.

Where a person is liable to other tax-related penalties for the same tax liability, the total amount of the tax-related penalties is restricted to the highest single penalty. Penalties for the late payment of tax, the failure to take corrective action after a follower notice and asset-based penalties are excluded.

PAYE and national insurance late payment penalties

HMRC charges late payment penalties on PAYE amounts that are not paid in full and on time. These include:

• monthly, quarterly or annual PAYE
• student loan deductions
• Construction Industry Scheme (CIS) deductions
• Class 1 National Insurance contributions (NICs)
• annual payments of employers’ Class 1A and Class 1B NICs
• determinations made by HMRC where it appears that there may be further tax payable
• decisions, for example about a person’s liability to pay NICs and the amount payable.

Late monthly and quarterly PAYE payments

The first failure to pay on time does not count as a default. The penalty percentage applied is:

Number of defaults in a tax year

Penalty percentage applied to the amount that is late in the relevant tax month (ignoring the first late payment in the tax year)