Missed tax deadlines can cost your business real money, as well as cause you plenty of administrative headaches.
HM Revenue & Customs (HMRC) issues financial penalties for late returns and overdue payments across a range of taxes, and the rules have become stricter in 2025, particularly for those affected by Making Tax Digital (MTD).
Making Tax Digital – VAT and Income Tax
The Spring Statement confirmed that HMRC is stepping up its enforcement of digital compliance. A key change is the rise in late payment penalties under MTD for VAT and Income Tax:
- If your payment is 16-30 days late, the penalty is now three per cent of the outstanding tax due on day 15 (previously one per cent).
- After 31 days, the three per cent still applies, plus another three per cent of what remains unpaid, and a daily penalty equivalent to 10 per cent per annum until full payment is made.
- These charges apply to balancing payments and post-assessment liabilities but not to payments on account.
MTD for Income Tax – Points mean penalties
From 6 April 2026, taxpayers earning over £50,000 and mandated into MTD for Income Tax will fall under a points-based penalty model:
- One late submission is allowed every 24 months.
- Each late quarterly update earns one point.
- At two points, a £200 penalty is issued.
- Additional £200 penalties follow until eight consecutive on-time returns are submitted.
- MTD for VAT and MTD for Income Tax penalties are tracked independently.
Voluntary participants in the MTD Income Tax public beta are currently exempt from late-filing penalties during the testing phase.
Corporation Tax penalties
Deadlines for Corporation Tax are strictly enforced:
- One day late – £100 fine
- Three months late – Additional £100
- Six months late – HMRC estimates your tax and adds 10 per cent of the unpaid balance
- 12 months late – Another 10 per cent penalty
- Frequent late submissions (three or more) can trigger £500 per return
VAT – Non-MTD filers also face points
Even if you are not in MTD, you’re still subject to the points-based penalty regime:
- Each missed return = one point
- Reach the threshold and incur a £200 fine
- Continue filing late? Keep paying £200 each time
Thresholds depend on return frequency:
- Annual – Two points
- Quarterly – Four points
- Monthly – Five points
A clean slate requires consistent, timely submissions over a set compliance period.
Capital Gains Tax – 60-day rule
If you sell residential property, you have 60 days to report and pay any Capital Gains Tax (CGT) due:
- £100 penalty for missing the deadline
- After six months – Extra £300 or five per cent of the tax due
- After 12 months – A further £300 or five per cent
HMRC is tightening compliance across the board.
Now more than ever, businesses must keep on top of deadlines, use up-to-date software, and maintain accurate records.
Need help with your tax compliance? Speak to our team of experts today.
