Penalties: Late Filing

The current late filing penalty regime was introduced by section 106 and Schedule 55 of the 2009 Finance Act.

A person is liable to a penalty if they fail to file a return or other document on time, unless: 

• They have a Reasonable excuse. 
• The return or other document is filed without unreasonable delay after the reasonable excuse ends. 

A person is liable for a late filing penalty where they have failed to deliver a return or other document to HMRC by the date by which it must be made or delivered. 

• The date on which a return or other document is to be filed will be specified in the relevant legislation. 
• Each specific tax has its own filing date detailed in the legislation. 

The first penalty will be an 'initial' fixed penalty:

• This becomes due the day after the missed filing deadline. 

Further penalties are then issued if the return or other document remains outstanding at a specific date, typically three, six or twelve months:

• Further penalties are incurred at the end of a period from the penalty date, i.e., three months after the initial penalty date. 

What's new?

From 1 April 2026, penalties for late filing of Corporation Tax returns have increased, see 'Overview' for details. 

Electronic communications

The Income and Corporation Taxes (Electronic Communications) (Amendment) Regulations 2023 provide that, from 6 April 2023, HMRC may digitally issue notices of daily late-filing penalties.

Proposed changes to the penalty regime

Finance Act 2021 introduced a points-based late filing penalty regime, which replaced previous late filing penalties for VAT from January 2023.

Individuals who are mandated into MTD for Income Tax will also be subject to the new regime. Those who are voluntarily taking part in the testing program will also be subject to the new regime, but only in respect of the annual tax return.

At Budget 2025 it was announced that no penalty points for late submission of the first four quarterly updates for individuals joining MTD in April 2026 but quarterly updates must still be submitted before the end of year tax return can be submitted. This easement does not apply to the end of year tax return for 2026 to 2027 (due 31 January 2028).

The new system will replace the schedule 55 FA 2009 penalty regime for the relevant returns.

• A point will accrue for each failure to submit on time.
• When the point threshold is reached, a penalty will be charged.
• Points will be reset after a period of good compliance.

See Penalties: Making Tax Digital

 The regime was rolled out gradually as follows:

Penalties under the Sch 55 penalty regime

Penalties are all charged at the same rate for all the taxes except for:

• PAYE: see below
• CIS: see below
• Offshore income: see below
• Soft Drinks Industry Levy: see below

*The penalties for being 6 months late and 12 months late are subject to the interaction rule in para 17(3) and taken together, they should not exceed 100% of the tax due. See Grounds for Appeal: HMRC error or flaw. 

**Where the late filing relates to offshore income and the territories are listed as either Category 2 or 3, the penalties are increased. For Category 3 territory inaccuracies, penalties can be as much as 200% of the tax. .

See:

• Penalties: SA late filing and payment for worked examples.
• Penalties, grounds for appeal: HMRC error for cases on miscalculation of penalties and errors in penalty notice and other failures and cases featuring successful and unsuccessful appeals. 
• Penalties: Grounds for Appeal toolkit for other reasons to appeal penalties
  

Penalties for late filing of Non-Resident CGT returns

These are calculated under Schedule 55 (as above), although subject to special non-statutory transitional provisions:

• No penalties were charged for late filing before 6 May 2016.
• In May 2017 HMRC confirmed that it would not charge daily penalties.

Appeal against NRCGT late filing penalties, see

• Non-Residents CGT returns: Penalties & Appeals
  
  • This note tracks the wide range of different decisions with regards to reasonable excuse for failing to file a return and penalty miscalculation issues.
• Penalties: Grounds for Appeal toolkit
  • This takes you step by step through the appeal process.

Penalties for late filing of online property disposal returns

For disposals completing on or after 6 April 2020, gains on UK residential property disposals must now be declared on HMRC's online CGT disposal return, and the tax paid, using the Capital Gains Tax UK property disposal service, within 30 days of completion (60 days from 27 October 2021).

These are also calculated under Schedule 55 (as above):

• No penalties were charged for late filing before 1 August 2020..

You can appeal against penalties issued, see Penalties: Grounds for Appeal toolkit and How to appeal a tax penalty (subscriber version)

Penalties for late PAYE returns

Sch 55 penalties were to apply to PAYE from 2013-14.

Under the change over to Real Time Information (RTI) filing, sch 55 did not apply until March 2015.

PAYE late fiing penalty rates 

This fixed penalty applies to late returns for each month after an employer has notified HMRC of their liability and to months that they have missed before that notification. The first month is excluded for the first failure in a tax year.

• For PAYE Annual Returns due for 2012-13 the late filing penalty is £100 per month, per 50 employees.
• If the filing deadline of 19 May is missed, the fine will be £100, even if only a part-month late.
• HMRC will not raise a penalty notice until you are four months late, and it will not do this until September, so if you forget to file a return you will probably incur a penalty of £400.

For further information on RTI penalties, see Tax Penalties RTI

Penalties for late CIS returns

• See also Penalties: Construction Industry Scheme for a detailed breakdown of old and new and transitional measures

 CIS: failure to register

When the first CIS return of a new contractor is filed, the total penalty for all fixed-penalty defaults in the capping period is capped at a maximum of £3,000. See Penalties: CIS (Construction Industry Scheme) for further detail. 

Offshore income and gains

The 2010 Finance Act modified Sch 55 introducing tougher penalties for category 2 and 3 offences relating to offshore income and gains. The effect is that penalties for inaccuracy increase to 45% for a careless but not concealed error to a maximum of 200%.

See Penalties: Offshore Income, CGT and IHT

Late LBTT returns

Penalties for late submission of a LBTT return are:

• Initial late submission - £100.
• 3 months late - £10 per day, up to £900.
• 6 months late - £300 or 5% of the tax due, whichever is greater.
• 12 months late - £300 or 5% of the tax due, whichever is greater.

Following several tribunal cases (see cases below) Revenue Scotland issued a Technical update about daily filing penalties, advising that where they have already been issued and paid, no refunds will be given and those daily penalties would continue to be charged where returns were more than three months late but they would be reviewing the administrative process for issuing the penalties. 

Soft Drinks Industry Levy

Penalties apply for failure to file returns within 30 days.

They apply to late returns starting with the June 2019 return.

 See Soft Drinks Industry Levy

All penalties

Determination of penalty when return is made

HMRC may determine the amount of tax due in order to raise a tax geared penalty. The amount will be re-assessed when the taxpayer makes the return.

Appeal and excuse

No penalty applies where the taxpayer satisfies HMRC or the tribunal on appeal that they have a reasonable excuse for the failure.

• Insufficiency of funds or relying on another to do something is not a reasonable excuse.
• Following the end of the reasonable excuse circumstances, the failure has to have been remedied without unreasonable delay.
• Proof of posting and other excuses, see Tax penalties: grounds for appeal

Daily penalties

There have been various cases which look at whether penalties have been correctly issued, see  Appeals: Grounds for appeal toolkit

Electronic communications

The Income and Corporation Taxes (Electronic Communications) (Amendment) Regulations 2023 provide that, from 6 April 2023, HMRC may digitally issue notices of daily late-filing penalties.

Changes to the penalty regime

Measures in Finance Bill 2019 which proposed to replace the Schedule 55 FA 2009 regime with a points-based system of late filing penalties: designed for Making Tax Digital and to initially apply to Income Tax Self Assessment and VAT, were shelved in Budget 2018. They were instead included in Finance Act 2021.

The new penalty system applies to late filing and late payment and is effective for VAT for accounting periods beginning on or after 1 January 2023 (delayed from 1 April 2022), following the revised commencement timetable for Making Tax Digital for Business.

The new rules come into effect for Income Tax Self Assessment (ITSA) as follows:

• For taxpayers with business or property income over £50,000: accounting periods beginning on or after 6 April 2026 (delayed for two years).
• For taxpayers with business or property income over £30,000: accounting periods beginning on or after 6 April 2027.
• For taxpayers with business or property income over £20,000: accounting periods beginning on or after 6 April 2028. 
• General partnerships from a date yet to be determined. 

A  one-year period of grace applies to MTD filings, as the legislation specifies HMRC can delay to allow for a familiarisation period’

The new system replaces the Schedule 55 FA 2009 penalty regime for the relevant returns.

• A point will accrue for each failure to submit on time.
• When the point threshold is reached, a penalty will be charged.
• Points will be reset after a period of good compliance.

See Penalties: Making Tax Digital

Coronavirus

The government made certain relaxations to the tax penalty regime as a result of the coronavirus (COVID-19) pandemic; these include:

• Deferral of Income Tax payments on account due by 31 July 2020 for the 2019-20 tax year under Self Assessment until 31 January 2021. No penalties were charged in the deferral period. See COVID 19: Deferring Income Tax payments
• Time to pay assistance: see COVID-19: Time to Pay
• Appeals: Reasonable excuse:  updated guidance on when taxpayers have a reasonable excuse for the late filing of returns or late payment of tax to specifically include being affected by Coronavirus. See Coronavirus is a reasonable excuse
• Appeals: deadline extended: for appealing tax penalties and decisions from 30 days to up to 3 months where the taxpayer or their business has been affected by COVID-19. See COVID-19: Tax appeal deadlines extended.
• 2019-20 Self Assessment late filing penalties usually charged on 1 February 2021 were not charged immediately. Taxpayers had until 28 February 2021 to file their tax return before a £100 late filing penalty was charged. See 2019-20 Tax return penalties delayed to 28 February
• 2020-21 Self Assessment late filing penalties usually charged on 1 February 2022 were not charged immediately. Taxpayers had until 28 February 2022 to file their tax return before a £100 late filing penalty was charged.
  • 2020-21 Self Assessment late payment penalties were not charged immediately. Taxpayers had until 1 April 2022 to pay or set up a time to pay agreement. 
  • See 30-day penalty waiver for 2020-21 tax return filing & payment.

Reasonable excuse

In Denise Howarth v HMRC [2025] TC09508, the First Tier Tribunal (FTT) found that a taxpayer who had failed to complete the final step to submit her tax return had a reasonable excuse for not submitting on time.

In Sayrun Lamuth v HMRC [2025] TC09578, the First Tier Tribunal (FTT) found that a taxpayer who did not understand the reporting requirements for her share of rental income had a reasonable excuse for the late payment of tax.

In Michael Breen v HMRC [2022] TC08482, the FTT stated that while mental health could constitute a reasonable excuse, it would need to have deteriorated to such an extent that the taxpayer could not deal with their affairs, submit or prepare to submit their tax return. This was not the situation in this case.

In Caris Properties Limited v HMRC [2019] TC7481, the First Tier Tribunal (FTT) upheld tax-geared penalties for a late filed Corporation Tax return; Brexit was not a reasonable excuse.

In Alexander Steele v HMRC [2018] TC06717, the taxpayer had a reasonable excuse as he could not have known that he was required to file a Tax Return until he received HMRC's notices to file:

• There was no legal reason why he should have notified chargeability.
• There was no legal obligation to tell HMRC he had moved. He was employed and his employer was obliged to provide HMRC with his current address in various returns.
• HMRC issued the notices to an old address, and by the time he received them, the deadline had passed and the penalties had been issued.

In McNamara Joinery Ltd v HMRC [2016] TC 05278, problems getting hold of HMRC by phone were found to be a reasonable excuse for late payment of VAT. The taxpayer had been assessed a surcharge as they had been unable to get through to HMRC to agree an extension before the filing date.

In PJD AV Services Ltd v HMRC [2019] TC7336, the First Tier Tribunal refused to allow a late appeal against a Corporation Tax late filing penalty; it was up to the company, not its agent, to ensure its tax affairs were up to date.

Voluntary tax returns

In Gerrit Wals v HMRC [2026] TC09855, the First Tier Tribunal (FTT) found that late filing penalties could not apply to voluntary Self Assessment tax returns, for which HMRC had not issued a notice to file. 

Late appeal

In Paul Needham vs HMRC [2024] TC09342, the First Tier Tribunal (FTT) found that failure to receive ‘notice to file’ letters and a prolonged lack of engagement from HMRC, were not reasons to permit a late appeal.

LBTT returns

In Foodwood Limited v Revenue Scotland [2020],  the First Tier Tribunal (FTT) for Scotland Tax Chamber was held that a reasonable excuse against a £100 penalty does not include relying on a reminder from Revenue Scotland to submit a three-year LBTT Lease Review Return (LBTT return). 

In Shu Fang Yang v Revenue Scotland [2020], the First Tier Tribunal (FTT) for Scotland Tax Chamber held that ignorance of the law is not a reasonable excuse for late submission of the three-year LBTT Lease Review Return (LBTT return).

In Michael Robert Harrison and Sharon Ross v Revenue Scotland [2019] FTSTC 5, the Scottish Tribunal again allowed an appeal against daily penalties for late-filed LBTT returns. The law on penalties was not complied with.

In Begbies Traynor (Central) LLP v Revenue Scotland [2019] FTSTC 4 the Scottish First tier tribunal allowed an appeal against penalties for a late LBTT return; Revenue Scotland had not met the legal conditions to permit them to charge daily penalties.

Useful guides on this topic

Client guide: Reasonable care and tax penalties
What triggers a tax penalty? What standard of care is expected from a taxpayer? What is reasonable care? When is an error careless?

Appeals
How to appeal a penalty for late filing of a tax return or late payment of tax. This section covers appeals in relation to tax returns and payments for income tax Self Assessment, Corporation Tax, PAYE, Non-residents CGT, VAT, ATED, SDLT and IHT.