Self Assessment late payment penalties

Late payment vs late filing

These are two different penalty regimes. Late filing penalties apply if you do not submit your tax return on time, even if you owe nothing. Late payment penalties apply if you do not pay the tax owed on time, even if you filed your return.

You can be hit with both at once. The most expensive scenario is filing late and paying late — they stack.

How late payment penalties build up

• Interest from day one — HMRC charges daily interest on unpaid tax from the day after the deadline. The rate is set by the Bank of England base rate plus 2.5%.
• 30 days late — 5% surcharge on the tax still unpaid.
• 6 months late — Another 5% surcharge on the amount still owed.
• 12 months late — Another 5% surcharge.

So if you owe £5,000 and still have not paid 12 months later, you will have been charged three lots of 5% surcharges (£750 in total) plus daily interest on the original £5,000 throughout that period.

What to do if you cannot pay

The single most important rule: file your return on time even if you cannot pay. Filing on time avoids the £100 late filing penalty, and signals to HMRC that you are engaging with them.

Then contact HMRC as soon as possible to set up a Time to Pay arrangement. If approved, you pay your bill in monthly instalments over an agreed period (usually up to 12 months for Self Assessment). Interest still accrues, but the surcharges may be paused or reduced.

You can usually set up a Time to Pay arrangement online if you owe less than £30,000 and are within 60 days of the deadline.

If you have already missed the deadline

Pay what you can immediately. Even a partial payment reduces the base on which interest and surcharges are calculated. Then contact HMRC to discuss the rest.

If you have a "reasonable excuse" — serious illness, bereavement, technical problems with HMRC's systems — you can appeal the surcharges. But this is judged strictly. "I forgot" or "I could not afford it" are not reasonable excuses.

Summary

• Daily interest applies from the day after the deadline
• 5% surcharges at 30 days, 6 months, and 12 months
• File on time even if you cannot pay — that avoids stacking penalties
• Contact HMRC to arrange Time to Pay if you cannot settle in full