How late payment penalties differ from submission penalties
It is important to distinguish between missing a deadline to send information and missing a deadline to pay tax. Submission penalties use a points-based system where you accumulate points for late quarterly updates or tax returns. Late payment penalties are different. They apply to each late payment and are calculated as a percentage of the tax owed. They do not apply to payments on account.
The first year of the new penalties
For the tax year 2026-27, which is the first year of the new late payment penalty regime, there is a specific grace period. You have 30 days from the payment due date to pay your tax or to arrange a payment plan with HMRC. If you do this within the 30-day window, no penalty is charged.
If you miss the 30-day window, a penalty of 3% of the tax owed is charged at day 15. Note that the 30-day grace period is available once only. After the first year, the rules change slightly.
Penalty rates from 2027-28 onwards
From the tax year 2027-28, the penalty structure becomes more stringent. The initial penalty remains at 3% of the tax owed at day 15. However, a second penalty of 3% is charged at day 30. This means that if you are more than 30 days late, you will have incurred a total of 6% in fixed penalties.
Additionally, from day 31 onwards, an annual interest rate of 10% is charged daily on the unpaid tax. This daily charge continues for up to 2 years until the tax is paid in full.
| Time late | 2026-27 penalty | 2027-28 onwards penalty |
|---|---|---|
| 16 to 30 days | 3% of tax owed (or none if within first-year grace period) | 3% of tax owed |
| 31 days or more | 3% at day 15, 3% at day 30, plus 10% annual rate | 3% at day 15, 3% at day 30, plus 10% annual rate |
Late payment interest runs from the first day the payment is late until it is paid in full, separate from the penalty charges.
Payment plans and pausing penalties
If you cannot pay your tax bill on time, you can contact HMRC to arrange a payment plan. If a payment plan is agreed and you keep to the terms, penalties are paused from the date you contacted HMRC. This can help prevent further penalty charges while you clear your debt over time.
How TradeKit helps you stay on track
TradeKit is MTD ready - recognised by HMRC (reference D4K6ZS). Our software helps you keep accurate digital records and send quarterly updates on time, which is the first step in avoiding submission penalties. While we do not process payments, our clear estimates of your tax liability help you plan ahead so you can meet your payment deadlines.