Starting a new business? Get 40% off our accountancy services for 3 months! 😎


Filling out your tax return is a confusing process, so the idea of submitting a tax return on time and getting everything right can be quite daunting. HMRC’s automatic penalty system can add to the pressure, but it’s good to know what’s what well in advance.

There are different types of penalties depending on what HMRC believes the issue is, such as overdue tax returns, late payments, or even common errors which can lead you to misrepresent your tax liability.

If you do find yourself with a tax return penalty, the amount of the fine will usually factor in the nature of the issue, whether or not HMRC suspect non-compliance, and any interest that might be due.

The different types of tax return penalties

There are a number of different tax return penalties that you could potentially receive if HMRC thinks you aren’t complying with your tax obligations. It’s important to understand how each one works so you know how much you can expect to pay and any other further repercussions.

It’s worth noting that the MTD for VAT penalty system is a bit different.

Overdue tax return penalty

If you miss the deadline for your tax return submission, you will receive a late filing penalty. After the initial penalty, there are additional charges applied until the outstanding tax return has been submitted.

  • £100 automatically applied once the submission deadline has passed
  • £10 per day once the return is 3 months late, for up to 90 days
  • £300 or 5% of the tax due (whichever is more) once the return is 6 months late
  • An additional £300 or 5% of the tax due (again, whichever is higher), applied once the form is 12 months late

If you fail to file your tax return after 12 months, you could also lose your right to things like the ability to appeal, or to claim certain types of relief. HMRC can also enforce filing, and even an investigation of your tax records.

Penalties if you are late paying your tax bill

If you miss the deadline for paying the tax you owe, HMRC will issue you a late payment penalty. This type of fine is worked out as a percentage of the tax owed and can increase for as long as the tax is left unpaid.

  • 5% of unpaid tax due, applied after payment is 30 days late
  • An additional 5% of unpaid tax due, applied after payment is 6 months late
  • A further 5% of unpaid tax, applied after the payment is 12 months late
These penalties are in addition to any interest on the unpaid tax, which is currently charged at the Bank of England base rate plus 2.5%.

You will not be liable for additional late-filing charges if you have made a Time to Pay agreement with HMRC.

Penalties for inaccurate tax returns

Even if you submit your tax return on time, you can still be charged a penalty if HMRC thinks you have submitted inaccurate information.

This type of fine depends on the scale and severity of your error. The amount is also influenced by whether or not you disclose the error to HMRC, and if this disclosure is prompted or unprompted.

Prompted by HMRC Unprompted (you reported it yourself)
Careless 15% – 30% 0% – 30%
Deliberate 35% – 70% 20% – 70%
Deliberate and Concealed 50% – 100% 30% – 100%

Failure to notify penalty

This type of penalty comes into play if a taxpayer fails to let HMRC know about a change in their tax status.

A change in tax status occurs if you become the director of a new business, or start taking earnings through property, for example. Basically, any new source of income or capital gain that you haven’t already told HMRC about.

Failure to notify penalties range from £100 to £3,000 depending on your individual situation.

As is the case with inaccurate penalties, this type of charge is also dictated by whether or not you disclose the omission to HMRC and if this disclosure is prompted by them, or unprompted.

Prompted by HMRC Unprompted (you reported it yourself)
Not Deliberate 0% – 30% within 12 months
(20% – 30% thereafter)
0% – 30% within 12 months
(10% – 30% thereafter)
Deliberate 35% – 70% 20% – 70%
Deliberate and Concealed 50% – 100% 30% – 100%

What to do if you get a penalty from HMRC

You’ve received a penalty from HMRC — what do you do next? The answer to this question depends on your circumstances.

File your late return and pay the overdue tax

If you’ve filed your tax return late or failed to settle your tax bill, you’ll need to accept your error, pay the fine and learn from your mistakes for next time.

Appeal a tax penalty

If you don’t feel that the penalty is fair and justified, or you think HMRC has made a mistake, you can appeal the fine. If HMRC agrees that you have what is deemed a ‘reasonable excuse’, the penalty may be lifted. There is a useful guide on the GOV.UK website on how to appeal against a tax decision you disagree with.

Seek payment support

A Time to Pay arrangement is an example of the payment support available. This is a plan that can be put in place to enable you to pay your tax bill in instalments if you can’t afford to settle it in full. HMRC will have to verify your eligibility for this type of support.

Comprehensive tax return services

From only £24.50 per month

Learn more

Top tips to avoid tax return penalties

There are ways to minimise the risk of receiving a tax return-related penalty from HMRC.

Practice good bookkeeping habits

When you stay on top of your bookkeeping, it means your accounts and financial records are more likely to be accurate and up to date. This reduces the risk of error but also stops delays in the tax return process that could result in missed deadlines.

Don’t leave your tax return too late

This one goes without saying but leaving your tax return to the last minute makes for a rushed process that is more conducive to mistakes and late filing. Get it in as soon as possible!

Learn more about our online accounting services and how we can support you with your tax returns. Call 020 3355 4047 and get an instant online quote.

About The Author

Stephanie Whalley

Serial snacker, compulsive cocktail sipper and full time wordsmith with a penchant for alliteration, all things marketing and pineapple on pizza.

More posts by this author
Notify of
Inline Feedbacks
View all comments

Read more posts...

Maternity Pay for Self-Employed People

Being self-employed can offer the kind of freedom and flexibility many of us dream about. But if you’re looking to start or…

Read More

What are Payments on Account?

Payments on account are a type of advance payment that you might need to make towards your Self Assessment tax bill. In…

Read More

Tax and VAT for Online Dropshippers

Selling online through your own website or on an ecommerce platform can be a great way to launch a business, or just…

Read More
Back to Blog...

Confirm Transactions

The number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct?

Yes, submit my quote
No, let me change it

Please contact our sales team if you’re unsure

VAT Returns

It is unlikely you will need this service, unless you are voluntarily registered for VAT.

Are you sure this is correct?

Yes, the business is VAT registered
No, let me change it

Call us on 020 3355 4047 if you’re not sure.


You will receive our bookkeeping software Pandle for free, as part of your package.

You can use this to complete your own bookkeeping, or we can provide a quote to complete your bookkeeping for you.

Please select and option below:

I will do my own bookkeeping
I want you to do my bookkeeping

Call us on 020 3355 4047 if you’re not sure.