Tax deadlines can sneak up on even the most organised business owners, but if you are late filing or paying, the resulting penalties handed out by HM Revenue & Customs (HMRC) could be costly to your business, especially under the latest Making Tax Digital (MTD) rules.
So what are the risks, and how can you avoid them?
Making Tax Digital – VAT and Income Tax get tougher
Under new rules from April 2025, HMRC increased penalties for late payments of VAT and Income Tax for businesses who use MTD:
- Wait more than 15 days to pay? That is three per cent of your tax owed.
- Still unpaid after 30 days? Add another three per cent plus a 10 per cent annual interest penalty, charged daily until you pay.
These rules apply to anything owed after an assessment or amendment, but not to payments on account.
MTD for Income Tax – Points add up fast
From April 2026, businesses and individuals with income over £50,000 will join MTD for Income Tax and face a new system of penalties:
- Each late return = one penalty point
- Hit two points, and you get a £200 fine
- Keep filing late? You will get a new £200 penalty every time
- To wipe the slate clean, submit eight quarterly returns in a row on time
Corporation Tax: Be on time—or pay for it
Corporation Tax deadlines are less forgiving than ever:
- One day late = £100 fine
- Three months late = another £100
- Six months late = HMRC estimates your bill and adds 10 per cent
- 12 months late = another 10 per cent on top
Repeat offenders face £500 per late return.
VAT – Penalties for everyone, MTD or not
Even if you are not using MTD for VAT, the points-based penalty system applies:
- Each late return gets you a point
- When you reach your limit (e.g. four for quarterly returns), HMRC hits you with a £200 penalty
- Stay at the limit and file late again? That’s another £200
Points reset once you file on time for a sustained period. How long depends on your filing frequency.
Capital Gains Tax – Short window, big penalties
Selling a residential property? You have got 60 days to report and pay Capital Gains Tax (CGT):
- Miss the deadline? That means a £100 fine
- After six months – Another £300 or five per cent
- After 12 months – Same again
The Government is investing in more automated compliance. That means more enforcement, more penalties, and fewer leniencies.
Avoid the trap by keeping your books in order, sticking to deadlines, and asking for support if you are unsure. Our advisors can help you stay ahead of the rules and remain compliant.
Contact us today for professional, expert advice.