For every freelancer, contractor, or small business operating as a sole trader or limited company in the UK, staying compliant with Her Majesty's Revenue & Customs (HMRC) and Companies House deadlines is non-negotiable. Missing a filing or payment deadline triggers immediate penalties and fines that rapidly escalate over time, impacting your business's finances and reputation.

This guide provides a breakdown of the penalties associated with the key returns you need to submit, focusing on the financial consequences of non-compliance.

A lifeline: "time to pay" arrangements

Before we break down the various taxes and penalties you need to be aware of, it’s important to remember that if you don’t think you’ll be able to make a payment deadline, there are options available to help.

You can apply to HMRC for what’s known as a “time to pay” arrangement, where HMRC can help agree a payment structure that allows you to meet your tax obligations. This could come in particularly handy if you’re in the midst of a cashflow crisis or if you don’t think you’ll be able to meet a payment deadline

There are special arrangements in place for people who need more time to pay their personal tax bill. If you meet certain criteria you can apply for an automatic extension - though you must still file your Self Assessment by the 31st January deadline. If you’re looking for more information on how to organise a time to pay arrangement for your Self Assessment, our “What happens if I miss the deadline?” article has all the information you need. 

If you need more time to pay any other tax bill, such as Corporation Tax or VAT, HMRC will usually ask you to complete an “income and expenditure” assessment to determine how much you can afford to pay. This information will then be used to establish a payment plan which could span a number of months until your debt is paid off in full.

You can also read more about time to pay arrangements on gov.uk.

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Self Assessment

You must submit your annual Self Assessment tax return and pay any tax you owe for the previous tax year by 31st January each year. To help make this process simple, we've got lots of handy advice available on paying your self assessment bill.

HMRC issue two types of Self Assessment penalties - those for late filing, and for late payment of tax due. Both increase over time.

Late filing penalties for Self Assessment

Additional penalties may be applied if HMRC believes the taxpayer is intentionally withholding information or trying to evade tax.

Late payment penalties for Self Assessment

HMRC will issue the penalties if you do not pay your tax when it is due. You can estimate your penalty for late Self Assessment tax returns and payments by using HMRC’s online estimator. The penalties for late payment are shown below.

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Penalties for late VAT submission and payment

For VAT accounting periods starting after 1 January 2023, HMRC has replaced the old default surcharge with a new points-based system. This system treats late submissions and late payment as two separate items. 

Late submission: The penalty points system

HMRC now issues a single penalty point for every VAT return submitted late (yes, even the nil or repayment returns). A financial penalty of £200 is only charged once you reach a specific points threshold based on your filing frequency. 

How it works:

Once you hit the threshold, you receive a £200 penalty. Every subsequent late submission while you are at the threshold triggers another £200 penalty. 

How to reset VAT penalty points

To return your points to zero, you must complete a “period of compliance”. This means submitting all returns on time for a set period:

• 6 months for monthly filing frequencies.
• 12 months for quarterly filing frequencies.
• 24 months for annually filing frequencies.

Late VAT payment penalties. 

The penalties for paying your VAT late are now determined by how quickly you either pay the balance or contact HMRC to arrange a “Time to Pay” agreement. 

Late payment interest

In addition to the penalties above, HMRC charges late payment interest from the first day your payment is overdue until the date it's paid off in full. So it’s incredibly important to get it sorted quickly.

Corporation Tax Return (form CT600)

You’ll have to pay penalties if you don’t file your Company Tax Return (form CT600) by the deadline.

If your tax return is late three times in a row, the £100 penalties are increased to £500 each.

If your tax return is six months late, HMRC will write telling you how much Corporation Tax they think you must pay. This is called a ‘tax determination’. You can’t appeal against it. You must pay the Corporation Tax due and file your tax return. HMRC will recalculate the interest and penalties you need to pay.

Construction Industry Scheme (CIS)

If you are a contractor working under the CIS, you will face penalties if you miss the date for your CIS return.

Companies House - Private Limited Company annual account filing penalties

You’ll have to pay penalties if you don’t file your annual accounts online at Companies House by the deadline. The deadlines are shown in the table below:

The penalties for missing these deadlines are:

If your accounts were late the previous year then these fines will automatically be doubled so it’s important you file your accounts by the due date.

Different penalties apply to public limited companies:

Confused about small business tax?

If you’re confused about the taxes you’ll pay as a freelancer, contractor or small business, check out our jargon-free article Small business taxes – what you need to know.