If you run a small business in the UK, you’ll already know that HMRC and Companies House deadlines are not flexible. Miss one, and you’re facing penalties. Miss a few, and things escalate quickly.

This guide breaks down what actually happens if you’re late filing or paying tax, including HMRC interest rates, so you know exactly what you’re dealing with. Plus how fast costs can build up.

HMRC interest rates for 2026/27

Let’s start with something that often gets missed. You can file everything on time and still end up paying more if you miss the payment deadline. That’s because HMRC treats interest and penalties as two separate charges.

Interest vs late payment penalties.

These are often confused, but they work in completely different ways.

HMRC interest rates explained

HMRC interest rates are charged when tax is not paid on time. They are separate from penalties and are applied daily until the full balance is cleared.

They can also apply when HMRC owes you a repayment, although repayment interest is usually lower than late payment interest.

HMRC interest rates explained

HMRC interest rates are charged when tax is paid late. They are separate from penalties and are applied daily until the full balance is cleared.

We often see that customers There are two main situations where HMRC applies interest:

• When you pay tax late (late payment interest).
• When HMRC owes you a repayment (repayment interest).

Most people only ever deal with late payment interest, where charges build up on unpaid tax after the deadline. If HMRC owes you money, they may also pay interest on repayments, although this is usually at a lower rate.

The key thing to understand is that HMRC interest rates are separate from penalties. They don’t replace late payment penalties, they apply alongside them.

What about if I’m struggling to pay? 

If you can’t pay your tax bill on time, don’t ignore it. HMRC may let you spread the cost.This is called a “Time to Pay” arrangement. It’s usually considered if you're temporarily short on money, you can realistically clear the debt over time, and if  you’re engaging with HMRC rather than avoiding them.

For Self Assessment, some people can access support more easily, but you still need to file your return on time. Filing late just adds extra penalties on top of an already stressful situation.

For VAT or Corporation Tax, HMRC will usually ask for a breakdown of your income and spending before agreeing a plan.

Remember, even with a payment plan in place, interest normally still applies while you’re paying it off. 

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So with that cleared up, here’s how the different penalties work depending on the tax you’re dealing with.

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

Payment penalties will apply 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.

On top of the late payment penalties, HMRC also charges interest on unpaid tax (HMRC interest rates are explained above).

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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. 

On top of VAT late payment penalties, HMRC also charges interest on late payments, which builds up daily until the balance is cleared. You can check out what the current HMRC interest rates are here (explained above in further detail). 

Corporation Tax Return (form CT600)

If you run a Limited Company, you’ll need to pay Corporation Tax and file a Company Tax Return (CT600) each year. These are two separate deadlines to be aware of:

• Paying Corporation Tax owed.
• Filing your Company Tax Return.

Key deadlines:

Late filing penalties:

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.