If you’re a freelancer, contractor or small business working as a sole trader or limited company in the UK, it’s vital you stay on top of the deadlines for filing your tax returns and accounts, as well as the various tax rates and thresholds.
If you miss a filing or payment deadline set by Her Majesty’s Revenue & Customs (HMRC) or Companies House, you’ll face immediate penalties and fines which escalate over time.
We’ve got the information you need to help you make sense of the main returns you need to submit and the financial consequences if you don’t. Please note this is not a complete list of the returns you will need to make as a company director, for that you can take a look at our article “What you need to file with HMRC and Companies House.”
HMRC
Self Assessment
You must submit your annual self assessment tax return and pay any tax you owe for the previous tax year by 31 January each year.
HMRC issue two types of Self Assessment penalties – those for late filing, and for late payment of owed tax. Both increase over time.
Late filing penalties
| Time after 31 January deadline |
Penalty
|
| 1 day |
£100 penalty |
| 3 months |
£10 daily penalty for up to 90 days (maximum £900) |
| 6 months |
5% of tax due or £300 (whichever is greater) |
| 12 months and later |
5% of tax due or £300 (whichever is greater) |
Additional penalties may be applied if HMRC believe the taxpayer is intentionally withholding information or trying to evade tax.
Late payment penalties
| Lateness |
Penalty |
| 30 days |
5% of tax due |
| 6 months |
5% of tax due at that date |
| 12 months and later |
5% of tax due at that date |
VAT
For VAT registered businesses, HMRC may issue surcharges and penalties. HMRC record a ‘default’ if:
- they do not receive your VAT return by the deadline
- full payment for the VAT due on your return has not reached their account by the deadline
Surcharges
You may enter a 12-month ‘surcharge period’ if you default. If you default again during this time:
- the surcharge period is extended for a further 12 months
- you may have to pay an extra amount (a ‘surcharge’) on top of the VAT you owe.
If you submit a late return, you will not have to pay a surcharge if you:
- pay your VAT in full by the deadline
- have no tax to pay
- are due a VAT repayment.
HMRC will write to you explaining any surcharges you owe and what happens if you default again.
How much you pay
Your surcharge is a percentage of the VAT outstanding on the due date for the accounting period that is in default. The surcharge rate increases every time you default again in a surcharge period.
This table shows how much you’ll be charged if you default within a surcharge period. You do not pay a surcharge for your first default.
| Defaults within 12 months |
Surcharge if annual turnover is less than £150,000 |
Surcharge if annual turnover is £150,000 or more |
| 1st |
None |
None |
| 2nd |
None |
2% (None if less than £400) |
| 3rd |
2% (None if less than £400) |
5% (None if less than £400) |
| 4th |
5% (None if less than £400) |
10% or £30 (whichever is greater) |
| 5th |
10% or £30 (whichever is greater) |
15% or £30 (whichever is greater) |
| 6th or more |
15% or £30 (whichever is greater) |
15% or £30 (whichever is greater) |
Penalties
HMRC can charge you a penalty of up to:
- 100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy
- 30% of an assessment if HMRC sends you one that’s too low and you do not tell them it’s wrong within 30 days
- £400 if you submit a paper VAT Return, unless HMRC has told you you’re exempt from submitting your return online.
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.
| Time after your deadline |
Penalty |
| 1 day |
£100 |
| 3 Months |
Another £100 |
| 6 Months |
HMRC will estimate your Corporation Tax bill and add a penalty of 10% the unpaid tax |
| 12 months |
Another 10% of any unpaid tax |
If your tax return is late 3 times in a row, the £100 penalties are increased to £500 each.
If your tax return is 6 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.
| Time after your deadline |
Penalty |
| 1 day |
£100 penalty |
| 2 months |
£200 penalty |
| 6 months late |
£300 penalty or 5% of CIS deductions (whichever is greater) |
| 12 months late |
£300 penalty or 5% of CIS deductions (whichever is greater) |
Companies House – private limited company
You’ll have to pay penalties if you don’t file your annual accounts online at Companies House by the deadline.
| Time after your deadline |
Penalty |
| 1 day |
£150 |
| 3 months |
£375 |
| 3 to 6 months |
£750 |
| More than 6 months |
£1,500 |
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.
