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 your company 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.”
This article includes:
“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.
As a result of the Coronavirus pandemic, 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.
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.
HMRC issue two types of Self Assessment penalties – those for late filing, and for late payment of tax due. Both increase over time.
Back to top
Late filing penalties for Self Assessment
| Time after 31st 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 believes the taxpayer is intentionally withholding information or trying to evade tax.
Back to top
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.
| 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 |
Back to top
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
Back to top
Surcharge periods and VAT
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.
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.
| Number of 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) |
Back to top
VAT 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.
Back to top
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.
| What must a director do? |
Deadline |
| Pay Corporation Tax or tell HMRC that your limited company does not owe any |
Nine months and one day after your ‘accounting period’ for Corporation Tax ends |
| File a Company Tax Return |
12 months after your accounting period for Corporation Tax ends |
| 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 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.
Back to top
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 |
additional £300 penalty or 5% of CIS deductions (whichever is greater) |
Back to top
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:
| What must a director do? |
Deadline |
| File first accounts with Companies House |
21 months after the date you registered with Companies House |
| File annual accounts with Companies House |
Nine months after your company’s financial year ends |
The penalties for missing these deadlines are:
| Time after your deadline |
Penalty |
| Up to 1 month |
£150 |
| 1 to 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.
Back to top
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.
Back to top
