HMRC penalty points, late filing fines and how to appeal
Two penalty systems now run side by side. Which one applies depends on who you are and which tax year the deadline belongs to, and the way to appeal is broadly the same for both.
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A late filing penalty is usually the first penalty anyone receives from HMRC, and often the first HMRC letter they have had at all. The amounts start small and grow quickly, and from April 2026 there is a second, points-based system for people within Making Tax Digital for Income Tax. The two work differently, and it is worth knowing which one a letter has come from before deciding what to do about it.
This guide covers the Self Assessment late filing and late payment penalties, HMRC penalty points under the new regime, interest, what counts as a reasonable excuse, and how to appeal.
Which penalty regime applies in 2026-27
There are now two sets of rules for personal tax returns.
- The existing Self Assessment penalties, under Schedules 55 and 56 to the Finance Act 2009. These still apply to most people. They also apply to every tax year before the year someone joins Making Tax Digital, so the 2025-26 return, due by 31 January 2027, is under the existing penalties even for people who joined from 6 April 2026.
- The points-based regime, under Schedules 24 and 26 to the Finance Act 2021. It applies to VAT for accounting periods starting on or after 1 January 2023, and to income tax for people within Making Tax Digital for Income Tax from the tax year they join.
Sole traders and landlords whose qualifying income from self-employment and property was over £50,000 in 2024-25 were required to use Making Tax Digital from 6 April 2026. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028. Partnership, trust and estate, and non-resident company returns stay under the existing penalties.
HMRC’s guidance also says that from April 2027 the new penalties will apply to everyone who submits a personal Self Assessment return, whether or not they are within Making Tax Digital.
Self Assessment late filing penalties
The online return for 2025-26 is due by 31 January 2027; a paper return was due by 31 October 2026. If the return is late, the penalties under Schedule 55 build up like this:
| How late the return is | Penalty |
|---|---|
| One day | £100, even if no tax is owed |
| 3 months | £10 a day for up to 90 days, a maximum of £900 |
| 6 months | 5% of the tax due or £300, whichever is greater |
| 12 months | A further 5% of the tax due or £300, whichever is greater |
A return filed thirteen months late can therefore carry at least £1,600 in late filing penalties before any late payment penalty or interest is added. Where a partnership return is late, every partner is charged.
The 12-month penalty is higher where someone has deliberately withheld information HMRC needs to assess the tax: 70% of the tax where the withholding was deliberate, and 100% where it was deliberate and concealed (or £300 if greater), with higher percentages for some offshore matters. Those percentages can be reduced for disclosure. Our guide to careless, deliberate and concealed penalties explains how behaviour and disclosure set the figure.
Self Assessment late payment penalties
Tax for 2025-26 is due by 31 January 2027. Under Schedule 56, if it is still unpaid HMRC charges a penalty of 5% of the unpaid tax at each of three points: 30 days, 6 months and 12 months after the due date. Each is worked out on what is still outstanding at that point. These penalties do not apply to payments on account.
HMRC penalty points in 2026: Making Tax Digital for Income Tax
For someone within Making Tax Digital, the fixed £100 and daily penalties are replaced by late submission points.
- One point for each missed deadline. Only one point is given per deadline, even for someone with several businesses.
- No penalties for late quarterly updates in 2026-27. Quarterly updates are still required, but for this first year only a late tax return earns a point. From 2027-28 a late quarterly update earns a point too.
- The threshold is 4 points. Reaching it brings a £200 penalty, and every further missed deadline while at the threshold brings another £200.
- Points expire. Below the threshold, each point is removed 24 months after the missed deadline. At the threshold, points stay until the person has met every deadline for 12 months and has sent everything outstanding from the previous 24 months.
Income tax points are kept separately from any VAT points. People who volunteered for Making Tax Digital have slightly different rules, including a lower threshold for their annual return, set out in HMRC’s guidance for volunteers.
Late payment penalties under the new regime
Late payment penalties are not points-based. They apply to each late payment of the balance of tax, and to tax due after an amendment or assessment, but not to payments on account. For tax for the 2026-27 year, which is due by 31 January 2028:
| How late the payment is | Penalty |
|---|---|
| Up to 15 days | None |
| 16 to 30 days | 3% of the tax unpaid at day 15 |
| 31 days or more | 3% of the tax unpaid at day 15, plus 3% of the tax unpaid at day 30, plus a further penalty at 10% a year on the unpaid tax, charged daily from day 31 |
In the first year under the new rules HMRC allows 30 days rather than 15 before penalties start. It also says that if someone contacts it early and a payment plan is agreed and kept to, penalties are paused from the date of contact. HMRC’s guidance shows the day-15 and day-30 percentages rising to 4% for 2027-28. See our guide to Time to Pay arrangements if paying in full is the difficulty.
VAT penalty points
VAT has used the same structure since 1 January 2023. The threshold depends on how often returns are due: 2 points for annual returns, 4 for quarterly and 5 for monthly, with a £200 penalty at the threshold. Late VAT is charged at the same 3%, 3% and 10% a year rates, which applied from 1 April 2025.
Interest is not a penalty
HMRC charges late payment interest on unpaid tax from the day after it was due until it is paid, under section 86 of the Taxes Management Act 1970 for Self Assessment. Since 6 April 2025 the rate has been the Bank of England base rate plus 4 percentage points, so it moves whenever base rate does. Interest is also charged on penalties paid late.
Because interest compensates HMRC for the delay rather than punishing it, there is no reasonable excuse defence to interest. An appeal can remove a penalty, but the interest on the tax itself will normally remain.
Reasonable excuse: what HMRC accepts
A penalty is not due if the person had a reasonable excuse for the failure. The rule is the same in substance under both regimes (paragraph 23 of Schedule 55 and paragraph 16 of Schedule 56 to the Finance Act 2009; paragraph 19 of Schedule 24 and paragraph 12 of Schedule 26 to the Finance Act 2021). Three limits are written into the law:
- Lack of money is not an excuse, unless it was caused by events outside the person’s control.
- Relying on someone else, such as an agent, is not an excuse unless the person took reasonable care to avoid the failure.
- Once the excuse ends, the return must be filed or the tax paid without unreasonable delay.
HMRC’s published examples of what may count include the death of a partner or close relative shortly before the deadline, an unexpected stay in hospital, serious illness, a computer or software failure while preparing the return, problems with HMRC’s online services, fire, flood or theft, and unforeseeable postal delays. It says it will not accept that a payment failed for lack of funds, that the online system was too difficult, that no reminder was received, or that the return contained a mistake.
The test is objective. Following the Upper Tribunal in Perrin v HMRC [2018] UKUT 156 (TCC), the question is whether what the person did was reasonable for someone with their experience and circumstances, at the time. A genuine belief is not enough if it was not a reasonable one.
HMRC can also reduce a penalty for special circumstances, though inability to pay does not qualify.
How to appeal a Self Assessment penalty
You usually have 30 days from the date on the penalty notice to appeal. For an individual’s Self Assessment penalty you can appeal online, or by post on form SA370 (SA371 for a partnership). You will need the date of the penalty notice, the dates the return was filed and the tax paid, and the details of the excuse, with dates.
Some practical points:
- Say what happened, when, and when it ended. An appeal that sets out the timeline and shows the return was filed promptly afterwards is easier to assess than a general statement.
- Consider paying while you appeal. HMRC will not collect a penalty under appeal, but if the appeal fails, interest runs on the penalty from its due date. If the appeal succeeds, HMRC repays what was paid, with interest.
- If no return was needed at all, ask HMRC to cancel the penalty rather than arguing an excuse.
Under the points-based regime HMRC sends a letter for each point, each £200 penalty and each late payment penalty, and you can appeal a point as well as a penalty. The letter explains how.
Late appeals, reviews and the First-tier Tribunal
A late appeal can still be made. Under section 49 of the Taxes Management Act 1970, HMRC must accept it if you ask in writing, had a reasonable excuse for missing the 30 days, and asked without unreasonable delay once that excuse ended. If HMRC refuses, the tribunal can give permission.
If HMRC rejects the appeal, it will offer a review by an officer not involved in the decision. You have 30 days from the offer to accept it or appeal to the tribunal instead. A review usually takes 45 days and ends by upholding, varying or cancelling the penalty. You can also ask for a review at any time after appealing.
The First-tier Tribunal (Tax Chamber) hears the appeal if the review does not resolve it, normally within 30 days of the review conclusion letter. The tribunal decides for itself whether the excuse was reasonable; it is not limited to checking HMRC’s view.
Sources
- Finance Act 2009, Schedule 55 (penalties for failure to make returns), paragraphs 3 to 6, 16 (special reduction) and 23 (reasonable excuse)
- Finance Act 2009, Schedule 56 (penalties for failure to pay tax), paragraphs 3, 9 (special reduction) and 16 (reasonable excuse)
- Finance Act 2021, sections 116 and 117, Schedule 24 (penalty points and penalties for failure to make returns) and Schedule 26 (penalties for failure to pay tax)
- Taxes Management Act 1970, section 49 (late notice of appeal), sections 49A to 49I (reviews) and section 86 (interest on overdue tax)
- Perrin v HMRC [2018] UKUT 156 (TCC)
- HMRC, “Self Assessment tax returns: penalties” and “Tax appeals” (GOV.UK)
- HMRC, “Check when to appeal a Self Assessment penalty for late filing or late payment” (GOV.UK)
- HMRC, “Penalties for Making Tax Digital for Income Tax” and “Find out if and when you need to use Making Tax Digital for Income Tax” (GOV.UK)
- HMRC, VAT late submission and late payment penalty guidance (GOV.UK)
- HMRC, “Rates and allowances: HMRC interest rates for late and early payments” (GOV.UK)
- HMRC Compliance Handbook, CH160900 onwards (reasonable excuse)
This guide is general information, not advice on any particular case.