If you pay Self Assessment tax late, HMRC charges interest from the day after the due date and, on the balancing payment, adds penalties of 5% of the tax still unpaid 30 days, 6 months and 12 months after it was due. Payments on account attract interest but not these penalties on their own. If you are in Making Tax Digital for Income Tax, a different penalty regime applies from the tax year you join.

What is the difference between late payment interest and a late payment penalty?

They are separate charges with different purposes. HMRC’s Self Assessment Legal Framework manual (SALF308A) describes interest as a way of cancelling the financial advantage of paying late, not as a penalty. Interest arises automatically on any Self Assessment amount paid late, including each payment on account, the balancing payment and extra tax following an amendment (SALF305). It is charged at the Bank of England base rate plus 4%, and the rate published by HMRC is 7.75% from 9 January 2026.

Late payment penalties are punitive and sit on top of interest. For Income Tax and Capital Gains Tax they are set by Schedule 56 to the Finance Act 2009. They also cover Class 4 National Insurance and student loan repayments collected through the return. Our guide to HMRC late payment interest explains how interest is worked out day by day.

When do the 5% penalties apply?

Paragraph 3 of Schedule 56 sets three penalties, each equal to 5% of the tax unpaid at a trigger point:

  • the first, on tax still unpaid 30 days after the due date;
  • the second, on tax still unpaid 5 months after the first penalty date (the “six month” penalty);
  • the third, on tax still unpaid 11 months after the first penalty date (the “12 month” penalty).

For a balancing payment due on 31 January, HMRC’s own example in SALF308A charges the first penalty if tax is still outstanding at midnight on 2 March, the second if it is still outstanding on 2 August and the third if it is still outstanding on 2 February of the following year. In a leap year each date is one day earlier, as the Self Assessment Manual explains at SAM61390. For the 2025 to 2026 tax year, the balancing payment is due on 31 January 2027, so the trigger points fall on 2 March 2027, 2 August 2027 and 2 February 2028.

Each penalty is calculated only on what is unpaid at that point, so paying part of the debt before a trigger date reduces the next penalty. The 30 day gap before the first penalty exists, HMRC says, so that people who intend to pay on time but slip, or who know they cannot pay, have time to pay or contact HMRC.

Which payments attract a late payment penalty?

The Self Assessment Manual (SAM61250) says late payment penalties apply to balancing payments, determinations, amendments and HMRC assessments, but not to interest, late filing penalties or payments on account. That last point catches people out. A missed payment on account does not itself trigger a penalty, but any part of it still unpaid at the balancing payment due date is added to the balancing payment, and the penalty is then calculated on the total.

Extra tax from an amended return has its own timetable. Under Schedule 3ZA to the Taxes Management Act 1970, tax payable because you amended your return is due 30 days after the notice of amendment, if that is later than the normal date. A penalty arises only if that extra tax is still unpaid 30 days after that new due date, so HMRC notes in SALF308A that no penalty is due if you pay within 60 days of the amendment. Interest still runs from the original due date. See our guide to amending a Self Assessment tax return for how the bill changes.

How much could late payment cost? A worked example

Illustration only. Sam’s 2025 to 2026 return shows a balancing payment of £4,000 due on 31 January 2027. Sam pays nothing until 15 March 2028 and has not agreed a payment plan.

Charge When it arises Amount
First penalty Unpaid at 2 March 2027 £200 (5% of £4,000)
Second penalty Unpaid at 2 August 2027 £200
Third penalty Unpaid at 2 February 2028 £200
Interest From the due date until payment About £347 if the rate stays at 7.75%

The penalties total £600, on top of the interest. If Sam also filed late, the separate late filing penalties described in our guide to Self Assessment deadlines and penalties would be added. Each penalty must be paid within 30 days of the penalty notice, after which interest runs on the penalty as well (SALF308A, paragraph 11 of Schedule 56).

Can a Time to Pay arrangement stop the penalties?

Yes, if it is agreed in time. Paragraph 10 of Schedule 56 says that where you ask HMRC to defer payment and HMRC agrees, you are not liable to a late payment penalty that would otherwise arise between your request and the end of the agreed period. HMRC’s guidance at SAM61380 spells out the timing: proposals that lead to an acceptable arrangement on or before the first trigger date avoid all three penalties, while an arrangement made after the first trigger date but before the second avoids only the second and third.

The protection is conditional. If you break the agreement, by not paying when the deferral ends or not meeting a condition such as an instalment, HMRC can issue a notice charging the penalties you would have paid anyway (paragraph 10(3) and (4)). Interest is still charged throughout. Our guide to setting up a Self Assessment payment plan covers the online route.

Can you appeal or have a penalty reduced?

There are three routes.

  • Reasonable excuse. Under paragraph 16 of Schedule 56 no penalty arises if you had a reasonable excuse. Lack of funds is not a reasonable excuse unless it was caused by events outside your control, and relying on someone else is not an excuse unless you took reasonable care. Our guide to reasonable excuse sets out how HMRC and the tribunal approach this.
  • Special reduction. Paragraph 9 lets HMRC reduce a penalty in special circumstances, but SALF308A confirms that inability to pay does not count.
  • Appeal. You can appeal against the penalty or its amount. SAM61250 says an appeal can be made within 30 days of the notice, and SALF308A confirms you do not have to pay the penalty before the appeal is decided.

How do penalties change under Making Tax Digital for Income Tax?

HMRC’s guidance on penalties for Making Tax Digital for Income Tax says new late payment penalties replace the current ones for your personal return from the tax year you join. People with qualifying income over £50,000 in their 2024 to 2025 return are required to use it from 6 April 2026 (SALF910). The current penalties still apply to earlier years, so someone who joined on 6 April 2026 is under the old rules for the 2025 to 2026 return due on 31 January 2027.

For the 2026 to 2027 tax year, the new penalties are 3% of tax unpaid at day 15 and a further 3% of tax unpaid at day 30, plus a yearly rate of 10% charged daily from day 31 until payment, for up to two years. In your first year you have 30 days to pay or arrange a payment plan before any penalty. For 2027 to 2028 the two fixed charges rise to 4%. Payments on account are excluded, and agreeing a payment plan pauses penalties from the date you contacted HMRC. HMRC says that from April 2027 the new penalties apply to everyone who submits a personal Self Assessment return, while partnership, trust and estate returns keep the current penalties. See our guide to Making Tax Digital for Income Tax.

What mistakes lead to avoidable penalties?

  • Leaving an unpaid payment on account until after 31 January, when it becomes part of the balancing payment and is exposed to penalties.
  • Contacting HMRC about a payment plan after the 30 day point, which loses protection from the first penalty.
  • Assuming a plan stops interest. It stops penalties only.
  • Missing a single instalment, which can bring back every penalty the plan had held off.
  • Paying with the wrong reference, so the money sits against another liability. Our guide to paying HMRC with the right reference explains the format.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.