Fixed penalties and tax geared penalties compared

A fixed penalty is a set sum triggered by a failure, such as £100 for a late self assessment return or £200 once a VAT business reaches its penalty point threshold, whatever the tax involved. A tax geared penalty is a percentage of tax, such as an inaccuracy penalty of up to 30% of the extra tax for a careless error. The two types are reduced in different ways: fixed penalties mainly through reasonable excuse or special reduction, tax geared behaviour penalties also through the quality of your disclosure.

What is the difference between a fixed and a tax geared penalty?

A fixed penalty punishes the failure itself. It is the same for a taxpayer who owes nothing as for one who owes a great deal, and it usually follows automatically once a deadline passes. A tax geared penalty is calculated by reference to an amount of tax, so it grows with the tax at stake. Some penalties combine both, charging a percentage of tax with a fixed minimum.

The distinction is more than academic. It decides which defences and reductions are available, whether the penalty is offset against other penalties on the same tax, and what you should be checking when a penalty notice arrives. For a full list of amounts see the HMRC penalties table.

Which HMRC penalties are fixed amounts?

Penalty	Amount	Source
Self assessment return late	£100	Schedule 55 FA 2009, paragraph 3
Self assessment return more than 3 months late	£10 a day for up to 90 days (up to £900), if HMRC gives notice	Schedule 55, paragraph 4
Company tax return late	£200, another £200 at 3 months; £1,000 each if late three times in a row	GOV.UK guidance on late filing penalties
VAT return late, once at the points threshold	£200, and £200 for each further late return while at the threshold	GOV.UK VAT penalty points guidance
Making Tax Digital for Income Tax submission late, at the 4 point threshold	£200, and £200 for each further missed deadline	GOV.UK MTD penalties guidance
Failure to keep or preserve records	Up to £3,000	Taxes Management Act 1970, section 12B(5)
Failure to comply with an information notice	£300, then up to £60 a day	Schedule 36 FA 2008, paragraphs 39 and 40

Our guides to self assessment late filing penalties and corporation tax late filing penalties cover those regimes in detail.

Which penalties are tax geared?

• Inaccuracy penalties under Schedule 24 to the Finance Act 2007. For a domestic inaccuracy, paragraph 4 sets 30% of potential lost revenue for careless action, 70% for deliberate but not concealed action and 100% for deliberate and concealed action.
• Failure to notify penalties under Schedule 41 to the Finance Act 2008, which are also percentages of potential lost revenue.
• Late payment penalties for self assessment: 5% of the tax unpaid at 30 days, at 6 months and at 12 months, according to GOV.UK.
• Later late filing penalties for self assessment: at 6 months, and again at 12 months, the greater of 5% of the liability that would have been shown in the return and £300 (Schedule 55, paragraphs 5 and 6). Where information is deliberately withheld, the 12 month penalty for a domestic matter rises to the greater of 70% (deliberate) or 100% (deliberate and concealed) of that liability and £300.
• Company tax return penalties at 6 and 12 months: 10% of the unpaid tax each time, according to GOV.UK.

The self assessment 6 and 12 month penalties are hybrids. For a small liability the £300 floor applies, so they behave like fixed penalties; for a larger one the 5% takes over.

How can a fixed penalty be reduced or removed?

Fixed penalties have no disclosure reduction, because there is no tax to disclose. The main routes are:

• Reasonable excuse. Paragraph 23 of Schedule 55 says no penalty arises if you satisfy HMRC or the tribunal that you had a reasonable excuse. Insufficiency of funds is not an excuse unless caused by events outside your control, reliance on someone else is not an excuse unless you took reasonable care, and once the excuse ends you must put the failure right without unreasonable delay.
• Special reduction. Paragraph 16 of Schedule 55 lets HMRC reduce a penalty because of special circumstances, which do not include ability to pay. See special reduction of penalties.
• Procedural defects. The daily self assessment penalty is only due if HMRC decides it should be payable and gives notice specifying the date from which it runs (Schedule 55, paragraph 4(1)).

How can a tax geared penalty be reduced?

Tax geared behaviour penalties offer more levers:

• Challenging the tax figure. Because the penalty is a percentage, any reduction in the tax or potential lost revenue reduces it proportionately.
• Behaviour. An error made despite taking reasonable care attracts no inaccuracy penalty, and the difference between careless and deliberate moves the starting point from 30% to 70% or more.
• Quality of disclosure. Paragraph 10 of Schedule 24 requires HMRC to reduce the standard percentage for telling, helping and giving access. A 30% careless penalty can fall to 15% for a prompted disclosure and 0% for an unprompted one; 70% can fall to 35% or 20%; 100% to 50% or 30%. See penalty reductions for disclosure.
• Suspension. Paragraph 14 of Schedule 24 allows HMRC to suspend all or part of a penalty for a careless inaccuracy, with conditions. See HMRC suspended penalties.
• Reasonable excuse and special reduction, where the relevant schedule provides for them.

Late payment penalties are tax geared but not behaviour based, so there is no disclosure reduction. The defences are reasonable excuse and special reduction (Schedule 56 FA 2009, paragraphs 16 and 9). The 12 month self assessment penalty for deliberately withholding information can be reduced for disclosure under Schedule 55 paragraph 15, but paragraph 15(5) stops it going below £300.

Why does the type of penalty affect offsetting?

The interaction rules in Schedule 24 paragraph 12(2), Schedule 41 paragraph 15(1) and Schedule 55 paragraph 17 reduce one penalty by another only where both are determined by reference to the same tax liability. A purely fixed penalty, such as the £100 initial late filing penalty, is not worked out from the tax, so it sits outside that offset. The tax geared late filing penalties can be offset against an inaccuracy penalty on the same extra tax. The details are in can HMRC charge two penalties for one error.

How do the two types compare on real numbers?

Illustration only. Two self assessment taxpayers both file 7 months late and HMRC has issued daily penalty notices. One owes £2,000, the other £40,000.

Penalty	£2,000 owed	£40,000 owed
Initial fixed penalty	£100	£100
Daily penalties, 90 days at £10	£900	£900
6 month penalty, greater of 5% and £300	£300	£2,000
Total	£1,300	£3,000

The fixed elements are identical; only the tax geared element changes. Late payment penalties and interest on any unpaid tax would be charged on top.

What mistakes do people make?

• Trying to argue disclosure against a fixed penalty, when only reasonable excuse or special reduction can help.
• Paying a daily penalty without checking that HMRC gave the required notice.
• Accepting a tax geared penalty without checking the tax figure it is based on.
• Expecting a fixed penalty to be deducted from an inaccuracy penalty.
• Assuming the 12 month withholding penalty can be reduced to nothing; it cannot go below £300.

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Related Accountapedia entries

• Accounting for the disposal of fixed assets
• Deposits paid on fixed assets
• SDLT, LBTT and LTT compared
• Fixed and floating charges
• Reasonable care and reasonable excuse compared

Sources

• legislation.gov.uk: Act 2009 c. 10, schedule 55
• legislation.gov.uk: Act 2009 c. 10, schedule 55
• GOV.UK: Penalties
• legislation.gov.uk: Act 2009 c. 10, schedule 55
• legislation.gov.uk: Act 2009 c. 10, schedule 55
• legislation.gov.uk: Act 2009 c. 10, schedule 55
• legislation.gov.uk: Act 2009 c. 10, schedule 55
• legislation.gov.uk: Act 2009 c. 10, schedule 55
• legislation.gov.uk: Act 2009 c. 10, schedule 55
• GOV.UK: Penalties for late filing

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.