The 12 month late filing penalty for withheld information

Q: How much is the penalty?

BehaviourPenalty (greater of)Can disclosure reduce it? Deliberate and concealed100% of the liability or £300Yes, to 30% unprompted or 50% prompted Deliberate but not concealed70% of the liability or £300Yes, to 20% unprompted or 35% prompted Any other case5% of the liability or £300No The liability is what a complete and accurate return filed on time would have shown (paragraph 24(1)). CH62240 explains that this is the net figure after tax deducted at source, and that it is not reduced by anything you have since paid. If no return has been filed, paragraph 24(2) lets HMRC estimate the liability to the best of its information and belief and then reassess once the return arrives. Higher maximum percentages can apply where the withheld information involves an offshore matter. CH62180 says these currently apply only to income tax and capital gains tax. See offshore penalties. Paragraph 17 reduces the penalty by any other penalty charged on the same tax, such as an inaccuracy or failure to notify penalty. CH65060 says this offset does not apply to other late filing penalties or to late payment penalties on the same tax.

Q: What does the calculation look like?

Illustration only. A return due on 31 January is filed 14 months late and shows tax of £20,000. HMRC finds the information was withheld deliberately but not concealed, and rates the quality of disclosure at 80%. Following the steps at CH63660: The maximum is 70%. The minimum is 20% if the disclosure was unprompted, so the available reduction is 50 percentage points. 80% of 50 points is 40 points, so the penalty percentage is 30%. 30% of £20,000 gives a 12 month penalty of £6,000. If the same disclosure had been prompted, the minimum would be 35%. The available reduction would then be 35 points, 80% of that is 28 points, and the penalty would be 42%, or £8,400. If the withholding had also been concealed and the disclosure prompted, the range would run from 100% down to 50%, and an 80% quality rating would give 60%, or £12,000. In each case the 6 month penalty of 5%, here £1,000, and the earlier fixed and daily penalties are charged as well.

If a return is still outstanding 12 months after the penalty date, paragraph 6 of Schedule 55 to the Finance Act 2009 adds a further penalty. It is normally the greater of 5% of the tax that would have been shown or £300, but it rises to 70% where you deliberately withheld information and 100% where you also concealed it. Disclosure can bring those percentages down to between 20% and 50%, depending on whether you came forward unprompted and how fully you helped, but never below £300.

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Which returns does the 12 month penalty cover?

HMRC’s Compliance Handbook at CH62180 says this version of the penalty applies to returns for income tax, capital gains tax, bank payroll tax, registered pension schemes, the annual tax on enveloped dwellings and stamp duty reserve tax. Construction Industry Scheme returns have their own scale. For most readers this means the Self Assessment return.

The clock starts on the penalty date, which is the day after the filing date. CH62200 gives the full sequence for an unfiled individual return:

£100 initial penalty on the penalty date;
£10 a day for up to 90 days once the return is 3 months late;
a 6 month penalty of 5% of the tax due or £300, whichever is greater;
the 12 month penalty described here.

Self Assessment late filing penalties covers the earlier stages. CH62180 notes that the 12 month penalty is the only late filing penalty that looks at why you failed to file.

When is information treated as deliberately withheld?

Paragraph 6(2) asks whether, by failing to make the return, you deliberately withheld information that would enable or assist HMRC to assess your tax. Paragraph 27 then sorts deliberate withholding into two kinds:

Deliberate and concealed: you withheld the information and made arrangements to hide the fact that it had been withheld.
Deliberate but not concealed: you withheld it on purpose but took no steps to hide it.

The examples at CH62220 show where the line falls. A taxpayer who decided not to file because the return would show tax on a large termination payment withheld information deliberately but did not conceal it. So did a taxpayer who sold a painting, spent the proceeds on a holiday and then did not file because he could not pay the capital gains tax. In the same example, if he had arranged for the auction house to pay the holiday company directly so that the money never passed through his bank account, the withholding becomes deliberate and concealed. Opening a foreign bank account to receive undeclared royalties is also treated as concealment.

CH62200 says that if HMRC has no information about why the return is missing, the 12 month penalty is charged at the 5% rate, and it is increased only if enquiries establish deliberate withholding. If a return involves more than one kind of behaviour, the highest percentage applies to the whole liability.

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How much is the penalty?

Behaviour	Penalty (greater of)	Can disclosure reduce it?
Deliberate and concealed	100% of the liability or £300	Yes, to 30% unprompted or 50% prompted
Deliberate but not concealed	70% of the liability or £300	Yes, to 20% unprompted or 35% prompted
Any other case	5% of the liability or £300	No

The liability is what a complete and accurate return filed on time would have shown (paragraph 24(1)). CH62240 explains that this is the net figure after tax deducted at source, and that it is not reduced by anything you have since paid. If no return has been filed, paragraph 24(2) lets HMRC estimate the liability to the best of its information and belief and then reassess once the return arrives.

Higher maximum percentages can apply where the withheld information involves an offshore matter. CH62180 says these currently apply only to income tax and capital gains tax. See offshore penalties.

Paragraph 17 reduces the penalty by any other penalty charged on the same tax, such as an inaccuracy or failure to notify penalty. CH65060 says this offset does not apply to other late filing penalties or to late payment penalties on the same tax.

How does disclosure reduce the penalty?

Under paragraph 14(2) you disclose by telling HMRC about the withheld information, giving reasonable help in working out the tax unpaid, and allowing access to records. A disclosure is unprompted if, when you make it, you have no reason to believe HMRC has discovered or is about to discover the information (paragraph 14(3)). Otherwise it is prompted. Prompted and unprompted disclosure looks at that line.

Paragraph 15 then requires HMRC to reduce the percentage to reflect the quality of the disclosure, judged on timing, nature and extent. CH63220 tells officers to weight telling at 30%, helping at 40% and giving access at 30%. It also warns that where someone has taken a significant period to put things right, normally over 3 years, they cannot expect the full reduction. CH63240 adds that you can earn the reduction by providing information even if you still have not filed the return.

Two floors apply. The percentage cannot fall below the minimum in the table, and under paragraph 15(5) the penalty cannot fall below £300. The 5% penalty for non deliberate cases cannot be reduced for disclosure at all. Penalty reductions for disclosure explains how the quality percentage is built up.

What does the calculation look like?

Illustration only. A return due on 31 January is filed 14 months late and shows tax of £20,000. HMRC finds the information was withheld deliberately but not concealed, and rates the quality of disclosure at 80%. Following the steps at CH63660:

The maximum is 70%. The minimum is 20% if the disclosure was unprompted, so the available reduction is 50 percentage points.
80% of 50 points is 40 points, so the penalty percentage is 30%.
30% of £20,000 gives a 12 month penalty of £6,000.

If the same disclosure had been prompted, the minimum would be 35%. The available reduction would then be 35 points, 80% of that is 28 points, and the penalty would be 42%, or £8,400. If the withholding had also been concealed and the disclosure prompted, the range would run from 100% down to 50%, and an 80% quality rating would give 60%, or £12,000. In each case the 6 month penalty of 5%, here £1,000, and the earlier fixed and daily penalties are charged as well.

What changes for people using Making Tax Digital?

The Finance Act 2021 (Income Tax and Capital Gains Tax) (Penalties) (Appointed Day: Digitally Obligated Persons) Regulations 2026 brought Schedule 25 to the Finance Act 2021 into force from 1 April 2026. It applies to people required to send quarterly updates under Making Tax Digital for Income Tax, for returns for 2026 to 2027 onwards. Trustees and partnerships are excluded.

Schedule 25 is a standalone penalty for deliberately withholding information. Paragraph 3(2) says it can apply if the withholding happens at any time, including any time after the due date, so it does not wait for the 12 month point. For domestic information the rates stay at 70% (deliberate) and 100% (deliberate and concealed), with a £300 minimum. The disclosure minimums are different, though: paragraph 8 sets 45% prompted and 30% unprompted for the 70% rate, and 60% and 40% for the 100% rate. Returns for earlier years stay under Schedule 55.

Can you appeal, and do other reliefs apply?

Paragraph 20 lets you appeal both against the decision that a penalty is due and against its amount. That includes the behaviour finding, the prompted or unprompted label and the quality of disclosure. Paragraph 23 still allows a reasonable excuse defence, although it is hard to square with deliberate withholding. Paragraph 16 allows special reduction for special circumstances, but excludes ability to pay. Under paragraph 22(3) and (4) the tribunal can only substitute its own view of special reduction if HMRC’s decision was flawed on judicial review principles. See special reduction of penalties.

Paragraph 19 sets the time limit for assessing the penalty. It is the later of 2 years from the filing date and 12 months after the end of the appeal period for the assessment of the tax itself. Time limits for penalty assessments covers this further. A partnership return is different: HMRC’s Self Assessment Legal Framework manual at SALF506A says the higher withholding penalty cannot apply to it, because the partnership itself has no tax liability.

What mistakes push the penalty up?

Not filing because you cannot pay. CH62220 treats that decision as deliberate withholding. File the return and deal with the payment separately.
Waiting for HMRC to make contact. Once you have reason to think HMRC knows, any disclosure is prompted and the minimum rises.
Giving partial information. The highest percentage then applies to the whole liability, and your disclosure quality is marked down.
Assuming the automatic £300 charged at 12 months is final. CH62220 notes that the 6 and 12 month penalties are often charged automatically first and then increased once the liability and behaviour are established.

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Sources

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.