HMRC penalty points, late filing fines and how to appeal

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.

Who is within Making Tax Digital for Income Tax depends on qualifying income: total income from self-employment and property before expenses, in other words turnover, for an earlier tax year. Sole traders and landlords join in stages:

Some people are exempt, for example if they are digitally excluded. 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:

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 (the law counts from the start of the following month). At the threshold, points stay until the person has met every deadline for 12 months and has sent everything due in the previous 24 months.

For someone who joined in April 2026, that means the earliest deadline that can bring a point is the first quarterly update for 2027-28, normally due by 7 August 2027, followed by the 2026-27 tax return, due by 31 January 2028.

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:

In the first year under the new rules HMRC allows 30 days rather than 15 before penalties start. That allowance is given only once, and HMRC says people who volunteered and are now required to join keep the 15 days. HMRC 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. See our guide to Time to Pay arrangements if paying in full is the difficulty.

The 3%, 3% and 10% rates were set by regulations in force from 31 May 2025, which raised them from 2%, 2% and 4% a year. For income tax, the late payment penalties themselves only start with Making Tax Digital: the regulations bringing them in apply to people required to use it, for 2026-27 and later years (SI 2026/370). HMRC’s guidance shows the day-15 and day-30 percentages rising to 4% for 2027-28; when this guide was updated, the legislation itself still set them at 3%.

VAT penalty points and late payment penalties

VAT has used the same points-based structure for accounting periods starting on or after 1 January 2023. Each late VAT return earns one point. The threshold depends on how often returns are due, and reaching it brings a £200 penalty, with another £200 for each later late return while at the threshold.

Below the threshold, each VAT point expires after 24 months, counted from the start of the month after the missed deadline. At the threshold, points are cleared only once every return has been sent on time for the period shown in the table and every return due in the previous 24 months has been sent.

Late VAT is charged in the same way as late income tax under the new regime: nothing if paid within 15 days, 3% of the VAT unpaid at day 15, a further 3% of the VAT unpaid at day 30, and a second penalty at 10% a year from day 31. Those rates apply to VAT for accounting periods starting on or after 1 April 2025, under the regulations in force from 31 May 2025. For periods that started between 1 January 2023 and 31 March 2025 the rates were 2%, 2% and 4% a year.

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. Our page on appealing an HMRC penalty gives HMRC’s fuller list, including delays related to a disability or mental illness.

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.

Appealing a late filing or late payment 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. Our page on how to appeal an HMRC penalty covers the routes in full, including SA370, reasonable excuse, and corporation tax, PAYE and VAT penalties.

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; paragraphs 2, 5, 7, 8 and 15) and Schedule 26 (penalties for failure to pay tax; paragraphs 5 and 8)
• The Finance Act 2021 (Increase in Schedule 26 Penalty Percentages) Regulations 2025 (SI 2025/589), in force 31 May 2025
• The Finance Act 2021 (Income Tax and Capital Gains Tax) (Penalties) (Appointed Day: Digitally Obligated Persons) Regulations 2026 (SI 2026/370), regulation 3
• 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”, “Check if you’re eligible for Making Tax Digital for Income Tax”, “Work out your qualifying income for Making Tax Digital for Income Tax” and “Use Making Tax Digital for Income Tax: send quarterly updates” (GOV.UK)
• HMRC, “Penalty points and penalties if you submit your VAT Return late”, “Remove penalty points you’ve received after submitting your VAT Return late” and “How late payment penalties work if you pay VAT late” (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.