When you pay your tax bill late, HMRC will charge a late payment penalty 😱
It’s a separate penalty from what you’re charged for filing your tax return late or failing to notify HMRC of a change in your tax liabilities.
They’ll send a Penalty Explanation Letter detailing the period your penalty covers.
How late you areLate payment penalty30 days5% of outstanding tax on that date6 monthsFurther 5% of outstanding tax12 monthsFurther 5% of outstanding tax
To compensate for the delay in payment, HMRC automatically charges 3.25% interest on any penalty fee from the date the payment is due.
To avoid a late payment penalty, you can arrange a payment plan with HMRC before the tax is due.
You can appeal against a late payment penalty in three ways:
HMRC will only accept your appeal if you have already sent your tax return. HMRC will use an officer (who’s not previously been involved with your penalty) to review your appeal. You won’t have to make any payments until after the appeal has been settled.
A reasonable excuse for missing the payment could be:
COVID-19 can also be a reasonable excuse in some circumstances, but you need to have a fair explanation.
You should appeal within 30 days of getting the penalty. During Covid-19 this window is extended for up to 3 months. If your appeal is successful, the late payment penalty and any interest will be cancelled.
If you paid your penalty during the appeal, it will be paid back with interest from the date you paid.
But if your appeal is unsuccessful, HMRC will get in touch to explain why. They’ll ask you to pay the late payment penalty plus any interest.
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