HMRC Late Payment Penalties and Interest: What You Owe When the Tax Itself Is Late

There are two different ways to be late with Self Assessment, and HMRC penalises them separately. Filing the return late triggers one set of charges. Paying the tax late triggers another, entirely distinct set. You can be on time with one and late with the other, and you can collect penalties from both at once. Most people who focus on getting the return in are caught out by the second system, because it carries on running quietly in the background on any tax that has not actually been paid. Late filing carries its own £100 charge and escalating penalties, a separate regime from the late-payment penalties below.

The Three Late Payment Penalties: 30 Days, 6 Months, 12 Months

HMRC charges a penalty of 5% of the tax that is still unpaid at three separate points: 30 days after the due date, 6 months after the due date, and 12 months after the due date. Each one is a fresh 5% charge calculated on whatever remains outstanding at that moment, so the three can stack into 15% of the original bill if nothing is paid across the whole period. GOV.UK confirms the structure in its guidance on Self Assessment penalties, which lists penalties of 5% of the tax unpaid at 30 days, 6 months and 12 months.

Because each surcharge is calculated on the balance still outstanding when it falls due, paying down the bill reduces every later charge. Clearing half the debt before the six-month point halves the six-month and twelve-month surcharges. There is no daily element to these penalties, unlike the filing daily charges, so the three trigger dates are what matter.

On a larger balance the same percentages produce much larger numbers. A £20,000 bill left unpaid for over a year collects £1,000 at each of the three points, a £3,000 penalty total, before any interest is counted and entirely separate from anything charged for filing the return late.

Interest Runs Daily on Top of the Penalties

Penalties are not the only cost of paying late. HMRC also charges interest on the unpaid tax, and it runs from the day after the payment was due until the day it is paid in full. Interest is not a one-off; it accrues every day the balance is outstanding, so it grows steadily rather than landing in fixed lumps like the surcharges.

The rate is set by formula. Late payment interest is the Bank of England base rate plus 4 percentage points, a margin that increased from the previous 2.5 points in April 2025. As of 9 January 2026 the late payment interest rate is 7.75%. Because it is tied to the base rate, the figure moves when the base rate moves, so the precise rate on any given day should be checked against the current HMRC rate (check GOV.UK), but the base-rate-plus-4-points formula is the constant.

Why This Is Separate From the Filing Penalties

It is worth being precise about the two systems, because conflating them leads people to think they are safe when they are not. The filing penalties begin with the automatic £100 charge the day a return is late, covered in detail in our guide to the £100 late filing penalty and what comes after it. Those charges are about the return not being submitted. The late payment penalties and interest in this article are about the tax not being paid. A person who files on 31 January but cannot pay the bill avoids every filing penalty and still faces the full late payment regime. The reverse is also true: someone who pays an estimated amount on time but files the return months late faces filing penalties while having reduced or removed the payment penalties.

This is why filing early, even on estimated figures, is useful beyond stopping the filing clock. Once you know the figure, you can pay something against it, and every pound paid before each surcharge date shrinks the penalty calculated at that date and slows the daily interest.

How to Stop the Payment Penalties Escalating

If you cannot pay the bill in full, the route that stops enforcement and caps the damage is a formal payment arrangement with HMRC. A Time to Pay arrangement spreads the debt over monthly instalments. For Self Assessment debts of £30,000 or less it can usually be set up online within 60 days of the payment deadline, as GOV.UK explains in its guidance on paying an HMRC bill when you are in difficulty. Larger debts are still eligible but have to be agreed by contacting HMRC directly.

A Time to Pay arrangement does not switch off interest, which keeps running on the outstanding balance, but it does stop further late payment penalties from being charged on the tax covered by the plan and it halts enforcement action while the plan is honoured. Where a debt is too large to clear even over instalments, the question moves into the broader territory of Time to Pay, an IVA or bankruptcy, which sets out the options when the bill is beyond what monthly payments can realistically cover.

1. 1File the return first, even on estimated figures, so the actual liability is known and can be quantified.
2. 2Pay as much as you can against the bill before each surcharge date, because every payment reduces the next 5% charge and the daily interest.
3. 3If you cannot pay in full, set up a Time to Pay arrangement online (debts of £30,000 or less) or by contacting HMRC for larger amounts.
4. 4Keep to the arrangement, because a defaulted plan lets the penalties and enforcement resume.

Common Questions About Late Payment Penalties

Do the late payment penalties apply if I owe no tax?

No. The late payment penalties are a percentage of the tax actually unpaid, so a return showing a nil or refund position attracts no late payment penalty. The filing penalties are different: the £100 fixed filing penalty applies even where no tax is owed.

Can I appeal a late payment penalty?

The 5% surcharges can be challenged on reasonable excuse grounds in the same way as filing penalties, where a genuine reason beyond your control prevented payment. The interest is different and cannot be appealed at all, because it is compensation rather than a penalty.

Does a Time to Pay arrangement stop the interest?

No. Interest continues to accrue on the outstanding balance throughout a Time to Pay arrangement. What the arrangement stops is further late payment penalties on the covered debt and any enforcement action, provided you keep up the instalments.