HMRC’s penalty system for Self Assessment has two separate tracks that run simultaneously: late filing penalties (for not submitting your return on time) and late payment penalties (for not paying the tax owed on time). Missing both triggers charges from both tracks on top of each other. The total cost can escalate quickly.
This article covers every penalty in the current system with exact figures, worked examples showing what a specific tax bill costs at each delay milestone, and the practical steps that reduce the penalty exposure once you have already missed a deadline.
One important note: a new penalty regime is coming from 6 April 2027. The current penalties described here apply for the 2025/26 and 2026/27 tax years. The 2027 changes are flagged at the end.
For the complete UK side hustle tax overview, see our complete UK side hustle tax guide.
The Two Penalty Tracks
Missing the Self Assessment deadline does not trigger one penalty — it can trigger two separate penalty sequences running simultaneously.
Track 1: Late Filing Penalties
These apply when your Self Assessment return is not submitted by the deadline (31 January for online returns). They are based on the return itself being missing — not on whether you owe any tax. You can owe zero tax and still receive the full filing penalty sequence.
Track 2: Late Payment Penalties
These apply when the tax owed is not paid by the deadline (also 31 January for the balancing payment). They are based on the unpaid amount and compound over time.
Both tracks can run simultaneously on the same tax year. A return filed late and payment also delayed accumulates charges from both columns.
Late Filing Penalties — the Exact Schedule
Day 1 Late: £100 Automatic Penalty
The moment you miss the 31 January online filing deadline, an automatic £100 penalty is applied. No warning. No grace period. Even if you owe no tax whatsoever, the £100 stands. Even if you filed the return the following morning, the £100 is owed.
This penalty is confirmed by HMRC’s own published guidance and multiple 2026 accountancy sources.
3 Months Late: £10 Per Day
From the day your return is 3 months late, HMRC charges £10 per day for up to 90 days a maximum additional charge of £900. These daily penalties run from 3 months late until the return is filed, capped at 90 days.
Running total at 3 months late: £100 (initial) + £900 (daily maximum) = up to £1,000 in filing penalties alone.
6 MONTHS LATE: 5% OF TAX DUE OR £300
At 6 months after the filing deadline, an additional penalty is applied: whichever is higher — 5% of the tax due on the return, or £300. This replaces neither of the earlier penalties; it stacks on top.
- If your tax bill is £2,000 and the return is 6 months late: 5% × £2,000 = £100. Since £300 is higher than £100, the penalty is £300.
- If your tax bill is £8,000: 5% × £8,000 = £400. Since £400 is higher than £300, the penalty is £400.
- If you owe no tax: the minimum £300 applies.
12 Months Late: Another 5% or £300
At 12 months late, the same calculation applies again another 5% of tax due or £300, whichever is higher.
For a return that is 12 months late on a £2,000 tax bill:
£100 (day 1) + £900 (daily) + £300 (6 months) + £300 (12 months) = £1,600 in filing penalties alone.
For a return that is 12 months late on a zero tax bill, the same £1,600 total can still apply.
Late Payment Penalties, Interest and Surcharges
Late payment penalties are separate from filing penalties and apply specifically to unpaid tax.
Daily Interest From Day 1
Interest begins accruing from 1 February (the day after the 31 January payment deadline) on any unpaid tax. The current rate is 7.75% per year — the Bank of England base rate plus 4%. This is simple interest, not compound. It accrues daily until the full amount is paid.
On a £1,200 unpaid tax bill, daily interest at 7.75% per year = approximately £0.25 per day. Not enormous in isolation — but it runs continuously until the debt is cleared and combines with the surcharges below.
5% Surcharge at 30 Days Late
If the tax is still unpaid 30 days after the 31 January deadline (i.e. by 2 March), a penalty of 5% of the unpaid tax is applied. On £1,200: £60.
Setting up a Time to Pay arrangement with HMRC before this 30-day point prevents this surcharge applying. This is the single most actionable step for someone who cannot pay in full — contact HMRC before 2 March.
5% Surcharge at 6 Months Late
If still unpaid at 6 months (31 July), another 5% surcharge on whatever remains unpaid. On an original £1,200 bill: another £60. These surcharges also attract interest from their date of application.
5% Surcharge at 12 Months Late
Same again at 12 months late (31 January the following year). Another 5% on whatever remains.
Total payment surcharges on a fully unpaid £1,200 bill over 12 months: £60 + £60 + £60 = £180 in surcharges, plus approximately £93 in daily interest (£1,200 × 7.75% × 1 year). Total payment cost: approximately £273 added to the original £1,200.
Worked Example: £1,200 Tax Bill at Each Delay Milestone
A side hustler files their 2025/26 return and pays their £1,200 bill late. Here is the cumulative cost at each stage.
- Filed and paid on time (by 31 January 2027): £1,200. Total cost: £1,200.
- Filed 1 day late, paid on time: £100 filing penalty. Total: £1,300.
- Filed 3 months late, paid on time: £100 + up to £900 daily = up to £1,000 filing penalties. Total: up to £2,200.
- Filed on time, paid 30 days late: £1,200 + daily interest (~£8 for 30 days) + 5% surcharge (£60). Total: approximately £1,268.
- Filed on time, paid 6 months late: £1,200 + daily interest (~£46) + 5% at 30 days (£60) + 5% at 6 months (£60). Total: approximately £1,366.
- Filed and paid 12 months late: Filing penalties up to £1,600 + payment surcharges £180 + daily interest ~£93. Penalties alone: up to £1,780. Total cost on original £1,200 bill: up to £2,980.
The message is clear: the same bill that cost £1,200 on time costs nearly £3,000 after 12 months of non-compliance.
Failure to Notify — a Separate Penalty
Failing to register for Self Assessment when required (i.e., not registering by 5 October after the relevant tax year) triggers a separate “failure to notify” penalty under Schedule 41 Finance Act 2008.
The penalty rate depends on the behaviour category:
- Reasonable excuse: no penalty if you can show genuine reasonable excuse.
- Non-deliberate: 0–30% of the potential lost revenue.
- Deliberate but not concealed: 20–70% of potential lost revenue.
- Deliberate and concealed: 30–100% of potential lost revenue.
The “potential lost revenue” is the tax you should have paid from the date you should have registered. For a side hustler who earned £5,000 above their personal allowance over two years without registering, the potential lost revenue might be £1,000 in income tax. A non-deliberate failure-to-notify penalty could be up to £300 on top of the tax owed.
Voluntary disclosure — coming forward before HMRC contacts you — results in significantly lower penalties. HMRC’s guidance explicitly rewards early voluntary disclosure with the minimum available penalty rate.
What Counts as a “Reasonable Excuse”
You can appeal a late filing or late payment penalty if you have a “reasonable excuse” — a genuine reason outside your control that prevented timely compliance. HMRC accepts appeals within 30 days of the penalty notice.
Examples HMRC typically accepts as reasonable excuse: serious illness or hospitalisation around the deadline; bereavement of a close family member close to the deadline; genuine postal delay in receiving a UTR or activation code; technical failure of HMRC’s own online systems (which HMRC monitors and accepts).
Examples HMRC does not accept: not knowing about the requirement to file; having an accountant who forgot; financial difficulty (which is grounds for Time to Pay, not penalty cancellation); forgetting the deadline.
The appeal process is through your online Self Assessment account or by writing to HMRC. State the reason clearly and provide evidence where possible. HMRC’s success rate on appeals with genuine reasonable excuses is reasonably high.
How to Reduce Your Penalty Once You Have Already Missed a Deadline?
If You Have Missed the Filing Deadline?
File immediately. Every additional day the return is outstanding adds £10/day from 3 months onward. Filing the return — even if you cannot pay the tax — stops the filing penalty clock. Filing and paying are separate obligations; file now regardless of your payment position.
If You Cannot Pay in Full?
File the return regardless. Then contact HMRC to set up a Time to Pay arrangement before the 30-day point (before 2 March for the January deadline). A Time to Pay arrangement agreed before the 30-day mark prevents the first 5% surcharge from applying.
If You Have Already Passed the 30-day Point?
File immediately if you have not done so. Pay as much as you can now partial payment reduces the base on which future surcharges are calculated. The 5% surcharges at 6 and 12 months are calculated on whatever remains unpaid, not the original full amount. A partial payment today reduces those future charges.
Contact HMRC proactively. HMRC’s compliance approach distinguishes between people who engage and those who ignore. Proactive contact, even when you cannot pay in full, is treated more favourably than silence.
Time to Pay Arrangements
If you cannot pay your Self Assessment bill in full by 31 January, a Time to Pay arrangement lets you spread payments over monthly instalments. Interest accrues during the arrangement, but the surcharges at 30 days, 6 months, and 12 months are suspended once an arrangement is in place.
How to Set One Up?
If your bill is under £30,000 and you have not previously missed Self Assessment deadlines, you can set up a Time to Pay arrangement online through your HMRC personal tax account without needing to call. The arrangement typically spreads payments over 6–12 months.
For larger bills or repeat late payments, you need to call HMRC’s Self Assessment payment helpline. Have your UTR, the amount owed, and your income and expenditure information ready.
Timing Matters
Set up a Time to Pay arrangement before the 30-day point (before 2 March) to prevent the first 5% surcharge. Setting it up after 30 days does not cancel the surcharge already applied, but it prevents further ones.
The 2027 Changes: What is Coming?
From 6 April 2027, HMRC is introducing a new penalty regime for Self Assessment — a points-based system for late submission and a revised late payment model.
The New Filing Penalty System (From April 2027)
Instead of an immediate £100 penalty, each late return earns one penalty point. When points accumulate to a threshold (four points for annual filers), a £200 penalty is triggered.
Points can be cleared by filing all outstanding returns and maintaining compliance for 24 months. This is designed to be more lenient for occasional late filers while being stricter on persistent non-compliance.
The New Late Payment Penalty System (From April 2027)
A new two-stage penalty model replaces the current surcharges. The key change: daily penalties from day 31 at a rate equivalent to 10% per year, in addition to interest. The intent is to create stronger incentive for early payment or early Time to Pay engagement.
What This Means Now?
The current penalty regime (described throughout this article) applies for the 2025/26 tax year (filing deadline 31 January 2027) and the 2026/27 tax year (filing deadline 31 January 2028). The new regime begins for returns due from April 2027 onward. Take action under the current rules — they are in force now.
Frequently Asked Questions
I owe no tax — do I still get a penalty for filing late?
Yes. The £100 initial penalty and subsequent daily penalties apply to the return being late — not to whether you owe tax. A zero-tax return filed after 31 January attracts the same filing penalties as one with a large bill.
The only tax-geared component (5% at 6 and 12 months) would be £0 on a zero-tax bill, but the minimum £300 per stage still applies after 6 and 12 months.
I filed my return late. Should I still pay the tax before calling HMRC?
Yes — pay whatever you can immediately. Filing and payment are separate obligations. Filing now stops the filing penalty clock. Paying now (or setting up Time to Pay) minimises the payment penalty exposure. Do both as soon as possible.
Can I appeal the £100 automatic penalty?
Yes, if you have a reasonable excuse. Submit an appeal within 30 days of the penalty notice. HMRC accepts appeals through your online tax account or by post. Document the reason clearly and include evidence.
What if I genuinely did not know I needed to file?
“Not knowing” is not a reasonable excuse for HMRC purposes. However, voluntary disclosure — registering and filing as soon as you realise — results in significantly lower failure-to-notify penalties than if HMRC discovers the non-compliance first.
If you have missed multiple years, use HMRC’s voluntary disclosure service and come forward proactively.
Does interest stop if I file the return but do not pay?
No. Interest on unpaid tax accrues from 1 February regardless of whether the return has been filed. Filing stops the filing penalty clock but not the interest on unpaid tax. Pay the tax, or set up Time to Pay, to stop interest accruing.
What to Read Next?
To avoid these penalties entirely, file accurately and on time. See our step-by-step guide on how to file your return and avoid penalties.
For registration penalties specifically, see our guide on how and when to register before the deadline.
Verified against HMRC guidance as of 13 June 2026. Interest rate 7.75% p.a. confirmed for current period. 2027 penalty reform details based on HMRC’s published consultation and PEM’s April 2026 technical guidance — confirm final implementation details at gov.uk closer to April 2027.
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