Last updated: 14 October 2026
Will you be charged interest and a penalty for paying tax late?
Yes. HMRC charges late payment interest from the day after the due date until you pay, currently at 7.75% a year (the Bank of England base rate of 3.75% plus 4%). For Self Assessment, late payment penalties are also added if tax is still unpaid 30 days, 6 months and 12 months after the due date. Interest is not a penalty and can’t be appealed, but penalties can be cancelled if you had a reasonable excuse or agree a Time to Pay arrangement in time.
Self Assessment late payment penalties
| Unpaid after | Penalty |
| 30 days | 5% of the tax unpaid |
| 6 months | A further 5% |
| 12 months | A further 5% |
Payments on account don’t attract penalties, only interest.
Making Tax Digital for Income Tax
From April 2026, taxpayers in MTD for Income Tax are under a new late payment penalty regime, like VAT:
- No penalty if paid within 15 days of the due date
- 3% of the tax unpaid at day 15
- A further 3% of the tax unpaid at day 30
- A daily penalty of 10% a year on the outstanding amount from day 31
Example
Owen owes £8,000 for 2025/26, due on 31 January 2027. He pays on 15 April 2027. Interest is charged at 7.75% for 74 days, around £126. As the tax was unpaid at 30 days, a 5% penalty of £400 also applies. If he’d set up a Time to Pay arrangement before day 30, the penalty could have been avoided.
Time to Pay
- Set up online for Self Assessment debts up to £30,000
- Interest still applies, but penalties are usually suspended
- Larger debts need a call with HMRC
- HMRC expects you to pay as much as you can afford
Other taxes
- VAT: penalty and interest regime from 2023, similar to MTD above
- Corporation tax: interest from the due date; no fixed late payment penalties, but HMRC can enforce
- PAYE: penalties for repeated late payments in a tax year, from 1% to 4% of the amount late
Interest on repayments
If HMRC repays tax you overpaid, it pays repayment interest at the base rate minus 1%, currently 2.75%, with a minimum of 0.5%.
Reasonable excuse
HMRC may cancel penalties if you couldn’t pay because of a serious illness, bereavement or an unexpected event outside your control. Lack of money is not usually accepted on its own.
Common mistakes
- Waiting until after day 30 to contact HMRC about a payment plan
- Paying the balancing payment but forgetting the first payment on account due on the same day
- Using the wrong payment reference, so the money is not matched to your account
- Assuming a pending appeal means you can delay paying tax that is not in dispute
If you think you will struggle to pay, call HMRC or set up a plan online before the due date. That keeps penalties to a minimum.
Frequently asked questions
Is late payment interest tax-deductible?
No, not for individuals.
Can I appeal interest?
No, only penalties.
Does HMRC charge interest on penalties?
Yes, if they’re paid late.
When does interest start?
The day after the payment was due.
Related: the £100 late return penalty, late VAT payments and interest and HMRC’s interest charges.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with tax payments and HMRC. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
