As announced in the Spring Statement, from April 2025, taxpayers who miss payment deadlines will face significantly higher penalties. The changes are part of a broader drive to close the tax gap and are set to affect self assessment income tax and other payment types.
Under the new regime, penalties for unpaid tax will increase sharply. Currently, a 2% penalty applies at 15 days and again at 30 days, rising to 4% after 31 days. From April 2025, this will rise to 3% at 15 and 30 days, and a steep 10% penalty from day 31.
In addition, HMRC interest rates are also increasing. From next month, interest charged on late tax payments will rise by 1.5%. This means the interest rate for most unpaid taxes will go from the Bank of England base rate plus 2.5% to the base rate plus 4%.
Other HMRC interest rate increases include:
- Late-paid corporation tax instalments: From base rate +1% to +2.5%
- Late-paid customs duty: From base rate +2% to +3.5%
These changes are expected to raise £1.2 billion throughout the current parliament. However, concerns have been raised that the harsher penalties may have unintended effects, especially on those struggling to keep up with payments.
The measures take effect at the beginning of the 2025/26 tax year, leaving little time for adjustment. Taxpayers are advised to review their cashflow and payment plans to avoid the risk of rising costs.
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