MTD: Changes To Late Tax Payment Penalties
13th May 2025
Late payment penalties for taxpayers within the Making Tax Digital (MTD) regime are set to increase from the start of the new tax year, the Chancellor announced in her first Spring Statement.
As part of a general push to close the tax gap, late payers will face an increase in penalty rates from 1st April 2025 onwards.
As taxpayers join Making Tax Digital for Income Tax, penalties for late payments will be increased, with those failing to pay within a month seeing the most notable hike as they face a penalty rate of 10% of the outstanding tax due after 31 days. This is more than double the current rate, being 4%, prior to 1st April 2025.
The penalties will rise as follows:
- 15 days late – from 2% to 3%
- 30 days late – from 2% to 3%
- 31 days late – from 4% to 10% per annum. Interest will be calculated daily from this point.
These penalty rate increases will also be applied to late payments of VAT. It is important to note that these penalty rates do not apply to taxpayers who are in the self-assessment regime and are not caught by MTD for Income Tax. Self-assessment taxpayers are subject to a different set of late payment penalty rates.
The rise in penalties comes on the back of the 1.5% increase to the HMRC interest rate for late payments.
With these changes in mind, it is more crucial than ever to pay your taxes by the due date.
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Disclaimer - All information in this post was correct at time of writing.
