Late payment penalties rise to 10% [Spring Statement 2025]
Posted on 28th March 2025 at 14:50
Taxpayers across the UK are set to face stricter financial penalties for late tax payments as the government implements a more punitive regime starting in April 2025. This change, announced in the Chancellor’s first Spring Statement, forms part of a broader effort to close the tax gap and ensure timely tax collection.
Significant Increase in Penalties
The upcoming measures will see a sharp increase in penalties for those who fail to meet their tax obligations on time. Under the revised system, individuals and businesses missing their payment deadlines will be hit with escalating fines:
From 2% to 3% on unpaid tax at 15 days overdue.
From 2% to 3% at 30 days overdue.
A significant jump from 4% to 10% for payments outstanding beyond 31 days.
This applies to both VAT late payments and self-assessment income tax under the new framework.
The immediate impact on revenue is projected to be relatively small, with an estimated £5 million in additional penalties collected in the first year. However, this figure is expected to surge to £50 million by 2026-27, and could potentially reach £125 million by the end of the parliamentary term, according to Treasury forecasts.
Interest Rate Hike Adds Further Pressure
In addition to increased penalties, taxpayers will also face higher interest rates on overdue tax. Beginning in April 2025, HMRC’s late payment interest rate will rise further, following a 1.5% increase announced in last year’s Autumn Budget.
As a result:
Late paid tax will be charged at the Bank of England rate (BR) + 4% (previously BR + 2.5%).
Late paid corporation tax quarterly instalments will increase from BR + 1% to BR + 2.5%.
Late paid customs duty will rise from BR + 2% to BR + 3.5%.
These changes are projected to raise an additional £1.2 billion over the course of the current parliament.
Concerns Over the Impact
While the government frames these increases as a necessary measure to enhance tax compliance, concerns have been raised about the potential impact on businesses and individuals already struggling with economic pressures. Businesses facing financial strain may find it increasingly difficult to meet their tax obligations. With tax arrears already at high levels, there are fears that heavier penalties could exacerbate rather than resolve the problem.
Another pressing concern is the growing disparity between the rates charged by HMRC on late payments and the interest paid to taxpayers awaiting refunds. HMRC could end up charging late payers significantly more than it reimburses in overpayment cases, a discrepancy that has not gone unnoticed.
What This Means for Taxpayers
For individuals and businesses, these changes mean that the cost of missing tax deadlines will rise significantly. The government’s aim is to incentivise timely payment, but for those facing financial challenges, it could present a considerable burden.
To avoid these penalties, taxpayers should take proactive steps, such as:
Setting reminders for tax deadlines.
Using HMRC’s online payment plans where necessary.
Seeking professional tax advice to ensure compliance.
With penalties and interest rates on the rise, managing tax obligations efficiently has never been more critical. As the new tax year approaches, businesses and individuals alike must be prepared to navigate this stricter fiscal environment.
Need help managing your tax obligations? Contact us today to discuss how we can support you in staying compliant and avoiding penalties.
📞 01249 816 810
Tagged as: Spring Statement 2025
Share this post: