This guide tells you how to deal with income tax arrears owed to HM Revenue & Customs (HMRC).

Use this guide to help you:

• deal with an income tax demand;
• ask HMRC for more time to pay your income tax arrears;
• find out when HMRC can add interest and penalties to the amount you owe;
• find out what action HMRC can take to recover income tax arrears; and
• make a complaint about HMRC if you have been treated unfairly.

Types of tax

Taxes are dealt with and collected by HMRC.  There are different types of tax. Some of the most common types are listed below.

• Income tax. This is a tax you pay on income you receive.
• National Insurance contributions (NICs). Some classes of NICs are paid to build up your entitlement to certain state benefits.
• Pay As You Earn (PAYE). HMRC uses this system to collect income tax and NICs from a person’s income at source if they work for an employer. If you employ people, you will usually have to take income tax and NICs from their earnings at source and pay this to HMRC.
• Value Added Tax (VAT). This is a tax that is charged on most goods and services which certain businesses provide.

Tax debts should be treated as priority debts. This is because HMRC has strong powers to collect the money from you.

This guide provides information about income tax debt. For information about VAT debt, see our VAT debt guide. For information about other types of tax, contact us for advice.

How does HMRC work out what income tax is owed?

The tax year runs from 6 April in one year to 5 April the following year.  You will usually fall within HMRC’s self assessment rules if you are self-employed or receive income that is not taxed at source. If you get income as an employee, your employer will usually deduct tax for that income before they pay you (at source) and pass it to HMRC.

If you fall within HMRC’s self assessment rules, you need to send HMRC a self assessment tax return for each tax year HMRC requires you to do so. The tax return gives HMRC details about your circumstances, including money that has come into and gone out of your business during that tax year. It enables HMRC to work out how much tax you need to pay for that year.

The deadline HMRC sets for receiving your tax return (the filing date) depends on how you send it to HMRC. The deadline is usually: 

• 31 October following the end of the tax year if you send your return by post; or 
• 31 January following the end of the tax year if you send your return over the internet or use Making Tax Digital for Income Tax.

Put aside a regular amount each month to help pay your income tax bill on time. Use My Budget to help you work out what you should put aside.

Mistakes on tax returns

If you have already sent your return to HMRC but think you have made a mistake, or missed off some information, you may still be able to sort it out. You usually have 12 months from the tax return deadline to correct the mistake.

Making Tax Digital for Income Tax

From 6 April 2026 onwards, HMRC is introducing a requirement for some sole traders and individual landlords to use Making Tax Digital for Income Tax. This creates a new way of reporting income and expenses to HMRC. If you are required to use Making Tax Digital for Income Tax, you will need to:

• sign up for Making Tax Digital for Income Tax;
• keep digital records of the income and outgoings for your business or rental property;
• provide quarterly digital updates of the income and outgoings to HMRC; and
• finalise your tax position for the year by submitting your tax return to HMRC digitally.

Making Tax Digital for Income Tax is being introduced in stages. In most cases, if you are already registered for self assessment and receive an income from self-employment, property or both, you will need to use Making Tax Digital for Income Tax from the following dates.

• April 2026 if your qualifying income from self-employment or property is over £50,000.
• April 2027 if your qualifying income from self-employment or property is over £30,000.
• April 2028 if your qualifying income from self-employment or property is over £20,000.

Your ‘qualifying income’ is the total gross income you get in a tax year from self-employment and property. It is based on the details shown in the self assessment tax return that was due before the start of the relevant tax year. For example, this means that for the April 2026 deadline, your qualifying income will be based on the information included in your tax return for the 2024 to 2025 tax year.

HMRC has an online tool to help you check if you need to use Making Tax Digital for Income Tax. For a link to the tool and for more information about Making Tax Digital for Income Tax, including possible exemptions, see HMRC’s Guidance: Find out if and when you need to use Making Tax Digital for Income Tax.

Some people can also voluntarily sign-up for Making Tax Digital for Income Tax. For more information, see HMRC’s guidance: Sign up for Making Tax Digital for Income Tax.

Making Tax Digital for Income Tax: return and quarterly update deadlines

Quarterly update	Period covered	Quarterly filing deadline
Period 1	6 April to 5 July or 1 April to 30 June if using calendar periods	The following 7 August
Period 2	6 April to 5 October or 1 April to 30 September if using calendar periods	The following 7 November
Period 3	6 April to 5 January or 1 April to 31 December if using calendar periods	The following 7 February
Period 4	6 April to 5 April or 1 April to 31 March if using calendar periods	The following 7 May

You will need to use external software that is compatible with HMRC’s systems to submit your quarterly updates and tax return digitally. HMRC has produced information and an online tool to help you find suitable software. See HMRC’s Guidance: Find software that works with Making Tax Digital for Income Tax.

Partnerships

HMRC has said that Making Tax Digital for Income Tax will also be required for business partnerships in the future, although exact dates have not been given.

Dealing with an income tax demand

Your income tax bill for a particular tax year has to be paid by 31 January following the end of that tax year. An income tax demand is sent when you do not pay your income tax on time. The demand shows the amount of income tax HMRC states you owe, plus any interest and penalties they have added. Whenever you receive an income tax demand, check whether it can be reduced or challenged.

Ask yourself the following questions.

• Did you send your tax return to HMRC? If not, the income tax demand will be for an estimated amount. This is often called a ‘determination’. The only way to challenge a determination is to send HMRC your completed tax return with the correct figures. See the next section Returns for more information.
• If you did send HMRC the tax return that the bill is based on, did you complete it correctly? For example, did you leave something out that you now realise you should have included? Or did you include a wrong amount and now need to correct it? You may still have time to correct any mistakes. Contact us for advice.
• Did you make full use of any available tax allowances to reduce your tax bill? If you are not sure what tax allowances you can get, you will need further professional advice. Contact us for advice about how to get the professional help that is right for you.
• Have any interest and penalties been correctly charged? See the later section Interest and penalties for more information.
• Is an appeal possible? Appealing an income tax decision by HMRC can be complicated. For more information about income tax appeals, see GOV.UK: Disagree with a tax decision or penalty. Alternatively, contact us for advice.
• Has HMRC correctly processed all your payments and information?
• Has HMRC made an error in sending the income tax demand?

Returns

HMRC will not agree to a payment arrangement if you have outstanding tax returns. If your tax return is outstanding, it is important to get it completed and sent to HMRC as soon as possible. You will usually be out of time to provide HMRC with your return four years after the end of the tax year it relates to.

If you have an income tax bill for an estimated amount (a determination) the rules about how long you have to send HMRC your return are different. You have:

• 12 months from the date of the determination; or
• 3 years from the original deadline to provide HMRC with your tax return.

If you are outside these timescales, you may be able to claim ‘special relief’. See the next section Special Relief for more information.

If you are having difficulty with your tax return and are on a low income, you may be able to get help from TaxAid. TaxAid is an independent charity that specialises in giving tax advice. See Useful contacts towards the end of this guide.

Special relief

If you have missed the deadline for sending in your tax return to replace an estimated income tax bill, you may be able to claim ‘special relief’.

‘Special relief’ was introduced on 1 April 2011. It allows HMRC to choose not to pursue their legal right to recover an estimated income tax debt. There is no time limit for claiming special relief. HMRC will consider giving special relief if:

• they believe it would be clearly unreasonable to recover the estimated debt;
• your income tax affairs are up to date, or you have made an arrangement to bring them up to date; and
• you have not previously made a similar request to HMRC.

Send your request to the office recovering the debt and explain your reasons fully. HMRC should tell you what information is required to make a decision about your claim.

If your request for special relief is successful, you should be able to give HMRC information about your income and outgoings for the tax year in question. You will be expected to pay any remaining debt that is due in full. If your request is refused, you can appeal. See the earlier section Dealing with an income tax demand for how to find more information about appeals.

The rules about special relief are complicated. Contact us for advice.

Further action

Ask HMRC to stop further action against you while they consider your request for special relief.  HMRC does not have to agree to do this.

HMRC delay

You may be able to ask for your income tax arrears to be written off if HMRC has not made prompt and correct use of the information you have given them. This request can be made under ‘Extra Statutory Concession A19’. To use Extra Statutory Concession A19, you usually need to show that you reasonably believed your income tax affairs were in order and:

• you were told about the arrears more than 12 months after the end of the tax year in which HMRC received the information from you; or
• HMRC told you about an ‘over-repayment’ after the end of the tax year following the year in which the repayment was made to you. An over-repayment is where HMRC has refunded you too much tax.

In very limited circumstances, arrears of tax that you were told about 12 months or less after the end of the tax year concerned can be written off by HMRC. This may be done if HMRC:

• failed more than once to make correct use of information you gave them about one of your sources of income; and
• allowed the arrears to build up over two consecutive whole tax years by failing to make correct and prompt use of information you gave them.

Appealing an A19 refusal

If HMRC refuses your request under Extra Statutory Concession A19, you can appeal. Contact us for advice.

Can I ask HMRC not to pursue my debt in other situations?

HMRC may consider a request for them not to pursue you for an income tax bill in other circumstances. This is sometimes known as HMRC ‘remitting’ the debt. HMRC does not remit debts very often, but they should consider requests on a case by case basis.

You will usually need to show that:

• you have very little or no spare income after your essential household bills and this is likely to continue for a long time; and
• you have no assets which could be sold to raise money to help clear the debt.

For example, these circumstances may apply if you:

• are elderly;
• have a disability or long-term illness; or
• are long-term unemployed. 

HMRC will not formally write off a tax debt in these circumstances, but may agree not to pursue it based on your circumstances. This still allows HMRC to pursue the debt if your situation improves.

Can I ask HMRC for more time to pay?

If you have missed your income tax payment deadline, you can ask HMRC for a payment plan (also known as ‘time to pay’). If HMRC agrees, the payment plan will let you pay your overdue tax bill in instalments.

Ask HMRC for a payment plan if:

• the tax demand cannot be challenged;
• you do not have grounds to ask for it to be remitted; and
• you cannot afford to pay it straightaway.

HMRC will not agree to a payment plan if you have outstanding tax returns.

Contact HMRC as early as possible. You can contact HMRC online or by calling the Self Assessment Payment Helpline. See Useful contacts towards the end of this guide.

HMRC are more likely to accept an arrangement before further action takes place. Making a payment arrangement also helps to avoid ‘penalties’ being added to your bill. Although, interest will continue to be added to any late payments. See the later section Interest and penalties for more information.

Tell HMRC that you have received advice from Business Debtline. This can help to show that you are taking steps to deal with your debts.

HMRC will ask for details of your income and outgoings when discussing a payment plan. It is important to show HMRC you are not refusing to pay, but that you cannot pay in full immediately. Use My Budget to show this and to work out how much you can afford to pay towards your income tax debt. 

What information should I give HMRC?

You should also give HMRC the following information.

• Details of how long the offer you have made is for.
• The reasons why the debt has come about (for example, ill health, loss of customers and so on).
• The date you propose to start making the payments you have offered.
• Your preferred payment method. (If you apply for a payment plan online, HMRC will ask you to set up a direct debit.)
• Any payments you are able to make as a goodwill gesture. For example, explain if you can make an initial lump sum payment as well as ongoing payments.
• An explanation of whether any of your assets are going to be used to help pay the debt. If you do not have any assets, this may make negotiating with HMRC easier. This is because HMRC will be more limited in the ways in which they can recover the money from you. See the later section Enforcement for more information.
• Any form of unsecured finance that you can raise to clear the debt. You will usually need to provide evidence of a creditor agreeing to lend you the money. Before taking out further credit to deal with a debt to HMRC, check to make sure you can afford the repayments and contact us for advice.

Have all this information ready when you contact HMRC. You will also need to provide your tax reference number, full address details of your business and a contact telephone number.

Keep copies and make notes.

When contacting HMRC in writing, keep copies of letters you have sent and received. When making contact with HMRC by phone, record:

• the name and title of the person you speak to;
• the time and date you spoke to them;
• brief details of what was said; and
• details of what was agreed.

If you contact HMRC online, take a screen shot of any important information you are given.

How do HMRC make decisions?

Under the ‘HMRC Charter’ your case should be dealt with fairly and promptly. You can mention this in any request you make for a payment plan. For more information, see the later section What service should HMRC provide?.

When HMRC considers your request for a payment plan, they should take into account:

• why you are experiencing difficulties;
• what assets you have; and
• the length of time your offer will take to clear the debt.

If your business is still trading, HMRC will expect you to offer a payment that will include your arrears and to pay your future bills on time as they become due. They will usually expect you to get completely up to date as soon as possible, but extra time may be given depending upon your circumstances.

All a payment plan requests should be considered on a case-by-case basis and your previous payment history will be taken into account.

HMRC guidance

HMRC has produced guidance about what to do If you cannot pay your tax bill on time. It is available on GOV.UK and explains how HMRC works out an individual’s payment plan repayments. It says the following.

• There is no limit on the amount of time HMRC can give you to pay the debt. The arrangement will depend upon how much you owe HMRC and what you can afford to pay.
• HMRC will usually expect you to pay 50% of the money you have available for your creditors each month towards the arrangement.
• HMRC won’t expect you to access your pension early to pay your debt.
• HMRC may be able to renegotiate an existing payment plan if your circumstances change.

It can be helpful to look at this guidance when you are preparing to ask HMRC for a payment plan.

Interest and penalties

If you send in your income tax return late, or pay the debt late, penalties can be added to the amount you owe. 

HMRC has introduced a new penalty system that applies from the tax year onwards that you volunteer for, or are required to use, Making Tax Digital for Income Tax. This means that two different penalty systems exist. When and what you will be charged in penalties currently depends on whether the tax year the penalties relate to falls within the Making Tax Digital for Income Tax rules or not. For more information on what can be added to the debt, see the following sections at the end of this guide:

• Penalties for tax years when Making Tax Digital rules apply to you
• Penalties for tax years when Making Tax Digital rules do NOT apply to you

HMRC will not add penalties to your debt if a payment plan is agreed before the penalties would have been applied, as long as you keep to the arrangement.

If you pay your income tax bill late, you will also have to pay late payment interest on the amount you owe. This includes any penalties that HMRC has added. HMRC will add interest to any unpaid tax and penalties even if you have a payment plan in place. Late payment interest is currently charged at 7.75%.

HMRC has an online tool which estimates penalties and interest for late filing and late payments under self assessment.

Enforcement

If you do not reach an agreement with HMRC to repay what you owe, your case will be transferred to your local office. The office will consider different ways of recovering the debt from you.

If you are currently working for an employer, HMRC may try to recover the money by changing your tax code. This allows them to recover the debt from your wages before you get them. If you think HMRC are trying to do this, contact us for advice.

You should still try to negotiate with HMRC and make an offer to pay if you have not already done so. It is good practice to start paying what you have offered straightaway. You can use the same ways of negotiating as described in the earlier section Dealing with an income tax demand. If you have previously been refused more time to pay, but your circumstances have now changed, tell HMRC this. If you are not given more time to pay, they may consider taking the following types of action.     

Debt collection agencies

HMRC may pass your debt to a debt collection agency. A debt collection agency is a private company that can ask you to pay what you owe. They are not bailiffs.

A debt collection agency that is acting for HMRC will only contact you by letter or phone (including text messages). They should not visit your home or place of work.

It is usually best to negotiate with a debt collection agency in writing. Send them a copy of your budget to show what you can afford to pay. If you negotiate payments over the phone, make sure that you have your budget available during the call. Only offer what you can afford to pay.

Bailiff action 

HMRC does not need a court order to take bailiff action against you. This type of action is known as ‘taking control of goods’. The ‘Collector of Taxes’ is the HMRC employee responsible for taking control of goods and may occasionally be accompanied by a certificated bailiff.

Bailiffs are also commonly known as enforcement agents. In this guide we use the term bailiff. 

HMRC will usually attempt to gain entry to your premises peacefully. You do not have to let them in. However, HMRC can apply to court for a warrant to break in. The court makes the final decision on whether to give HMRC this warrant. The court will look at whether it is reasonable to allow HMRC to force entry, taking into account the size and type of debt you owe.

It may be very difficult to stop the collector entering your business premises if it is open to the public.

If the Collector of Taxes gains entry, they will usually list items and ask you to sign a ‘controlled goods agreement’. This allows you to keep using the goods listed. However, if you do not pay, the goods listed on the controlled goods agreement can be removed. Bailiffs can force entry to your premises to do this, but they must give you two clear days’ notice if they want to break into your home. ‘Clear days’ do not include Sundays or bank holidays.

In some situations, your goods may be removed straightaway or locked up in a room on your premises. As a last resort your whole business premises may be locked up. You should try to agree affordable payments by instalments, based on your budget.

HMRC bailiffs should not take:

• clothing, bedding, furniture and basic household items that are necessary for the basic domestic needs of you and your family;
• items you or someone else is physically using where taking the goods is likely to lead to a breach of the peace (this will normally only apply if the collector wants to remove the item straightaway); and
• items belonging to other people, including rented and leased goods.

Specific goods that bailiffs are not allowed to take include: 

• a cooker or microwave
• a refrigerator
• a washing machine
• a dining table and chairs for you and your household.

This is not a complete list of the goods that bailiffs should not take. If you are unsure whether an item is exempt or not, contact us for advice.

There are different legal views about whether bailiffs can take control of goods on hire purchase or conditional sale agreements. If a HMRC bailiff threatens this, contact us for advice.

HMRC can take goods that are necessary for you to use in your business. Goods that are removed can be sold seven clear days later, unless you make an arrangement to pay with HMRC.

Where goods can be taken from

Bailiffs can try to take goods from either your business premises or your home. Bailiffs can remove a vehicle if it is parked on your own driveway. They can clamp and possibly remove your vehicle if it is parked on a public road. However, they cannot remove a vehicle on third party premises (for example, someone else’s driveway) unless they have a court order allowing them to do this.

What if there are no goods to take?

If the bailiffs come into your business premises or your home, they may decide that your goods are not worth enough to cover the cost of them coming with a van to remove and sell them.  If this is the case, the bailiff may return at a later date to try to take control of your goods. They have 12 months from the date of the enforcement notice to take control of your goods.

If in the meantime you make an arrangement to pay the bailiff, and you do not pay, the 12-month time period starts running again from the date you missed the payment.

Direct deductions from bank accounts

If you owe HMRC at least £1,000, they can ask your bank whether there is any money in your account to pay the debt. HMRC will normally be able to do this 30 days after you have had a letter from them telling you how much you owe. This can be done without a court order. However, HMRC guidance says that you should have had a visit from them first, to make sure that you know you owe the debt.

HMRC will send you a hold notice, telling you that the bank has frozen money in your account. In most cases the first £5,000 in your account is protected and the bank will only freeze any funds above this amount.

HMRC will then send you a deduction notice, advising how much they have asked the bank to pay them out of your account. The bank will send this money to HMRC. The bank can also make a charge to your account for carrying out this process. If you are unhappy about the amount of charges, contact us for advice.

Objections

If you do not agree that HMRC should make the deduction, for example, because the debt has already been paid, then you can object to HMRC. Contact us for advice.

Joint accounts

HMRC can ask for money to be taken from a joint account. Only money in the account belonging to the person who owes the debt can be taken. However, HMRC will assume that balances in joint accounts are split equally. For example, if the account is in two names, and only one person owes the debt, HMRC will say 50% of the money in the account can be taken.

County Court procedures 

HMRC may make a claim through the County Court to get a county court judgment (CCJ) against you. This may be done if bailiff action is not successful. A CCJ will be recorded on your credit reference file for six years and can affect your ability to get further credit.

• When county court action is taken against you, you will get a ‘claim form’. This gives details about the debt and tells you how much is being claimed.
• You can complete the ‘admission’ form if you admit the debt and want to make an offer to pay the debt in instalments.
• If you want to dispute all or part of the debt, contact us for advice.

The County Court should consider your circumstances and your income and outgoings before making a decision about how the debt should be paid back. The final decision about how much you should pay back each month is taken by the court, even if HMRC wants a higher amount.

If HMRC applied for a CCJ against you on or after 1 October 2012, they can apply to secure the debt against any property you own, even if you have not missed payments on the CCJ. If HMRC applied for a CCJ against you before 1 October 2012, the rules are different. For more information about charging orders, see our Charging orders guide.

If you miss payments on a CCJ, HMRC can take other types of enforcement action against you through the County Court, which could include:

• freezing money in your bank account (called a ‘third party debt order’);
• using bailiffs to take control of your goods;
• taking regular deductions from your wages, if you are working for an employer (called an ‘attachment of earnings order’); and
• applying to court for a ‘judgment summons’ (see the section Judgment summons below).

Judgment summons

If you do not pay what is ordered on a CCJ, HMRC can ask the court to issue a ‘judgment summons’. This orders you to go to court and explain why you have not paid. You can be sent to prison if you:

• have had the money to pay the amount of the judgment summons since the CCJ was made; and 
• have wilfully neglected or refused to pay as the court ordered.

Although this power exists, it is not currently being used by HMRC.

Magistrates’ court action

If you owe less than £2,000 of income tax, in some situations HMRC could recover the debt through the magistrates’ court. The process is called ‘summary proceedings’. HMRC has 12 months to start summary proceedings once the debt is due.

Although this power exists, it is not currently being used by HMRC.

Bailiff action

If an income tax debt has previously been referred to the magistrates’ court and you have not paid as the court ordered, magistrates’ court bailiffs could be used to collect the debt. Magistrates’ court bailiffs can force entry to your home to remove goods, but this should only be done as a last resort and when it is reasonable. Contact us for advice.

Bankruptcy proceedings

If HMRC has been unable to recover the debt by other methods, they will pass the debt to the Enforcement and Insolvency Service office in Worthing. Once the debt reaches this stage, HMRC may try to make you bankrupt if the debt you owe is at least £5,000. Bankruptcy is a court order which means that valuable things you own (your ‘assets’) could be sold to help pay your debts.

You would usually receive a ‘statutory demand’ before being made bankrupt. This is a legal document which shows how much HMRC claims you owe. To find out more, see our Statutory demands guide.

Even at this stage, you can still try to negotiate a payment arrangement. If you have a lump sum of money to offer, you could try to offer this to HMRC as well as instalments that you can afford, based on your budget.

If HMRC still refuses to accept the offers you make and you own your home, you could consider offering to secure the debt on your property. If the debt is secured against your property, this would mean that the debt will be paid when the property has been sold. This may help to persuade HMRC not to make you bankrupt. If you are ill and can only make very small payments, or none, explain this to HMRC.  If you are considering this option, contact us for advice.  

What service should HMRC provide?

HMRC should provide you with a service that is fair, accurate and based on mutual respect. They should also be mindful of your wider personal situation, and give you extra support if you need it. This is explained in their service charter, called the ‘HMRC Charter’.

How to complain

If you are unhappy with the way HMRC has dealt with your case, there is a complaint procedure that you can follow. For example, you may want to complain if you have been refused more time to pay your arrears and you feel that this is unreasonable in view of your circumstances.

You can make a complaint to HMRC by phone, online or in writing. As explained in their charter, HMRC should deal with your complaint fairly and as quickly as they can.

• To complain, you usually need to contact the HMRC department that has been dealing with your case and explain the reason for your complaint. HMRC should investigate your issue thoroughly and provide you with a response. This is called the ‘first tier’ review. 
• If you are unhappy with HMRC’s response to your complaint, you can ask for your case to be looked at again by another member of staff. They will review your complaint and send you a ‘final response’. This is called the ‘second tier’ review.
• If you do not agree with the final response, you can contact the Adjudicator’s Office and ask them to look at your case. See Useful contacts at the end of this guide. The Adjudicator’s Office is not part of HMRC and acts as a free impartial referee in unresolved complaints.
• Finally, after going through all these steps, you can ask your Member of Parliament to refer your case to the Parliamentary and Health Service Ombudsman (PHSO). The PHSO is the final stage for unresolved complaints. For contact details, see Useful contacts at the end of this guide.

For more information, go to www.gov.uk and search for ‘Complain about HMRC’.

If you are not happy with a decision that HMRC has made, such as the amount of tax you owe, or charges they have asked you to pay, you may need to follow the review and appeals process instead of the complaints process. Contact us for advice.

Alternative dispute resolution

HMRC runs an alternative dispute resolution (ADR). This involves an independent HMRC mediator working with both you and HMRC to sort out your dispute. You can use ADR if you are a small business and there is a tax issue in dispute. Using the ADR process will not affect your review and appeal rights. For more information see HMRC guidance – Use Alternative Dispute Resolution to settle a tax debt.

Useful contacts

Chartered Institute of Taxation To find a tax adviser for tax advice and help. www.tax.org.uk

HMRC Self Assessment Payment Helpline Phone 0300 200 3820 www.gov.uk

Institute of Chartered Accountants in England and Wales Find a Chartered Accountant. www.icaew.com

TaxAid Phone: 0345 120 3779 www.taxaid.org.uk

The Adjudicator’s Office Phone: 0300 057 1111 www.adjudicatorsoffice.gov.uk

Penalties for tax years when Making Tax Digital rules do NOT apply to you

This section applies to tax years:

• where you were not required to use Making Tax Digital for Income Tax; and
• that occurred before a tax year in which you volunteered to use Making Tax Digital for Income Tax.

Penalties for missing an income tax return deadline

Delay	Penalty you will have to pay	Additional information
At least 1 day	£100	You will still have to pay this, even if HMRC work out that you don’t owe any tax, or if you pay the tax they say you owe.
At least 3 months	£10 for each day up to a maximum of £900.	For example, if HMRC receive your return 3 months and 6 days after the deadline, this charge will be £60. This penalty will be added as well as the fixed penalty above.
At least 6 months	£300 or 5% of the income tax due, whichever is higher.	This penalty will be added as well as the penalties above.
At least 12 months	£300 or 5% of the income tax due, whichever is higher.	In some serious cases, this penalty may be 100% of the tax due instead. This penalty will be added as well as the penalties above.

Penalties if you pay your income tax late

Delay	Penalty you will have to pay
30 days	5% of the income tax you owe at that time.
6 months	5% of the income tax you owe at that time, which includes the penalties above.
12 months	5% of the income tax you owe at that time, which includes the penalties above.

Penalties for tax years when Making Tax Digital rules apply to you

This section applies to tax years that you volunteered for or were required to use Making Tax Digital for Income Tax.

If you volunteered to use Making Tax Digital for Income Tax, these penalties will also apply to any subsequent tax years even if you stopped volunteering. This is because once you volunteer for Making Tax Digital for Income Tax, you stay within this penalty system. You cannot return to the old penalty system.

Penalties for missing income tax return deadlines: Making Tax Digital

Making Tax Digital for Income Tax uses a points-based penalty system. HMRC will give you one penalty point each time you miss a submission deadline. Under Making Tax Digital for Income Tax rules, you need to submit quarterly updates as well as your end of year tax return. You will get:

• a £200 penalty if you reach your penalty points threshold; and
• a further £200 penalty each time you miss a submission deadline while you are at your penalty point threshold.

However, as a temporary measure, HMRC has said that they will not add penalty points for missing a quarterly update:

• while you are volunteering for Making Tax Digital for Income Tax; or
• during the 2026 to 2027 tax year if you are required to join Making Tax Digital for Income Tax for this year.

While the temporary measure applies, your penalty threshold will be two points.

Once the temporary measure ends, your penalty threshold will be four points, and you will receive a penalty if you miss a quarterly return.

Penalties if you pay your income tax late: Making Tax Digital

The penalties that apply for a late payment depend on the tax year that the payment relates to (see tables below). However, HMRC has said that they will not add a late payment penalty until your payment is more than 30 days late for your first year of Making Tax Digital for Income Tax.

Late payment penalties for the 2024 to 2025 tax year

These penalties may apply if you volunteered for Making Tax Digital for Income Tax for the 2024 to 2025 tax year.

Period overdue	First late payment penalty	Second late payment penalty
Up to 15 days overdue	No penalty	No penalty
Between 16 and 30 days overdue	No penalty	No penalty
31 days or more overdue	2% of what was outstanding at day 15, PLUS 2% of what was still outstanding at day 30	Calculated at a daily rate of 4% per year on the outstanding balance. This will be charged every day from day 31, until the outstanding balance is paid in full.

Late payment penalties for the 2025 to 2026 and 2026 to 2027 tax years

Period overdue	First late payment penalty	Second late payment penalty
Up to 15 days overdue	No penalty	No penalty
Between 16 and 30 days overdue	3% of the tax you owed at day 15. (No penalty if it’s your first year of Making Tax Digital for Income Tax.)	No penalty
31 days or more overdue	3% of what was outstanding at day 15, PLUS 3% of what was still outstanding at day 30	Calculated at a daily rate of 10% per year on the outstanding balance. This will be charged every day from day 31, until the outstanding balance is paid in full.

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