Penalties, interest and time limits

FORTHCOMING CHANGES relating to (1) Making Tax Digital (MTD) for Income Tax and penalty reform: late payment and late submission penalties, (2) increases to corporation tax late filing penalties, and (3) penalty reform calls for evidence and behavioural penalties reform: (1) As announced at Spring Budget 2021, Finance Act 2021 provides for substantial changes to the regimes for late payment and late submission penalties for VAT and income tax. For VAT, these changes (alongside changes aligning the late payment interest rules for VAT with those for income tax) took effect from 1 January 2023 (see Practice Note: VAT penalties). For those within income tax self-assessment (ITSA):

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prior to Budget 2025, the changes were expected to come into effect as taxpayers become mandated to Making Tax Digital (MTD): from 6 April 2026 for those with business or property turnover of over £50,000 per year; from 6 April 2027 for those with business or property turnover of over £30,000 per year; and (as announced at Spring Statement 2025) from 6 April 2028 for sole traders and landlords with qualifying income over £20,000 per year

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