Interest and penalties on late paid tax under self assessment

Produced by Tolley
  • (Updated for Autumn Budget 2021)

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Interest and penalties on late paid tax under self assessment
  • Interest
  • Coronavirus (COVID-19) impact on 2019/20 payments on account
  • Penalties for late paid tax
  • Time to pay arrangements
  • Reasonable excuse
  • Late payment penalty waiver for 2019/20 tax year
  • Allocation of payments on the statement of account
  • Taxpayer’s right to request reallocation of payments
  • Future changes ― new late payment penalty regime from 6 April 2024

Interest and penalties on late paid tax under self assessment

Interest

If the capital gains tax, the balancing payment or payments on account of tax and / or Class 4 national insurance contributions (NIC) are paid late, HMRC will charge interest on the amount overdue from the original due date. The due date for the balancing payment of tax is usually 31 January after the end of the tax year and the due dates for the payments on account are 31 January before the end of the tax year and 31 July next. See the Payment of tax and Self assessment ― payments on account guidance notes for further information.

Interest runs from the normal due date for payment to the day before payment is actually received by HMRC.

Interest is also charged on any late paid Class 2 NIC, with the normal due date being 31 January after the end of the tax year.

HMRC charges interest at an annual rate which can be found by adding 2.5% to the Bank of England base rate. As the interest figure is calculated on a daily basis, the annual rate is multiplied by the number of days in the period divided by the number of days in the year to give the adjusted figure.

The interest figure is calculated on the amount outstanding at the interest rate in force at that time. If the interest rate has changed during the period the amount has been outstanding, the interest figure at each interest rate must be calculated separately. The historic rates, along with the current rate of interest on late payments can be found on the GOV.UK website.

See Example 1.

The interest due on late payments is automatically calculated and added to the self assessment statement of account. To avoid having to ask the taxpayer to make two payments (one for the outstanding tax and one for the interest) you could check the interest position on the online statement

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