The Chancellor’s 2025 Spring Statement introduced harsher penalties for late taxpayers under Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).
With the Government confirming an extension of the scheme to sole traders and landlords earning more than £20,000 from April 2028, more taxpayers – an estimated 900,000 – will need to pay tax via MTD for ITSA from 5 April 2026.
Under the current rules, you will not receive a penalty if you pay your tax within the first 15 days of the deadline.
Penalties then apply at the following rates:
- Day 15 – two per cent
- Day 30 – four per cent
- Where tax remains unpaid by day 30 – four per cent
However, from April 2025, the new penalty rates will be:
- Day 15 – three per cent
- Day 30 – six per cent
- From day 31, a second late penalty is charged at 10 per cent per annum
The 15-day grace period, however, will remain.
This amended late penalty regime will be aligned across the main taxes.
How to avoid late tax penalties
Higher penalty charges will be painful for those with cashflow difficulties, individuals and businesses still getting to grips with MTD for ITSA, and those who simply forget to pay their taxes on time.
To avoid getting caught out, make sure your bookkeeping is up to date and that you have money set aside for tax bills.
Give yourself plenty of time to submit your tax return and make payments. Leaving everything to the last minute will be even more costly than before.
Avoid getting caught by costly penalties. Get in touch with us today for urgent advice and guidance.
