What is the Penalty for Late Payment of Corporation Tax?

One of the most common questions directors ask when facing a corporation tax bill they cannot pay is what penalty they will face for paying it late. What is the penalty for late payment of corporation tax? The honest answer is that there is no penalty for late payment of corporation tax, only penalties for late filing. However, interest on late payment of corporation tax WILL apply.

This is a common misconception, with many directors believing they are being penalised for paying late, when they are actually being charged interest, or being penalised for late filing. 

This guide explains what interest HMRC charges on late payment, what penalties apply for late filing, and what options are available if you cannot pay your corporation tax bill.

Blog First Published November 2023. Last Updated June 2026. 

What is the Corporation Tax Payment Deadline?

Corporation tax has two separate deadlines — one for payment and one for filing your return — and missing either has different consequences. Your corporation tax payment is due nine months and one day after the end of your accounting period. 

Your corporation tax return must be filed within 12 months of your accounting period ending. Missing the payment deadline triggers interest, charged daily from the day after the deadline. Missing the filing deadline triggers escalating penalties. 

These deadlines are independent of each other. Paying your corporation tax on time does not protect you from filing penalties if your return is late. Filing your return on time does not protect you from interest if payment is late. Both can apply simultaneously.

If you are reading this because you have already missed one or both deadlines, the most important thing you can do is act now. The interest and penalties described in this guide increase the longer the position is left unaddressed. Contacting HMRC today could alleviate potential issues in the future. 

Is There a Penalty for Late Payment of Corporation Tax?

No, there is no penalty for paying your corporation tax late. What HMRC charges on late payment is interest, not any form of penalty. Interest is charged from the day after the payment deadline until the tax is paid in. 

As of 2026, the current late payment interest rate is 8.5% per year — calculated as the Bank of England base rate plus an additional 4%. This rate applies from 6th April 2025 following a change by HMRC that increased the differential form base rate plus 2.5% as it had been. 

For context, a company with an unpaid corporation tax liability of £20,000 that pays three months late would now accrue approximately £425 in interest charges. Paying three months late would be approximately £850. The longer the delay, the more interest accrues. This is why acting early is important, even if you can’t pay in full right away. 

Interest is charged automatically by HMRC. There is no warning and no grace period. The clock starts immediately the day after your deadline.

What Are the Corporation Tax Late Filing Penalties?

While there may be no penalty for paying late, there are significant penalties for filing your corporation tax return late; and these penalties have increased from April 2026. 

Corporation tax late filing penalties apply regardless of whether you have paid your taxes or not. So, even if you pay your bill in full after the deadline, you can still expect to face penalties if returning late. 

As of April 2026, the standard structure for late filing penalties is as follows: 

• One day late: £200 fine (doubled from £100 previously). 
• Three months late: An additional £200 charge (doubled). 
• Six months late: 10% of unpaid tax charge. 
• 12 months late: An additional 10% charge of unpaid tax.

Upon the third consecutive failure, the first two fixed penalties rise to £1000 and £2000 respectively.

What Are the More Serious Consequences of Non-Payment?

While there are numerous possible penalties for late payment of corporation tax, it’s worth noting that such consequences are generally only taken as a last resort for serious breaches. As a general rule of thumb, HMRC would generally prefer to work with a struggling business in order to help them meet their tax obligations in a manner that suits all parties. 

With that said, beyond interest accruing and filing penalties, persistent non-payment can trigger HMRC enforcement action that can escalate through the following stages: 

1. 1. Enforcement Action: HMRC can look to instruct bailiffs to seize company assets. Seized assets are then sold on to recover the outstanding liability. 
   2. Winding-up Petition: HMRC is one of the most common petitioners for compulsory liquidation in the UK. If all other attempts to recover unpaid tax fail and corporation tax debt remains unpaid, they can petition the court to wind-up the business. Once a winding-up petition is advertised in The Gazette, company bank accounts are typically frozen.  
   3. Personal Liability: If unpaid corporation tax contributes to a company becoming insolvent and entering liquidation, the appointed liquidator will investigate director conduct. Directors found to have continued trading while knowingly insolvent, accumulating further tax debt in the process, may be held personally liable for company debts as a result of wrongful trading.
   4. Deregistration: If a company repeatedly, over a significant amount of time, fails to meet its tax obligations, HMRC does have the authority to deregister the business. This course of actions will not absolve the business of its previous liabilities.
   5. Prosecution: Reserved for particularly extreme cases of tax evasion or deliberate failure to comply. HMRC can, should it wish, pursue official criminal prosecution against a guilty party. None of these outcomes are inevitable, and HMRC’s preference will always be to recover what is owed rather than force closure on a business. However, the risk of such outcomes does escalate the longer a tax debt is left unaddressed.

What Can You Do if You Cannot Pay Your Corporation Tax?

If you find that you can’t pay your corporation tax bill, for any reason, the most important thing you can do is contact HMRC immediately — before the deadline, not after. HMRC is significantly more likely to agree to a repayment agreement from a director approaching them proactively, rather than one who waited to be chased following non-payment of a tax bill. 

The primary option for directors who cannot pay their corporation tax is a Time to Pay Arrangement with HMRC. This is the route a majority will look to take. Besides that, options like tax funding and tax losses also exist.

Time to Pay Arrangements 

HMRC will consider an instalment plan for directors who, while not able to pay in full, can demonstrate that they have a realistic prospect of paying over time. 

As part of the application process, you will need to provide current management accounts, a cash flow forecast, and a proposed repayment schedule. HMRC will assess how much you can pay immediately as well as how long you need to pay off the remainder. 

TTP arrangements typically run for up to 12 months. You WILL continue to pay interest on the outstanding amount during the arrangement period — this will be factored into monthly repayments. 

To apply for a Time to Pay Arrangement, contact HMRC’s Business Payment Support Service on 0300 200 3835. 

If a Time to Pay Arrangement Isn’t Suitable

• • Tax Losses: If your business made a trading loss in the current accounting period and has a corporation tax liability from the preceding 12 months, it may be possible to carry back those losses and offset them against earlier profits. This would potentially reduce or even eliminate the liability altogether. This requires filing the current period return and claiming the relief. An accountant should advise on whether your specific circumstances qualify.
  • Tax Funding: It is possible to obtain specific financing to help pay a corporation tax liability. To approve such an application, lenders will typically require security, either against company assets or in the form of a director personal guarantee. This is generally considered a costly route, and only worth considering where cash flow is expected to improve in the coming months. 

If none of the above options are viable, and the company is insolvent, a Creditors’ Voluntary Liquidation may be the most appropriate route. CVL involves closing the company in an orderly way, writing off unsecured debts, and protecting directors from the consequences of continuing to trade while insolvent. 

Inquesta is a licensed insolvency practice led by Steven Wiseglass — IPA regulated, Fellow of R3, over 20 years of experience guiding directors through CVL and all options available when a company cannot meet its tax obligations. Call 0800 093 4604 for a free, confidential assessment.

Frequently Asked Questions

What is the difference between a late payment and a late filing? The payment deadline is nine months and one day after your accounting period ends. The filing deadline for your corporation tax return is 12 months after your accounting period ends. Missing the payment deadline triggers interest. Missing the filing deadline triggers penalties. You can face both independently. Paying on time does not protect you from filing penalties, and filing on time does not protect you from interest on late payment.

Is there a penalty for paying corporation tax late? No, there is no penalty for paying corporation tax late. However, HMRC does charge interest on the outstanding debt from the day after the payment deadline passes until it is paid in full. The current rate of interest is 8.5% per year charged daily. Penalties only apply if you fill your corporation tax return late — but these are entirely separate consequences.  

What happens if my corporation tax return is more than six months late? If your return is more than six months late, HMRC will issue a tax determination with an estimate of your liability. There is no appeals process to a tax determination. Your only option left in this circumstance is to pay the figure determined, or file your actual return and pay the correct liability amount — along with any penalties and/or interest that have accrued. 

We always recommend filing your return on time, even if you can’t pay it immediately. 

Can I appeal a corporation tax late filing penalty? Yes, you can appeal a corporation tax penalty for late filing within 30 days of receiving the penalty notice. Reasonable excuses HMRC will consider as mitigating circumstances for a late return include: 

• Serious illness. 
• Bereavement. 
• HMRC system failure. 

Appeals can be submitted online via your HMRC account or by post. If HMRC rejects your appeal, you can request an internal review or escalate the issue to the Tax Tribunal. 

What happens if I cannot pay my corporation tax on time? Contact HMRC’s Business Payment Support Service on 0300 200 3835 before the deadline. Acting early significantly increases the likelihood of HMRC agreeing to a Time to Pay arrangement. You will need to provide current management accounts and a cash flow forecast. Interest continues to accrue on the outstanding amount throughout any arrangement.

Can HMRC wind up my company for unpaid corporation tax? Yes. HMRC is one of the most frequent petitioners for compulsory liquidation in the UK. If a corporation tax debt remains unpaid and informal recovery attempts fail, HMRC can petition the court to wind up the company. Once the petition is advertised in The Gazette, company bank accounts are typically frozen. If you have received a statutory demand or winding-up petition from HMRC, seek advice immediately.

Support With Corporation Tax Late Filing Penalties From Inquesta

Understanding the distinction between late payment interest and late filing penalties is one thing — knowing what to do if you genuinely cannot pay your corporation tax bill requires advice tailored to your specific circumstances.

Inquesta is a licensed insolvency practice led by Steven Wiseglass — IPA regulated, Fellow of R3, over 20 years of experience supporting directors through corporation tax arrears, HMRC negotiations, and all stages of financial difficulty.

For support with avoiding corporation tax late filing penalties, don’t hesitate to consult with a trusted insolvency practitioner. Alternatively, if Corporation Tax has increased and you need support, feel free to get in touch and we can help you.

At Inquesta, our team of experts have years of experience supporting businesses through all manner of financial issues. So regardless of the size of your business, what industry you are in, or where in the UK you are based, get in touch today. 

We can provide valuable guidance to help you navigate the complexities of Corporation Tax and safeguard your business from any unnecessary penalties and legal consequences.