Following the Autumn Budget, it is increasingly clear that the Government is toughening its approach to tax compliance.

This is a break with tradition, as penalties have remained unchanged for years, meaning that inflation has caused the impact to soften with time.

As such, we are facing an update to penalties aimed at tackling late filing, late payment and repeated non-compliance, all of which will soon result in larger fines.

Corporation Tax penalties are increasing

From 1 April 2026, Corporation Tax late filing penalties will double, as missing a deadline will result in a £200 fine, up from £100.

This penalty increases to £400 if the return is more than three months late.

Repeat offenders will face a fine of up to £2,000 for missing three consecutive filings.

HMRC expects to raise £60 million a year through the changes, though this could be higher if the penalties improve taxpayer behaviour.

Wider tightening of penalties

While the penalties for missing Corporation Tax filings are changing for the first time in 25 years, other penalties are increasing too.

Late payment interest will also increase as tax interest rates are aligned more closely with the Bank of England base rate movements.

Higher penalties are also being proposed where undeclared income or gains involve overseas assets, while failure-to-notify penalties are being strengthened too, particularly where businesses fail to register correctly for VAT or PAYE on time.

Making Tax Digital for Income Tax

As the first deadline is swiftly approaching, all eyes are on Making Tax Digital (MTD) for Income Tax.

To allow people time to prepare, the 2026 tax year will not have penalties for missing MTD deadlines, but 2027 will see the penalty system take effect.

Each late submission earns one penalty point.

A £200 penalty will be enforced after you get two points for annual filings and four points for quarterly filings.

Any further missed annual filings will also face a £200 fine.

Points reset when outstanding submissions are filed and after 12 months of compliance with quarterly filings and 24 months for annual ones.

Stay compliant with tax obligations by speaking to our team today.