Big Penalty Hike for Late Tax Payments Coming in 2025 – Here’s What You Need to Know

If you’ve been a little lax about making tax payments on time, you might want to take note of some big changes coming in April 2025. In a bid to close the tax gap, the UK government has announced some hefty penalty hikes for those who miss tax deadlines. So, what does this mean for you?

The New Penalty System

Under the new rules, the penalties for late tax payments are going to get a lot steeper. Right now, if you’re late by just 15 days, you face a 2% penalty. That penalty increases to 4% if you're 31 days late. But from April 2025 onwards, that’s going up.

Here’s the breakdown:

• 15 and 30 days late: 3% penalty (up from 2%)

• 31 days late or more: 10% penalty (a huge jump from the current 4%)

That's not all! HMRC will also be cranking up its interest rates. Starting next month, the interest on unpaid taxes will rise by 1.5%, which means the new interest rate will be the Bank of England base rate + 4% (up from the previous base rate + 2.5%).

More Interest Rate Hikes

In addition to the general late-payment penalties, there are also increases in interest rates for specific tax payments:

• Corporation tax: Late payments will now incur interest at base rate + 2.5% (up from +1%)

• Customs duty: Late payments will be charged at base rate + 3.5% (up from +2%)

The government expects these changes to raise around £1.2 billion during the current parliament, but there are some concerns about the impact this could have on businesses and individuals struggling with cash flow.

What You Should Do Now

The new penalties will kick in at the start of the 2025/26 tax year, so there’s still a bit of time to adjust, but don’t wait too long! If you’re at risk of missing deadlines, now’s the time to review your cash flow and make sure you’ve got a payment plan in place to avoid these steep costs.

If you’re unsure about how these changes might affect your situation, it’s worth speaking to a tax advisor sooner rather than later. It’s always better to stay ahead of these things!

So, mark your calendars and get your financial ducks in a row before April 2025 – because those penalties are about to get expensive!

If you require support with your business accounting requirements, get in touch with Zyla Accountants today.