For more than 25 years, the cost of filing a Company Tax Return a day late was a fixed £100. From 1 April 2026, that figure has doubled, and the wider penalty structure has been overhauled with it. It is the first meaningful uplift to corporation tax late filing penalties since 1998, and many SME directors are entirely unaware that the rules have moved.
The changes were confirmed at the Autumn Budget 2025 and apply to any Company Tax Return with a filing date on or after 1 April 2026, including returns covering accounting periods that ended before that date. With HMRC also focusing more sharply on the small and medium-sized business tax gap, the new regime is worth understanding properly, not least because the fixed penalties apply even where no corporation tax is due.
The corporation tax planning team at Hamlyns has put together this short guide to explain what has changed, why, and what limited company directors should be doing now to stay compliant.
The New Penalty Structure at a Glance
HMRC’s late filing penalties for corporation tax remain split into two parts: fixed penalties that apply automatically once the deadline passes, and tax-geared penalties that are charged once the return is significantly overdue. The tax-geared element (10% of unpaid tax at six months late, and a further 10% at twelve months late) is unchanged. It is the fixed penalties that have doubled.
From 1 April 2026, the fixed penalties for first-time and occasional late filers are:
- One day late: £200 (previously £100).
- More than three months late: a further £200, taking the total fixed penalty to £400 (previously £200).
For companies that have filed late in each of the previous two consecutive accounting periods, the third late filing in a row triggers the higher repeat-offender rates:
- One day late on the third return in a row: £1,000 (previously £500).
- More than three months late on the third return in a row: a further £1,000, taking the total fixed penalty to £2,000 (previously £1,000).
These fixed penalties are completely separate from late payment interest, which currently sits at 7.75% (Bank of England base rate plus 4%) and accrues daily on any corporation tax that is paid after the nine-months-and-one-day deadline. A return that is filed late and paid late can therefore attract several layers of charges in quick succession.
Why HMRC Has Increased the Penalties
The stated aim of the increase is to restore the deterrent effect that inflation has eroded over time: a £100 penalty in 1998 simply does not carry the same weight as it does today. In practice, the increase also fits into HMRC’s wider strategy of closing the SME tax gap, which the department considers to be the single largest source of unpaid tax in the UK.
Compliance funding has been increased, more compliance staff are being recruited, and several tightening measures (including this one) are designed to encourage SMEs to engage with their filing obligations earlier and more reliably. For directors who file on time, nothing changes. For those who slip, the cost has roughly doubled.
What Limited Company Directors Should Do Now
The good news is that avoiding the new penalties is largely a question of process. Most late filings are caused by a small number of recurring issues: missed accounting period reminders, dormant companies that were never formally notified to HMRC, accounts that are still being finalised when the filing window closes, and director changes that disrupt internal handovers.
A short pre-deadline checklist will catch the majority of these:
- Confirm both your filing deadline (12 months after the accounting period end) and your payment deadline (nine months and one day after the accounting period end) are diarised, with internal review dates well in advance of each.
- If your company is dormant or has been dormant for any part of the period, check that HMRC has been notified in writing. Dormant companies still receive the new fixed penalties if a return is expected and not filed.
- If you have filed late in either of the last two accounting periods, treat the current return as a priority: a third consecutive late filing pushes you straight into the higher repeat-offender penalties.
- Review who, internally, signs off the return and what happens if they are unavailable. A clear deputy and an early review date are the cheapest forms of penalty insurance available.
- Where cash flow is the issue rather than the return itself, file on time and engage with HMRC about a Time to Pay arrangement separately. Filing late to “buy time” simply adds penalties on top of the underlying tax.
How Hamlyns Can Help
Our corporation tax planning service is built around exactly this kind of forward-looking compliance: managing your filing calendar, preparing your return well ahead of the deadline, and giving you visibility of your liability long before the payment date arrives. For SME directors who are already stretched, the value is less about the return itself and more about removing the risk that a missed date turns into a four-figure penalty.
If you are unsure whether your current process is fit for the new penalty regime, or if you would like a second pair of eyes on your next corporation tax return before it is filed, please get in touch with the Hamlyns team. We are happy to talk through where the new rules sit in your wider tax position, and what (if anything) is worth changing in good time.
