If you pay your Self Assessment tax bill late, HMRC late payment penalties stack on top of interest. HMRC charges late payment interest at 7.75% a year (the Bank of England base rate plus 4%) from the day after the deadline until you clear the balance, plus a 5% penalty surcharge on any tax still unpaid 30 days after the due date, with two further 5% charges at six months and twelve months.
Interest accrues daily and is unavoidable; the percentage penalties only bite once you slip past the 30-day mark. The longer the bill sits unpaid, the more both costs grow, so even a part-payment or a payment plan is worth arranging quickly.
How Much Is HMRC Late Payment Interest in 2026?
Late payment interest is pegged to the Bank of England base rate plus 4%. Since 9 January 2026 that gives a headline rate of 7.75% a year, charged daily from the day after your payment was due. The base rate-plus-4% formula has applied since 6 April 2025; before that it was base rate plus 2.5%.
Interest is not a penalty, it is HMRC recovering the cost of being paid late, so you cannot appeal it simply because you had a good reason. It runs on the tax itself and, separately, on any unpaid penalties. If the base rate moves during the year, HMRC adjusts the rate accordingly, so check the current figure before you calculate.
What Are the Late Payment Penalties for Self Assessment?
For Self Assessment income tax, the percentage penalties kick in at three milestones after the 31 January payment deadline:
| When tax is still unpaid | Penalty charged |
|---|---|
| Day 1 to day 30 late | No fixed penalty (but interest runs from day 1) |
| 30 days late | 5% of the tax outstanding |
| 6 months late | A further 5% of the tax still outstanding |
| 12 months late | A further 5% of the tax still outstanding |
A taxpayer who owes £4,000 and pays a full year late would face £600 in penalties (3 × 5%) plus roughly £310 in interest, close to £910 on top of the original bill.
These late payment penalties are entirely separate from late filing penalties (the automatic £100 for a missed return, then daily £10 charges up to £900, plus further 5%-or-£300 charges at 6 and 12 months). You can be hit with both at once if you neither file nor pay on time. To see how the two interact in your case, our Self Assessment service team can model your exact position.
Do Payments on Account Count Towards the Deadline?
Only partly. The 5% late payment penalties apply to your 31 January balancing payment, but not to your 31 July second payment on account. Missing the July instalment triggers late payment interest only, running from 1 August until you clear it, there are no 30-day, 6-month or 12-month penalties on a payment on account, so the penalty clock runs solely from the 31 January balancing payment.
Is the Penalty Regime Changing for Making Tax Digital?
It is. As taxpayers move into Making Tax Digital for Income Tax (phased in from April 2026), HMRC is rolling out a points-based late submission system and a revised late payment penalty model. Under the new late payment penalties:
- Nothing is charged if you pay within 15 days of the due date.
- If tax is still unpaid after day 15, the first penalty is 3% of the amount outstanding at that point. If it is still unpaid after day 30, a further 3% (calculated on the amount outstanding at day 30) is added, so the first penalty reaches a maximum of 6% once you pass day 30.
- From day 31, a second penalty accrues daily at an annualised rate of 10% a year on the outstanding balance until the debt is cleared.
In your first year within MTD you get a longer 30-day grace period before the first penalty applies, dropping to 15 days from your second year onwards. These rates are due to rise, to 4% plus 4%, from April 2027. If you have been mandated into MTD, check which regime applies to your filing period before assuming the classic 5% milestones. Our FAQ page sets out where MTD currently stands and who is affected.
How Is the Interest Actually Calculated?
Interest is simple daily interest, not compound, on the tax outstanding each day. The rough formula is:
tax owed × 7.75% × (days late ÷ 365)
So £10,000 paid 90 days late attracts about £191 of interest (£10,000 × 7.75% × 90/365), before any 5% penalty. Because it accrues daily, paying even a week earlier shaves real money off the bill, there is no benefit to waiting for a "round" date.
How Can I Reduce or Avoid the Charges?
A few practical steps cut the cost materially:
- Pay something now. Interest and the 5% penalties are charged on the outstanding balance, so a part-payment immediately reduces both.
- Set up a Time to Pay arrangement. If you agree an instalment plan with HMRC before the penalty dates, you can avoid the 5% surcharges (interest still applies). You can often arrange this online for debts under £30,000.
- Appeal a penalty with a reasonable excuse. Serious illness, bereavement or a genuine HMRC service failure can get penalties cancelled, though not the interest.
- File on time even if you can't pay. Filing the return is a separate obligation; doing so avoids stacking late-filing penalties on top.
You can confirm the live rates and use HMRC's own calculator on the official Estimate your penalty for late Self Assessment tax returns and payments tool.
Frequently Asked Questions
Can I Get HMRC Late Payment Interest Cancelled?
Generally no. Interest is statutory and reflects the cost of late payment, so it stands even where a penalty is successfully appealed. The common exception is where HMRC made an error that caused the delay, in which case you can ask for the interest to be reviewed.
Will a Time to Pay Plan Stop the Penalties?
If you agree the plan before the relevant penalty date and keep up the payments, you avoid the 5% surcharges. Interest, however, continues to run on the outstanding balance for the life of the arrangement.
What Happens if I Pay Just a Few Days Late?
For classic Self Assessment, there is no fixed penalty within the first 30 days, but daily interest at 7.75% starts from day one. Under the newer MTD regime, you have a 15-day grace window before any penalty applies, so the answer depends on which system you fall under.
Do Penalties Apply if HMRC Owes Me a Refund?
No. Penalties and interest only apply to tax you owe. If your account is in credit or you are due a repayment, HMRC may instead pay you repayment interest, currently 2.75%, a lower rate than the late payment rate.
If you have missed a deadline, or you can see a bill you won't be able to clear, the worst move is to do nothing while interest and penalties stack up. Get in touch with Zmartly and we'll work out exactly what you owe, whether an appeal or Time to Pay arrangement fits, and how to stop the charges growing.
