HMRC tightens late payment penalties and boosts enforcement in April 2025

As of April 2025, HMRC has implemented significant changes to its late payment penalty regime, aiming to enhance compliance and ensure timely tax payments from UK businesses.

Increased late payment penalties

Under the revised system, penalties for late VAT and Income Tax payments have escalated:

• 16 to 30 days late – A penalty of 3% on the tax owed at day 15, up from the previous 1%.
• 31 days or more – An additional 3% penalty is applied, along with daily interest accruing at an annual rate of 10%, increased from 6%.

These changes are part of the broader Making Tax Digital (MTD) initiative, which is expanding to include more taxpayers over the coming years. 

Enhanced enforcement through increased staffing

To support these stricter penalties, HMRC is bolstering its enforcement capabilities:

• Compliance officers – An additional 500 compliance officers are being recruited, adding to the previously announced 5,000 new positions. This expansion aims to intensify efforts against tax evasion and ensure adherence to tax obligations.
• Debt management staff – 600 new debt management personnel are being hired to improve the collection of overdue taxes, focusing on later-stage debt recovery processes.

These staffing increases are part of a broader strategy to close the estimated £40 billion tax gap and are expected to enhance HMRC’s capacity to enforce compliance effectively.

Essential financial and tax planning tips:

With heightened penalties and increased enforcement, it’s crucial for both individuals and businesses to take proactive steps to stay financially healthy and compliant:

• Avoid debt – Don’t get into tax debt, as it can negatively impact your credit lines and limit future financial flexibility.
• Contribute to tax funding – Ensure accurate reporting and timely contributions to tax obligations to remain compliant.
• Plan ahead – Leave plenty of time to organise finances and meet deadlines; avoid leaving things until the last minute.
• Ensure timely payments – Avoid accruing penalties by meeting all tax payment deadlines without delay.
• Stay informed – Keep up to date with changes in tax regulations, especially with initiatives like Making Tax Digital (MTD).
• Seek professional advice – Engage with financial advisors or tax professionals to navigate complex or evolving regulations with confidence.

At NGI Finance, we understand the challenges businesses face in managing cash flow and meeting tax obligations. Our team is here to provide guidance and financial solutions to help you stay compliant and financially healthy. For help please call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.