UK raises Corporation Tax late filing penalties for returns due from 1 April 2026, doubling fixed fines under Schedule 18 Finance Act 1998, while HM Revenue & Customs temporarily pauses automatic notices during system updates until June 2026.
The UK has increased late filing penalties for Corporation Tax (CT) for all returns due on or after 1 April 2026. This measure, originally announced in Budget 2025, is now in effect.
HM Revenue & Customs (HMRC) is currently in the process of updating its systems to ensure the new penalty amounts are applied correctly. This update period is scheduled to continue until 30 June 2026. During this time, HMRC has temporarily paused the issuance of automatic penalty notices to ensure no company receives a notice for an incorrect amount.
Despite the pause in automatic notices, companies remain legally liable for late filing penalties if they miss their deadlines. Returns are still due on time, and additional penalties may be imposed if a return is not submitted promptly following the initial deadline.
New penalty rate
The level of fixed late filing penalties, governed by Schedule 18 Finance Act 1998, has doubled to restore its real terms value following nearly 30 years of inflation. The revised rates are as follows:
- Return late: increased from GBP 100 to GBP 200
- Return is more than 3 months late: increased from GBP 200 to GBP 400
- Three successive failures, return late: increased from GBP 500 to GBP 1,000
- Three successive failures, return is more than 3 months late: increased from GBP 1,000 to GBP 2,000
Implementation and impact
The penalty notice process is scheduled to recommence in July 2026. From that point forward, companies can expect to receive penalty notices automatically.
The measure affects companies and civil society organisations that fail to file Corporation Tax returns by the required date. Compliant businesses that file on time are not impacted. According to the government, there is no impact on individuals, households, or families, as the measure only applies to incorporated businesses.
Financial projections
The increase is expected to contribute to the exchequer over the coming years. Certified figures from the Office for Budget Responsibility project the following revenue:
- 2026 to 2027: GBP 45 million
- 2027 to 2028: GBP 60 million
- 2028 to 2029: GBP 65 million
- 2029 to 2030: GBP 65 million
- 2030 to 2031: GBP 70 million
The government stated that the policy objective is to encourage timely filing and close the tax gap. The measure is being monitored through information collected from tax returns and ongoing compliance activity.
