Interest & Penalties

Key facts

Late filing penalties start at £100 and can reach 10% of the unpaid tax after 6 months.
Late payment interest runs from the day after the due date — there is no grace period.
A second tax-geared penalty of 10% applies if the return is more than 12 months late.
Filing penalties apply even if there is no tax to pay.
You can appeal a penalty within 30 days if you have a reasonable excuse.

Late Filing Penalties

If a Company Tax Return (CT600) is not filed by the deadline — 12 months after the end of the accounting period — HMRC imposes automatic penalties that escalate the longer the return remains outstanding:^[1]

How Late	Penalty	Details
1 day late	£100	Flat penalty; applies immediately after the deadline
3 months late	£200	Additional flat penalty on top of the first £100
6 months late	10% of unpaid tax	Tax-geared penalty; HMRC estimates the tax if no return has been filed
12 months late	Further 10% of unpaid tax	Second tax-geared penalty; added to all previous penalties

This means a return that is more than 12 months late attracts £100 + £200 + 10% + 10% of the unpaid tax. For a company with a £50,000 liability, that could mean penalties of £10,300.^[1] Filing on time with HMRC-recognised CT600 software avoids these charges entirely.

Penalties apply even when no tax is due. If the company has no Corporation Tax liability, the £100 and £200 flat penalties still apply for late filing. Only the tax-geared penalties (10% of unpaid tax) will be nil.^[1]

Repeated Late Filing

If a company files its CT600 late for three consecutive accounting periods, the flat penalties increase:^[1]

The £100 penalty (1 day late) rises to £500
The £200 penalty (3 months late) rises to £1,000

This applies from the third consecutive late return onwards. The tax-geared penalties remain unchanged.

Late Payment Interest

Separately from filing penalties, HMRC charges interest on any Corporation Tax that is paid after the due date (9 months and 1 day after the period end).^[2]

Interest starts the day after the payment deadline — there is no grace period
It accrues daily until the tax is paid in full
The rate is the Bank of England base rate plus 2.5%
Late payment interest is not tax-deductible

Tip: If HMRC owes you money (for example, after a loss carry-back), they pay repayment interest at the base rate minus 1% (minimum 0.5%). The repayment rate is much lower than the late-payment rate, so it always pays to get your own payments right.^[3]

Current Interest Rates

HMRC’s interest rates change when the Bank of England base rate changes. The current rates are:^[3]

Type	Rate	Basis
Late payment interest	Base rate + 2.5%	Charged on tax paid after the due date
Repayment interest	Base rate − 1% (min 0.5%)	Paid by HMRC on overpayments and refunds
Instalment interest	Base rate + 1%	Charged on underpaid quarterly instalments

Appealing a Penalty

You can appeal a late filing penalty if you have a reasonable excuse — for example, serious illness, a natural disaster, or an HMRC system failure. “I forgot” or “I didn’t know” is generally not accepted.^[4]

To appeal:

Write to HMRC or appeal online within 30 days of the penalty notice
Explain the reasonable excuse and provide supporting evidence
Show that the return was filed as soon as reasonably possible after the excuse ended
If HMRC rejects the appeal, you can request a statutory review
If still unsatisfied, you can escalate to the First-tier Tribunal (Tax Chamber)

Note: You cannot appeal late payment interest — only late filing penalties. Interest is charged automatically and cannot be reduced or cancelled, even if you have a reasonable excuse for paying late.^[2]

Frequently Asked Questions

What is the penalty for filing a CT600 late?

Penalties start at £100 for being 1 day late, then £200 at 3 months, 10% of unpaid tax at 6 months, and a further 10% at 12 months. These apply even if there is no tax to pay.

Does HMRC charge interest on late Corporation Tax payments?

Yes. Late payment interest runs from the day after the due date with no grace period. The rate is the Bank of England base rate plus 2.5%, and it accrues daily until the tax is paid in full.

Can I appeal a Corporation Tax penalty?

Yes. You can appeal within 30 days of the penalty notice if you have a reasonable excuse, such as serious illness or an HMRC system failure. If HMRC rejects the appeal, you can request a statutory review or escalate to the First-tier Tribunal.

Is late payment interest on Corporation Tax tax-deductible?

No. Interest charged by HMRC on late Corporation Tax payments is not deductible as a business expense.

Sources

Company Tax Returns: penalties for late filing — GOV.UK
Corporation Tax: interest charges and penalties — GOV.UK
HMRC interest rates for late and early payments — GOV.UK
Appeal a tax penalty — GOV.UK

Corporation Tax Interest & Penalties