Penalties and interest
Information about penalties and interest.
If you’ve made an error related to mandatory payrolling in your Real Time Information (RTI) returns for 2027 to 2028, you will not be charged penalties for inaccuracies unless there is evidence of deliberate non-compliance.
Existing late filing and late payment penalties will still apply.
There will be no change to the penalties that apply for P11D and P11D(b) returns where you’re required to complete those returns.
For later tax years from 2028 to 2029 onwards, penalties and interest will apply for mandatorily payrolled benefits in kind and expenses.
Penalties and interest may be applied in the following scenarios:
- late Full Payment Submission (FPS) filing
- incorrect submission of a P11D or P11D(b)
- non -submission of an end of year FPS if it is subsequently discovered that one should have been sent in
Check that from April 2027, benefits in kind are reported correctly, as employees may end up with underpayments of tax on benefits that should have been reported earlier in the tax year.
No penalties will be charged if you:
- used a reasonable estimate, due to insufficient information — find out how to reasonably calculate the value of a benefit
- later discover the estimate was wrong
- submit a correction either during the tax year or by 19 April after the end of the tax year
- pay any resulting liabilities on time
Any Income Tax liabilities must be paid by 19 April (or 22 April if paying electronically) following the end of the tax year. You have additional time to pay Class 1A National Insurance contributions liabilities due by 22 July following the end of the tax year.
You will be charged a penalty if you fail to submit a required return or if an inaccurate return is found not to have been corrected, with interest backdated from 22 April (Income Tax) and 22 July (Class 1A National Insurance contributions).
The penalty rates will be calculated as follows:
- careless action, which is applied if an error occurs and reasonable care was not taken to avoid it (0% to 30% of the return)
- deliberate action (unprompted), which is applied if the error was intentional but not concealed — penalty rates can be reduced if you tell HMRC about inaccuracies unprompted before we discover them (20% to 70% of the return)
- deliberate action (prompted), which is applied if the error was intentional but not concealed (35% to 70% of the return)
- deliberate and concealed (unprompted), which is applied if the error was intentional and steps were taken to hide it from us — penalty rates can be reduced if you tell us about inaccuracies unprompted before we discover them (30% to 100% of the return)
- deliberate and concealed (prompted), which is applied if the error was intentional and steps were taken to hide it from us (50% to 100% of the return)
We generally reduce these penalty rates if you voluntarily tell us about inaccuracies before we discover them. You can correct minor errors in previous tax years by submitting a previous year correction — this will likely be done through amendment functionality in your payroll software.
Check the section on previous year corrections and adjustments for more information.
Other compliance actions may be taken depending on the circumstances. You should keep records explaining why the original value was estimated and when the correct value became known.
Example — employee tax liability paid late, but Class 1A National Insurance contributions paid on time
Kay receives a car benefit during the tax year 2027 to 2028. Her employer reports an estimated taxable value of £4,000 through payroll. After the end of the tax year, the employer establishes that the correct taxable value was £5,200. This means that a further £1,200 of car benefit should have been reported.
The employer submits a further FPS on 30 June 2028 to correct the final year-to-date value. The correction results in additional Income Tax and Class 1A National Insurance contributions becoming due.
Following receipt of the further FPS, HMRC reviews Kay’s tax year. She then receives a P800 or PA302 to collect the underpayment of tax. If she completes a Self Assessment tax return, it would be collected through her Self Assessment tax bill.
As Kay’s employer has not reported the additional tax due until 30 June 2028, they are liable for late-payment interest, which applies to the outstanding Income Tax from 23 April 2028 until 30 June 2028. Interest is calculated from the day after the payment was due until the date it is paid.
The employer may also be charged an appropriate penalty because the inaccurate position was not corrected, and the resulting tax liability was not paid, by the relevant deadline. The penalty treatment will depend on the circumstances, including why the error occurred, whether the employer took reasonable care and whether the employer disclosed the error before HMRC identified it.
The Class 1A National Insurance contributions are paid electronically on 20 July 2028, before the 22 July 2028 deadline, so they will not have any late-payment interest of penalty.
Example — employee tax and Class 1A National Insurance contributions both paid late
Paul receives a company car benefit during the tax year 2028 to 2029. His employer does not report the benefit through payroll because payroll is not informed that the car has been provided.
On 10 August 2029, the employer identifies that the car benefit should have been reported for the previous tax year and calculates its taxable value. The employer follows the previous year correction process and submits a further FPS to correct the final year-to-date position and pays the resulting Income Tax and Class 1A National Insurance contributions electronically on 10 August 2029.
Following receipt of the further FPS, HMRC reconciles Paul’s tax year. He then receives a P800 or PA302 to collect the underpayment of tax. If he completes a Self Assessment tax return, it would be collected through his Self Assessment tax bill.
As Paul’s employer has not reported the additional Income Tax due until 10 August 2029, they are liable for late-payment interest.
The interest applies to the outstanding tax from 23 April 2029 until 10 August 2029. Interest is calculated from the day after the payment was due until the date it is paid.
The additional Class 1A National Insurance contributions were due by 22 July 2029. As they are also not paid until 10 August 2029, late-payment interest applies separately to the Class 1A National Insurance contributions from 23 July 2029 until 10 August 2029.
The employer may also be charged appropriate penalties because they failed to report the benefit correctly and did not correct the inaccurate position or pay the resulting liabilities by the relevant deadlines. Late-payment penalties may apply to annual Class 1A National Insurance contributions charges when they are not paid by the applicable 19 or 22 July deadline.