HMRC penalties for sole traders: late filing, late payment, and how to appeal

Missing a Self Assessment deadline can become expensive quickly. The first penalty is usually automatic, and late payment interest can keep growing until the tax is paid.

Late filing penalties

If your Self Assessment return is late, the standard penalty schedule is:

1 day late: £100 fixed penalty.
3 months late: daily penalties of £10 per day, up to 90 days.
6 months late: further penalty of £300 or 5% of the tax due, whichever is higher.
12 months late: another £300 or 5% of the tax due, whichever is higher.

More serious penalties can apply if HMRC believes information has been deliberately withheld. Use the late filing penalty estimator for a rough sense of the fixed and daily penalty stack.

Late payment penalties and interest

Filing late and paying late are separate problems. If tax remains unpaid, HMRC can charge late payment penalties and daily interest. Interest is not a punishment in the same way as a penalty; it compensates HMRC for tax paid after the due date.

If you cannot pay in full, contact HMRC early and ask about a Time to Pay arrangement. Do not ignore the return just because you cannot pay the bill. Filing on time can avoid late filing penalties even if payment still needs arranging.

Reasonable excuse appeals

You may be able to appeal if you had a reasonable excuse for missing the deadline. HMRC usually expects the problem to be unexpected, outside your control, and resolved as soon as reasonably possible. Serious illness, bereavement, service failures, or major disruption may qualify; simply forgetting or not having the money usually will not.

How to appeal

File the missing return as soon as possible.
Pay what you can or contact HMRC about Time to Pay.
Gather evidence for the reason you missed the deadline.
Appeal within the deadline shown on the penalty notice where possible.
Explain the timeline clearly and show when the issue was resolved.

How to avoid penalties next year

Keep records monthly, estimate tax before January, and set aside money from each invoice. The weekly tax set-aside calculator can help you build a routine, while the record-keeping guide covers the evidence HMRC may expect.

Official sources

GOV.UK explains Self Assessment penalties here: Self Assessment penalties. Reasonable excuse guidance is here: Reasonable excuses for tax appeals.