For UK accountants and practices, meeting Corporation Tax deadlines has long been a core compliance requirement. Until now, penalties for late corporation tax returns and payments had not been revised in over 25 years.
But in 2026, the landscape for corporation tax penalties has changed significantly. Companies that miss filing deadlines now face much higher fixed penalties, and late payment interest rates have evolved as well. These changes are designed to encourage better compliance and reflect the impact of inflation on penalty values that have remained largely unchanged since the late 1990s.
This guide explains the key penalty changes, how they apply and what accountants need to know to help limited companies avoid unexpected penalty costs.
This guide covers:
- What has changed in corporation tax penalties
- Updated late filing penalties from April 2026
- Interest charges and late payment penalties
- Practical examples and tables
- Steps to minimise penalties and stay compliant
What has Changed in Corporation Tax Penalties in 2026?
In the Autumn Budget 2025, the UK government confirmed that penalties for late Corporation Tax returns will increase significantly from 1 April 2026.
The aim is to restore the deterrent effect that inflation has eroded over time. These changes affect the penalties that apply when a company’s Corporation Tax return is filed after the statutory deadline, even if no tax is due.
The updates mainly focus on:
- Higher fixed penalties for late filing
- Increased penalties for repeat offenders
- Continued use of tax-geared penalties for serious delays
- Updated interest rates on late payments
Updated Late Filing Penalties (from April 2026)
Before April 2026, the fixed penalties for late Corporation Tax returns were based on amounts introduced decades ago. From 1 April 2026, these penalties are approximately double for most late filing scenarios.
Corporation Tax Late Filing Penalties: Old vs New (from 1 April 2026)
| Filing Scenario | Previous Penalty | New Penalty (2026) |
|---|---|---|
| Return filed late | £100 | £200 |
| Return more than 3 months late | £200 | £400 |
| Three successive late filings | £500 | £1,000 |
| Three successive filings >3 months late | £1,000 | £2,000 |
These changes apply to returns with filing dates on or after 1 April 2026.
Even dormant companies or companies with no tax liability must file their CT600 on time or face these fixed penalties.
Fixed Penalties vs Tax-Geared Penalties: What Is the Difference?
Understanding the difference between fixed penalties and tax-geared penalties is essential for managing compliance risks.
Fixed Penalties
Fixed penalties apply automatically when a Corporation Tax return is filed late, regardless of whether any tax is due.
Key features include:
- Set amounts based on how late the return is
- Apply even if no tax is payable
- Increase for repeated late filings
- Introduced immediately after the deadline
These penalties are designed to encourage timely filing.
Tax-Geared Penalties
Tax-geared penalties apply when a return is seriously late and Corporation Tax remains unpaid.
They are calculated as a percentage of the unpaid tax and usually apply when:
- A return is more than six months late
- A return is more than twelve months late
Common rates include around 10% of unpaid tax, depending on circumstances.
Key features include:
- Based on outstanding tax
- Added on top of fixed penalties
- Increase financial impact significantly
- Target persistent non-compliance
In practice, many companies first face fixed penalties and then, if delays continue, tax-geared penalties are added.
Late Payment Interest and Related Charges
Corporation Tax late payment penalties and interest are separate from late filing penalties.
Interest on Late Payments
From 9 January 2026, HMRC charges 7.75% annual interest on late Corporation Tax payments. This rate is calculated as the Bank of England base rate plus 4%.
Interest is calculated daily from the payment due date until the tax is paid in full.
This means that even short delays can result in noticeable costs, especially for companies with higher liabilities.
There is no fixed penalty for late payment alone, but interest can accumulate quickly if payments are delayed for several months.
How Penalties Escalate Over Time?
If a company files its return late, fixed penalties apply. If a return is more than six months late, additional tax-geared penalties come into play. These are based on a percentage of the unpaid Corporation Tax.
Escalation of Penalties after Late Filing
When tax returns are not submitted on time, penalties increase gradually based on the length of the delay. The longer the filing remains outstanding, the higher the financial impact, as shown below:
These tax-geared penalties are added on top of the fixed penalties for late filing and remain a serious cost for delayed compliance.
Practical Examples
Example 1: Single Late Filing
A small limited company files its CT600 two months after the deadline (return date after 1 April 2026). The penalty is £200.
Example 2: Extended Delay
A company files its return five months after the deadline. The total fixed penalty is £400, plus potential interest on unpaid Corporation Tax if that also remains unpaid.
Example 3: Repeat Late Filer
A company that misses three successive return deadlines faces a £1,000 penalty under the old rules, rising to £2,000 from April 2026.
Steps Accountants Can Take to Minimise Penalties
Penalties for Corporation Tax filings and payments can be costly, but many are avoidable with proper planning.
1. Set Internal Deadlines Ahead of Statutory Deadlines
Remind clients to file CT600 early, not just by the legal deadline. This builds a buffer against delays.
2. Calendar System for Key Dates
Use a compliance calendar for:
- CT600 filing (within 12 months of period end)
- Corporation Tax payment (9 months + 1 day after period end)
- Quarterly instalment payments (if applicable)
This reduces the risk of human error.
3. Review Returns Before Submission
Check figures, documentation, and client approvals well before the filing deadline.
4. Plan for Tax Payment Cash Flow
Corporation Tax liabilities should be forecast in advance to avoid late payment interest.
Conclusion
In 2026, Corporation Tax penalties have been updated for the first time in decades, with significantly higher fixed penalties for late filing effective from 1 April 2026. These changes reflect inflation adjustments and aim to strengthen compliance.
For UK accounting practices advising limited companies, these changes mean that compliance must be treated proactively. Filing deadlines, payment deadlines and penalty schedules should be clearly communicated to clients, and internal processes should be designed to avoid the cost of penalties and interest.
Understanding both the fixed penalties and the interest that accrues on late payments will help firms manage client expectations and reduce unexpected compliance costs.
FAQs
What are the new late filing penalties for corporation tax in 2026?
From 1 April 2026, late filing penalties double £200 for late returns, £400 after three months, up to £2,000 for repeated late filings.
What happens if my company keeps missing Corporation Tax deadlines?
Repeated late filings lead to higher fixed penalties, potential tax-geared penalties, increased HMRC scrutiny and higher compliance risks.
How can I avoid unexpected accounting costs?
Plan early, maintain accurate records, use compliance calendars, forecast tax liabilities and submit returns well before deadlines.
What happens if I miss three consecutive filing deadlines?
Repeat late filings attract higher penalties up to £2,000 under the 2026 regime.
How can I avoid or reduce penalties?
Plan early, set internal deadlines, and ensure CT600 and payment deadlines are met. Internal review and forecasting help minimise risks.
What if a return is over six months late?
Additional penalties based on a percentage (e.g. 10%) of unpaid Corporation Tax apply.
Are there new quarterly payment rules in 2026?
Quarterly instalments apply based on taxable profits over £1.5m, but these rules are separate from mandatory late filing penalties
Divyanshi is a subject matter expert in the UK accounting space, creating clear and easy-to-read content for accountants and businesses. She covers topics such as VAT returns, Self-assessment tax, bookkeeping, business planning and Year-end accounts. By understanding the common challenges faced by accountants and business owners, she focuses on writing content that answers real questions and simplifies complex topics. Her approach keeps information clear, relevant and useful for everyday business needs.
