How are the interest and late payment penalties applied if I miss balancing payments or payments on account?

Let’s build on the same example and show exactly how HMRC charges interest and penalties if you pay late under Self Assessment

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Example: Late Payment Interest & Penalties under Self Assessment

We’ll continue with your 2024/25 example:

Type of payment	Due date	Amount
1st Payment on Account	31 Jan 2025	£6,000
2nd Payment on Account	31 Jul 2025	£6,000
Balancing Payment	31 Jan 2026	£1,500

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 Step 1 – Interest for Late Payment

HMRC charges daily interest from the day after payment was due until the day it’s actually paid.

• Rate: Based on the Bank of England base rate + 2.5% (as of 2025, that’s typically around 7.75% per year, but it can change quarterly).

Example:
If you paid your £6,000 July instalment 60 days late and the rate was 7.75%:

[
Interest = £6,000 × 7.75% × \frac{60}{365} = £76.16
]

You’d owe £6,076.16 total.

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Step 2 – Late Payment Penalties

Since 2010–11, HMRC applies Late Payment Penalties under Schedule 56 FA 2009 — these are separate from interest.

They apply to any unpaid Self Assessment tax, including balancing payments and payments on account.

Days Late	Penalty % of tax unpaid
30 days late	5%
6 months late	Additional 5%
12 months late	Further 5%

Example:
You didn’t pay your £1,500 balancing payment due on 31 January 2026 until 15 August 2026 — that’s 197 days late.

→ Penalty timeline:

• After 30 days (2 March 2026): 5% × £1,500 = £75
• After 6 months (31 July 2026): another 5% × £1,500 = £75
• Total penalty by payment date = £150
• Plus interest for ~197 days (~£63 at 7.75%)

So you’d owe £1,713 total (£1,500 + £150 + £63 interest).

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Step 3 – Summary

Component	Description	Amount
Tax	Balancing payment due	£1,500
Interest	197 days @ 7.75%	£63
Penalties	2 × 5%	£150
Total payable		£1,713

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Key Tips

• Always pay by 31 January and 31 July to avoid both interest and penalties.
• You can make advance payments or set up a Budget Payment Plan through your HMRC online account.
• If you can’t pay in full, contact HMRC for a Time to Pay arrangement — this pauses further penalties, though interest still runs.

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