Penalties and interest

In this lesson

1. 0:00 Penalties and interest overview
2. 0:08 Behaviour related penalties explained
3. 0:31 Unprompted versus prompted disclosure
4. 0:50 Late returns and filing penalties
5. 2:21 Inadequate records and interest charges

About this lesson

This video covers the penalty framework for incorrect returns and late filings—from lack of reasonable care through to deliberate concealment—plus how unprompted disclosure can reduce what you owe. You'll also understand interest charges on late payments and repayments, which are essential for both ATX and SBR exam success. The penalty system is behaviour-driven and based on lost revenue. Penalties range from 0–30% for lack of reasonable care, 20–70% for deliberate behaviour, and 30–100% for deliberate concealment. If you disclose an error yourself (unprompted), penalties are reduced more generously than if HMRC discovers it first. Late filing carries fixed penalties—£100 for up to three months late, £200 for 3–6 months—plus percentage-based penalties of 10–20% of outstanding tax for delays beyond six months. Failure to keep adequate records can result in penalties up to £3,000 per accounting period. Interest is charged at 8.5% on any underpaid tax from the due date until payment, and the tax office pays you interest at 3.5% on repayments you're owed. Understanding these rules helps you advise clients on compliance costs and the real value of early, honest disclosure to HMRC.

Duration: 3m