Pay your tax before 3 March to avoid penalty
If you do not pay your 2021/22 Self Assessment tax bill before 3 March 2023, or agree a Time to Pay arrangement with HMRC before that date, then in most cases HMRC will charge a penalty equal to 5% of the outstanding amount.
When do I need to pay my 2021/22 Self Assessment tax bill?
In most cases, if you owe tax and other liabilities for the 2021/22 tax year, then the due date for payment is 31 January 2023. This includes:
any income tax for 2021/22 which you have not already paid under PAYE or via payments on account;
capital gains tax for 2021/22 which you have not already paid to HMRC, such as via 60-day reporting;
Class 2 or 4 National Insurance contributions for 2021/22; and
student loan repayments for 2021/22 which have not already been collected via PAYE.
There is one unusual exception where these amounts might be due on a later date. This can happen where you notified HMRC of your liability to tax for 2021/22 by 5 October 2022 (for example, by registering for Self Assessment) but HMRC did not ask you to file a tax return until after 31 October 2022. In this case, the amounts would be due three months after the date of the notice on which HMRC asked you to file the 2021/22 return.
⚠️ If you are late in paying amounts owed, then you will owe late payment interest on the outstanding amounts. The rate of interest on late payments significantly higher than it has been in recent years. From 21 February 2023, the rate is 6.5% per year. There is no right of appeal against late payment interest.
If you also owe payments on account for 2022/23, then the first of these is also payable on 31 January 2023. However, these are not subject to late payment penalties.
What if I cannot afford my tax bill?
See our guidance at What if I cannot pay my tax bill?.
There is also guidance on GOV.UK.
When might I be charged a penalty for late payment of tax?
If you owed amounts for 2021/22 by 31 January 2023 and some or all of these are still outstanding, then you will be charged an initial late payment penalty if:
HMRC do not receive payment for those amounts by midnight at the end of 2 March 2023; and
you do not agree a Time to Pay arrangement with HMRC for all unpaid 2021/22 amounts by midnight at the end of 2 March 2023.
The first late payment penalty is calculated at 5% of the amounts for 2021/22 still outstanding on 3 March 2023.
If you make a Time to Pay arrangement with HMRC and you do not make the payments on time as agreed, HMRC may charge late payment penalties as if the arrangement never existed.
For the 2019/20 and 2020/21 tax years, HMRC announced relaxations to late payment penalties for amounts due by 31 January 2021 and 31 January 2022 respectively. At the time of writing, no such relaxation has been announced for 2021/22.
Sam is a self-employed barber and started trading on 1 May 2021. He registered for Self Assessment a month later, and HMRC sent him a notice to complete a 2021/22 tax return on 6 April 2022. He submitted this return online on 10 January 2023 which showed he owed income tax and National Insurance contributions for 2021/22 of £1,200. Sam also owed payments on account for 2022/23 of £600 each (the first is due by 31 January 2023 and the second by 31 July 2023).
Sam therefore owed £1,800 on 31 January 2023. However, he didn’t have enough money to pay the whole amount, so he only paid £500 on 30 January 2023.
Sam will owe late payment interest on the £1,300 which is outstanding from 1 February 2023. If he takes no further action to clear the amounts owed by the end of 2 March 2023, then HMRC will charge an initial late payment penalty on the amount outstanding for 2021/22 (that is, the £1,200 owed for the 2021/22 tax year, less the £500 already paid, giving £700). The penalty would be 5% * £700 = £35. There is no late payment penalty for the first payment on account, though late payment interest would still be due on that amount.
Sam can avoid this penalty by either paying at least £700 before the end of 2 March 2023, or by agreeing a Time to Pay arrangement with HMRC before that date. As he doesn’t have any further money at this stage to pay the bill, he makes a Time to Pay arrangement online on 22 February 2023. This states he will make monthly payments of £325 each towards the outstanding balance (including the first payment on account for 2022/23) over four months.
Sam will still owe interest on the late payments, but he will avoid the late payment penalty which would have applied to 2021/22 amounts which were still outstanding on 3 March 2023.
Can I appeal late payment penalties?
HMRC define a reasonable excuse as something which means you did not meet an obligation which you took reasonable care to meet. For example, you may have taken all reasonable action to ensure the payment is made on time, but a banking error beyond your control meant that HMRC did not receive the payment.
For your appeal to be successful, you must ensure the payment is made without unreasonable delay after the reasonable excuse ended.
Even if you don’t have a reasonable excuse, it is technically possible for HMRC to reduce the penalty amount if there are special circumstances. However, this is at HMRC’s discretion, and such cases would be uncommon and exceptional. In most cases where there are special circumstances, a reasonable excuse would usually exist alongside them.
Insufficiency of funds or inability to pay is not, by itself, a reasonable excuse (or special circumstances). But the underlying causes may be. HMRC provide an example in their Compliance Handbook.