UK Spring Statement 2025: Sharp Rise in Late Payment Penalties
The UK Spring Statement 2025 introduces major reforms to tax penalty rules, significantly increasing fines for late payments starting April 2026. Key changes include a rise in the initial 30-day penalty from 5% to 7.5%, with further 7.5% charges at 6 and 12 months (up from 5%). A new daily compounded interest rate of 8.5% (previously 6.5%) will apply from the due date, linked to the Bank of England’s base rate plus 2.5%.
Chancellor Rachel Reeves justified the reforms as a response to the £44 billion in post-pandemic tax debt, estimating an additional £1.2 billion in revenue to support public services like healthcare and infrastructure.
However, the changes have sparked concern. The Federation of Small Businesses warns that higher penalties could push cash-strapped SMEs toward insolvency. Critics, including Sarah Olney MP, describe the move as a “stealth tax” on struggling firms. Charities such as TaxAid highlight risks for vulnerable taxpayers and urge more support.
To ease the burden, HMRC has expanded its Time to Pay scheme, though access remains limited to those proving financial hardship.
While the government sees this as a step toward fiscal responsibility, many argue the timing is harsh amid ongoing economic recovery. Taxpayers are urged to meet deadlines, seek advice, and consider payment plans to avoid steep penalties
