From April 2026, HMRC is increasing late filing penalties for Corporation Tax returns (CT600). For limited companies, this represents the first major change to the corporation tax penalty regime in almost three decades, and it will have a noticeable impact on businesses that miss deadlines.
Why are CT600 penalties increasing?
The key driver behind the changes is inflation. The current penalty levels were introduced in the late 1990s and have not been updated since. In real terms, according to HMRC their value, and therefore their deterrent effect, has eroded substantially.
As part of Budget 2025, the government confirmed that penalties would be increased to restore their original value and encourage better compliance among companies. HMRC believes the existing penalties are no longer strong enough to discourage late filing.
What exactly is changing?
From 1 April 2026, fixed late filing penalties for CT600 returns will double.
|
Filing delay |
Current penalty |
From April 2026 |
|
1 day late |
£100 |
£200 |
|
3 months late |
£200 total |
£400 total |
|
3 consecutive late filings (1 day late) |
£500 |
£1,000 |
|
3 consecutive late filings (3+ months late) |
£1,000 |
£2,000 |
These penalties apply to returns with a filing deadline on or after 1 April 2026.
While the fixed penalties for non filing are doubling, the broader penalty framework remains unchanged:
-
6 months late: HMRC estimates your tax and adds a 10% surcharge
-
12 months late: A further 10% surcharge is added
This means the financial impact can escalate quickly, especially for companies with larger tax liabilities.
Key point: penalties apply even if no tax is due
One of the most misunderstood aspects of CT600 penalties is that they are filing-based, not tax-based.
A company can receive penalties even if:
-
It made no profit
-
It owes no Corporation Tax
-
It is effectively dormant (unless HMRC has been formally notified)
This is particularly important for small or inactive companies that may assume filing is optional, and highlights why non trading companies still need to retain the services of an accountant.
Who will be affected?
Any UK limited company required to submit a Corporation Tax return will be impacted, including:
-
Owner-managed businesses
-
Contractors operating via limited companies
-
Non trading companies
The change applies based on the filing deadline, not the accounting period. So companies with year-ends in 2025 may still fall under the new regime if their filing deadline is after April 2026.
Why this matters more than it seems
At first glance, the increase may appear modest, an extra £100 or £200. However, in practice:
-
A return just 3 months late now costs £400 instead of £200
-
Repeated non-compliance can lead to £2,000 fixed penalties
-
Additional tax-based surcharges can significantly increase the total cost
For businesses with multiple companies or poor compliance processes, costs can quickly multiply.
These changes reinforce a clear message from HMRC: timely filing is no longer optional or low-risk.
Businesses should review their year-end and filing timelines, ensure records are prepared well in advance, implement deadline reminders and internal processes and work closely with their accountant to avoid last-minute submissions
Final thoughts
The increase in CT600 penalties marks a shift in HMRC’s approach to compliance. By doubling fixed penalties for the first time in nearly 30 years, the government is signalling a tougher stance on late filing.
For limited companies, the takeaway is simple, missing your Corporation Tax deadline is about to become significantly more expensive, regardless of whether you owe any tax or not.
At PayStream we ensure are clients are aware of the filing deadlines, we prepare for the submissions well in advance and send plenty of reminders to ensure our clients are never faced with a penalty.
