Budget 2026: What Changes For HMRC Penalties, Payments And Disputes

Nothing in Budget 2026, published on 28 October 2026, changes a deadline you face today. You still have 30 days from the date on most HMRC decisions and penalty notices to appeal. HMRC reviews, postponing disputed tax and time to pay arrangements work as before.

One change in this guide would apply from Budget day: late filing penalties on a missed 60-day return for a UK residential property sale are to stop growing once the sale is on your Self Assessment return. It isn't law yet, so file the late return as soon as you can.

The bigger changes come later: new penalties for every personal Self Assessment return from April 2027, a duty to correct mistakes from April 2028, and new ways of paying HMRC from 2029. Almost all of it still needs legislation.

On this page:

• 28 October 2026
• April 2027
• Next Finance Bill
• April 2028
• 2029
• What To Do Now

At A Glance

"Announced" means not law until a Finance Bill passes or regulations are made. The Budget 2026 measures are in the government's overview of tax legislation and rates; the April 2027 penalty changes date from Budget 2025.

From 28 October 2026: Penalties For Late CGT Property Returns

Late filing penalties on a missed 60-day capital gains tax (CGT) return for a UK residential property are to stop growing once you report the sale on your Self Assessment return. HMRC's note, published the same evening, says that where you deliver a Self Assessment return reporting the sale on or after 28 October 2026, the duty to file the 60-day return ends when you deliver that Self Assessment return, and late filing penalties stop accruing from then. It covers only Self Assessment returns delivered from that date, and says nothing about cancelling penalties already charged. The change needs the next Finance Bill.

If you're in a dispute: nothing published cancels a penalty already charged, so appeal each notice you dispute within 30 days of its date, and file the late return as soon as you can (CGT 60-day penalties).

April 2027: New Penalties And Other Changes

Penalties For Every Personal Self Assessment Return

Budget 2025 announced two changes from April 2027. The points-based late filing and newer late payment penalties used for VAT and Making Tax Digital (MTD) are to cover every personal Self Assessment return (not trust, estate or partnership returns, HMRC's guidance says). The day-15 and day-30 late payment penalties are to rise from 3% to 4% each, for income tax and VAT.

Neither is law yet, and this Budget changed neither. For income tax, HMRC's guidance applies the new rate from the 2027/28 tax year; if the regulations follow the MTD ones, most people's first return and payment on the new rules will be for that year, due 31 January 2029. Which VAT periods the new rate covers is unpublished.

If you can't pay: under the new rules, there's no late payment penalty if you make time to pay proposals within 15 days of the due date and keep to the arrangement that follows, even if it's agreed later (Schedule 26 paragraphs 4, 6(1) and 7 FA 2021). For income tax, in your first year on the new penalties the government has said you will have 30 days rather than 15 days (Budget 2025), and HMRC's guidance confirms this, once only, for people in MTD for Income Tax; it is an easement, not law, and there is no first-year extension for VAT (new penalty regime; VAT penalties).

Making Tax Digital Joiners

If you must join MTD in April 2027 (broadly, self-employment and property income over £30,000 before expenses), the government says late quarterly updates in the 2027/28 tax year won't earn points, though a late tax return will (Making Tax Digital).

R&D Claim Notification Forms

Some companies, including most first-time claimants, must tell HMRC in advance that they plan to claim research and development (R&D) relief. The next Finance Bill is to drop this Claim Notification Form for claims made on or after 1 April 2027; that won't rescue an earlier claim that failed without one. The Additional Information Form stays, simplified from autumn 2027, and a claim without it is still invalid (R&D appeals).

Directors And Security Deposits

Under the next Finance Bill, a court would be able to consider disqualifying someone convicted of a qualifying tax security offence, committed on or after 1 April 2027, from acting as a company director for up to five years. The security rules let HMRC demand a payment or bond to protect tax such as VAT, PAYE or corporation tax; a demand can usually be appealed.

When The Next Finance Bill Becomes Law

No date has been set for this.

Child Benefit Overpayments And HICBC

HMRC are to offset Child Benefit overpayments against the High Income Child Benefit Charge (HICBC) paid on them, back to the charge's start in January 2013, once the next Finance Bill becomes law. HMRC's note says any overpayment the charge doesn't cover will still be recovered, and that your appeal rights against a Child Benefit overpayment are unaffected, so keep to the deadline on each letter you get (HICBC).

Information Notices

HMRC's information notices (demands for documents or information) are to change: a notice about someone who has died would be possible after today's time limit, usually with the tribunal's approval, and notices to financial institutions would reach cryptoasset firms. Nothing published changes your rights to appeal against a notice (Schedule 36 notices; crypto).

Naming Deliberate Defaulters

After an investigation, HMRC can publish the details of people and businesses penalised for deliberate errors in returns, for deliberately failing to tell HMRC they owed tax, or for some deliberate VAT or excise wrongdoing, such as handling goods with unpaid excise duty (section 94 FA 2009).

Already law. Since 2 October 2026, HMRC can do so only where the "potential lost revenue" (broadly, the extra tax involved, across all the penalties) is over £50,000, up from £25,000 (SI 2026/1000).

The next Finance Bill is to let HMRC publish a description of what happened and the taxes and penalties charged, and the details of company officers given a personal liability notice for a company's deliberate penalty. The July 2026 policy note says both apply only to deliberate conduct after the Bill becomes law.

Your protections today. HMRC must tell you first and give you a reasonable chance to make representations (section 94(6)). Nothing is published until the penalty is final, so not while an appeal against it is open (section 94(7) and (11)), and nothing at all if your penalty gets the maximum reduction for disclosure (section 94(10)). If HMRC allege deliberate behaviour, consider getting advice.

Excise Penalties And Seized Goods

A new excise penalty. Today's penalty for handling goods with unpaid excise duty applies only after the "excise duty point" (broadly, when the duty becomes payable); a new civil penalty would target deliberate steps to evade the duty before it. HMRC's note says it will be a new penalty in Schedule 41 FA 2008, using that Schedule's existing framework, for conduct on or after the day the next Finance Bill becomes law.

Seized goods. Today, HMRC can sell or destroy seized goods before condemnation (formal forfeiture) only if they are living creatures or, in HMRC's opinion, perishable; a new power would add goods unreasonably costly or impracticable to store or handle. HMRC's note says it starts on the day the next Finance Bill becomes law and covers goods seized before then too. It describes the power as an update to paragraph 16 of Schedule 3 CEMA, so paragraph 17, which pays you the sale proceeds or the goods' value at seizure (less any unpaid duty) if a court finds they were not liable to forfeiture, should cover goods sold or destroyed under it, though the Bill's wording will settle that. A notice of claim challenging a seizure is still due within one month of the date of the seizure notice, or of the seizure if none was served on you (seizure appeals).

April 2028: A Duty To Correct Mistakes

This is announced for the next Finance Bill, from 1 April 2028. As drafted for consultation on 13 July 2026 (the Bill may differ):

• A duty to correct. If you become aware of an error in a return or document you gave HMRC that understates your tax (or overstates a loss or repayment) while it can still be corrected within the existing time limits, you would have to take reasonable steps to correct it or tell HMRC.
• Ignore it and it would be treated as deliberate. Today, an error you discover later and don't report is treated as careless (section 118(6) TMA 1970; Schedule 24 paragraph 3(2) FA 2007). Deliberate would mean penalties of up to 70% of the extra tax (100% if you also took steps to hide the error, and more for some offshore errors), not 30% (penalty bands), and, for income tax and CGT, 20 years for HMRC to assess, not 6 years (time limits).
• Customer Correction Notices. HMRC could require you, by a deadline, to correct a suspected error or explain why no correction is needed.
• Your first notice in six years? Correcting a careless error by the deadline would mean no penalty.
• Ignoring a notice. The error would be presumed careless unless it was deliberate (which, as drafted, includes an error the notice made you aware of and you then left uncorrected) or you satisfy HMRC (or the tribunal, on appeal) that you took reasonable care.

The draft gives no right to appeal against a notice itself (a resulting penalty could still be appealed). It is silent on how notices fit with open enquiries, how long a notice must allow, and whether a correction after one is prompted or unprompted.

What it means now. Telling HMRC about an error before you have any reason to think they have found it, or are about to (an unprompted disclosure), already earns the lowest penalties: as low as 0% for a careless error. You can amend a Self Assessment return within 12 months of the filing deadline; after that, tell HMRC.

2029: Changes To How You Pay

More regular Self Assessment payments (April 2029). If you pay on account (advance payments towards your tax bill), you are to pay smaller, more regular amounts, automated by default or, if you have enough PAYE income and choose to, through PAYE. The frequency, safeguards, penalties and interest are still to be set out.

Direct Debit for VAT and PAYE (April 2029). Businesses, unless exempt, would need a Direct Debit instruction for HMRC to collect anything unpaid at the due date; you could still pay another way before a cut-off. The government's response doesn't say how disputed amounts or time to pay arrangements will be treated.

Bank deductions. HMRC are to be able to take regular deductions from the bank accounts of people and companies who can afford to pay an established tax debt (up to £5,000 for individuals, £10,000 for companies, including penalties and interest) but repeatedly fail to engage. The Budget dates it from July 2029; the government's published plan is to explore a limited test in 2028, then start with companies in 2029 and reach individuals in 2030. Engaging with HMRC to manage the debt, at any point, would take you out of the process; debts in dispute or already under a payment arrangement would not be included; and you would get at least 28 days' notice and a right to object. Our guide to whether HMRC can take money from your bank account explains today's power and how this one would differ.

Consultations To Watch

Consultations are promised on offshore penalties and on new powers against serious and serial avoidance scheme users, including earlier recovery of some liabilities. Nothing changes yet (offshore penalties; accelerated payment notices; the loan charge).

What To Do Now

1. Keep to the deadline on your letter. Appeal within 30 days of the date on a decision or penalty notice (your appeal rights); if you're late, see late appeals.
2. Appealing a direct tax assessment? Ask HMRC in writing to postpone the disputed tax within 30 days of its date (postponing payment). Interest still runs on whatever proves due (interest on unpaid tax).
3. Offered a review? If HMRC offer to review a direct tax decision, you have 30 days from the date of the offer letter to accept the review or take your appeal to the tribunal. Do neither and HMRC's view is treated as agreed, and the tribunal can then hear you only with its permission (HMRC reviews).
4. Can't pay? Contact HMRC about time to pay before a late payment penalty is due (old rules; new rules).
5. Missed a 60-day return? File it and pay the CGT now, put the sale on your Self Assessment return, and appeal each penalty notice you dispute separately (CGT 60-day penalties).
6. Found a mistake in a return? Correct it now; don't wait for 2028 (reducing HMRC penalties).

Key Legislation And Resources

Budget 2026 Documents

• Budget 2026: overview of tax legislation and rates (OOTLAR): every measure; this guide covers paragraphs 1.31, 1.47, 1.49, 1.87 to 1.90, 1.93, 1.95, 2.31, 2.32, 2.35, 2.36, 2.42 and 2.45
• Budget 2026 document: the Budget report
• Timely Payments in Income Tax Self Assessment (ITSA): Summary of responses: more regular payments from April 2029
• Requiring payment of VAT and PAYE return liabilities by Direct Debit: Summary of responses: Direct Debit from April 2029
• Proposals to tackle lower value tax debts: Summary of responses: bank deductions and their safeguards
• Budget 2025: overview of tax legislation and rates: paragraph 2.46, the April 2027 penalty changes

Draft Legislation And Policy Papers

• Modernising the correction of errors: the duty to correct and Customer Correction Notices, with the July 2026 draft clauses
• Publishing details of deliberate defaulters reform: more detail published, and personal liability notices
• Reforming information powers and modernising computer records law: the Schedule 36 changes

Legislation

• Schedule 55 FA 2009: late filing penalties, including those on the 60-day property return
• Schedule 24 FA 2021 and Schedule 26 FA 2021: points-based late filing penalties and the new late payment penalties
• Schedule 24 FA 2007: penalties for errors
• Section 118 TMA 1970: subsection (6), an error discovered later and not reported
• Section 94 FA 2009 and SI 2026/1000: publishing deliberate defaulters' details, and the £50,000 threshold
• Schedule 36 FA 2008: information notices
• Section 1142A CTA 2009: R&D claim notification
• Schedule 3 CEMA 1979: seizures, notices of claim and the disposal of seized goods (paragraph 16)

GOV.UK Guidance

• Penalties for Making Tax Digital for Income Tax: HMRC's guidance on the new penalties, the 2027/28 rates and the first-year easement

On This Site

• The New Penalty Regime: points, late payment penalties and how to challenge them
• Self-Assessment Penalties: the old rules
• Appealing A CGT 60-Day Reporting Penalty: the penalty stack and the grounds of appeal
• HMRC Penalties Explained: every penalty regime, including careless and deliberate errors
• Reducing HMRC Penalties: disclosure reductions, prompted and unprompted
• Discovery Assessments: HMRC's time limits for assessing
• Personal Liability Notices: when a director pays a company's penalty or tax
• Schedule 36 Information Notices: HMRC's power to demand documents
• Customs Seizure And Restoration Appeals: notices of claim and restoration
• Making Tax Digital For Income Tax: who must join, and the first-year easements
• Postponing Payment During An Appeal: how section 55 works
• Interest On Unpaid Tax: how interest runs, and today's payment dates

This article is for informational purposes only and does not constitute legal or tax advice. For advice specific to your situation, consult a qualified tax adviser, accountant, or solicitor.