For the first time in 25 years, the penalty for failing to pay Corporation Tax (CT) is set to increase.
Many SMEs already struggle to keep pace with their tax obligations and these penalties might mean that more attention will be paid to this problem.
As such, we want to help SMEs understand their tax obligations so that increasing penalties do not become a concern for them.
What new tax penalties are coming into force in 2026?
The increase in CT penalties is set to take effect from 1 April and serves as a timely reminder that SMEs need to take their tax obligations seriously.
Missing a CT filing will incur a £200 penalty, double the current penalty of £100.
That figure will double again to £400 after three months if you continue not to complete your tax filing.
Repeat offenders will face the top penalty of £2000, which is incurred when three successive filings are late.
With operational costs steadily increasing, losing money to penalties that can be avoided is a wasteful expense that SMEs can easily avoid.
Is HMRC targeting SMEs?
To a certain extent, HMRC is very interested in the tax affairs of SMEs.
This is due to SMEs having a widespread issue of not paying enough tax.
While there may be some SMEs that are trying to keep costs down by misleading HMRC, plenty of SMEs are either careless or ignorant when it comes to completing their tax returns.
This meant that 40 per cent of SMEs failed to pay the corporation tax they owed in the 2023/2024 fiscal year.
Only £22 billion of tax was collected compared to the £36.7 billion that was owed.
Given the size of that tax gap, it is no wonder that HMRC is taking action to make SMEs pay more attention to their tax filings.
While the penalties are not massive, they are enough to communicate to SMEs that sloppy tax filings are not going to be tolerated anymore.
If the data shows that the 2024/2025 fiscal year was similarly bad for SMEs paying tax, then we can expect further penalty increases in the future.
How can SMEs keep up with tax obligations?
One of the most common problems SMEs face is that the people running them have too much to juggle and some things must inevitably get pushed to one side.
Tax filings cannot be neglected though and seeking support from experts is a good way to keep tax compliant while still giving your full attention to keeping your business going.
Our professional team can help you manage your tax obligations so that you stay fully compliant without taking your eye off the ball anywhere else.
Don’t let your SME get caught up in the tax gap statistics, speak to our team today!
