The government said the penalty regime needed to be updated to ‘counteract the effect of inflation since the penalties were introduced’ nearly 30 years ago back in 1998. The measure was one of many in the small print of the Budget.

The new fines will come into effect for corporation tax returns due from 1 April 2026.

HMRC said the increase was necessary as ‘the relative value of these penalties, and therefore behavioural impact, has been eroded by nearly 30 years of inflation and in real terms they are worth around half the amount they were when introduced. The penalties are therefore being increased to restore their original real terms value’.

Under the new penalty regime, the basic late filing fine will double to £200, while if there are three successive failures and the return is late the penalty will increase from £500 to £1,000. All fines will go up as detailed in the table below.