Compliance
Compliance Challenges: HMRC’s Late Payment Penalties & Third-Party Data Reforms
Recent policy moves are increasing penalties for late payments and using better data from banks and merchants—here’s how to stay compliant and avoid surprises.
By NomadicTax Research Team • 5-8 min read • November 21, 2025
## What’s Changing in Compliance
### Late Payment Penalties (VAT & Income Tax Self-Assessment)
From **6 April 2025**, UK taxpayers who are late in paying VAT or filing under Income Tax Self Assessment (ITSA) will face:
- 3% penalty if tax is overdue by 15 days,
- an extra 3% when 30 days overdue,
- plus 10% per annum for tax still outstanding after 31 days. ([gov.uk](https://www.gov.uk/government/publications/supporting-documents-for-spring-statement-2025/spring-statement-2025-policy-costings?utm_source=openai))
### Better Use of Third-Party Data
As of **Spring Statement 2025**, recent government reforms expand HMRC’s access to card sales data, bank/building society interest (BBSI), and other financial account info. Aim: improve accuracy in tax assessments, reduce small liabilities, and pre-populate returns. ([gov.uk](https://www.gov.uk/government/consultations/better-use-of-new-and-improved-third-party-data/outcome/summary-of-responses?utm_source=openai))
## What This Means for Individuals & Businesses
- **No more waiting**: Data from third parties like banks can be used to cross-check self-reported income. Inconsistencies may trigger HMRC queries.
- **Higher stakes for small underreporting**: Small amounts of interest or incorrect card sales entries are easier to detect and harder to overlook.
- **Self-assessment thresholds shifting**: Income thresholds for mandatory Self Assessment filings are being realigned (~£3,000 gross for trading and property income) under new proposals. ([gov.uk](https://www.gov.uk/government/publications/summary-of-tax-update-spring-2025-simplification-administration-and-reform/tax-update-spring-2025-simplification-administration-and-reform-summary?utm_source=openai))
## Actionable Compliance Tips
- Keep accurate records of all income sources, especially interest and card transactions—not just major earnings.
- Consider using accounting software that integrates with bank feeds to accurately capture income activity in real time.
- File on time and pay early when possible to avoid escalating penalties.
- Review whether you fall under Self Assessment thresholds; if below, explore simpler reporting methods wher eavailable.
## Case Example
A freelancer earning £2,500 from a small rental property and £2,000 from another side business will now, under proposed rules, likely fall under new £3,000 gross thresholds for both trading and property income. Instead of filing Self Assessment, they may be able to report via a simpler digital reporting service—a time-saver and lower risk.
## Final Thoughts
These changes underscore a shift toward **data-driven enforcement** and **automatic triggers** rather than relying on manual audits. Staying proactive—using good tools and auditing your own data—will keep you far ahead of trouble.