Late PAYE payment 😬 what are the penalties?
Employers incur PAYE liabilities payable to HMRC when they deduct Income Tax and National Insurance from their employees' in processing the payroll.
When are the payment deadlines? 🗓️
A tax month is always considered to end on the 5th monthly
If you choose to pay monthly then HMRC must receive your payment by 22nd
If you choose to pay quarterly then your payment deadlines are:
22nd July (for months 1 – 3 ending 5th July)
22nd October (for months 4 – 6 ending 5th October)
22nd January (for months 7 – 9 ending 5th January)
22nd April (for months 10 – 12 ending 5th April)
Only businesses whose PAYE liabilities are usually less than £1,500 per month can choose to pay quarterly (where possible we recommend choosing quarterly payments).
Deadlines and how to pay found here: https://www.gov.uk/pay-paye-tax
Remember the deadline is for HMRC to have received payment by 22nd of the month. We therefore recommend making your payment (even if using Faster Payments) at least one day early. Some find it helpful to set a future dated payment using Online Banking so as not to forget.
In the rare instance you’re not paying electronically then the payment deadline becomes 19th of the month.
What are the penalties for late payment? ⛔
HMRC PAYE allow one penalty free late payment per tax year.
After that the penalty is 1% of the amount outstanding + interest. The penalty % rate increases if you exceed 4 late payments.
Details of the penalty regime are here: https://www.gov.uk/guidance/what-happens-if-you-dont-pay-paye-and-national-insurance-on-time
However, for the time being, penalties are not being issued automatically as HMRC PAYE continue to trial a “risk based” / discretionary approach according to the PAYE Employer Bulletin June 2021: https://www.gov.uk/government/publications/employer-bulletin-june-2021/employer-bulletin-june-2021
HMRC may withdraw their risk based trail at any time and resume issuing automatic penalties.
Would you like help to pay less tax? Feel free to get in-touch or check-out our related posts 👇