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Late VAT penalties explained ⚠️

Updated: Jul 20, 2023

VAT periods from 1 January 2023 are subject to the new late penalty regime. Read on to understand the potential charges for late VAT Returns and payments.

Penalties for late VAT submission, payment and registration are treated separately.

Our examples below presume you're preparing the usual quarterly (3 monthly) VAT Returns (although a minority of businesses elect monthly or annual reporting.

VAT Deadlines

Quarterly VAT Returns must be submitted and paid within one month +7 days of the end of the VAT quarter. For example, a VAT Return covering January - March has a deadline of 7th May.

Penalties for late submission

For each quarterly VAT Return submitted late, your business will receive a penalty point. Reach the threshold of 4 penalty points, and you'll be issued a £200 penalty.

Penalty points 1-3 will automatically expire 24 months after the missed deadline. If you've reached the 4-point threshold, it'll require 4 on-time Returns to remove those points.

Penalties for late submission apply even to NIL or repayment VAT Returns.

Penalties and interest for late payment

  • HMRC will charge you interest of 2.5% over the Bank of England base rate from the first day that payment is overdue until it's paid in full. Link to HMRC's latest interest rates.

  • First late payment penalty for payments 1-15 days late: £NIL

  • First late payment penalty for payments 16-30 days late: 2% of the VAT payable

  • First late payment penalty for payments +30 days late: 4% of the VAT payable + the "Second late payment penalty" (see next point)

  • Second late payment penalty for payments +30 days late: Daily penalty of 4% per year on the outstanding balance charged every day until paid in full

  • If you're having difficulty paying, then contact HMRC as soon as possible to help reduce the penalties and interest you're charged.

Penalties for late VAT registration

If you're late in applying to register for VAT, the amount of the penalty depends on whether the error was deliberate, if you were prompted by HMRC, and how late you submit your application to register. For details see here.

Whilst determining exactly what you might be charged for late VAT registration is complex, the penalties applied are generally as follows (presuming the error is non-deliberate and unprompted):

If you register not more than 9 months late, the penalty is usually around 5% of the net VAT liability. The penalty increases to 10% for registrations 9 - 18 months late and 15% for notifications later than 18 months.

If you're not already VAT registered see: When should you register for VAT?

Appealing against a penalty

You can view details of your penalties, make appeals or pay VAT using your Business Tax Account.

Would you like help to pay less tax? Feel free to get in touch or check out our related posts 👇

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