Late payment penalties for VAT depend on days overdue, determined by the due date for VAT returns and assessments. The first penalty is 3% of the unpaid amount on day 15, 2% on day 15, and 3% on day 30 if no Time to Pay (TTP) application is made. The second penalty is 10% annual rate on outstanding amount, 4% on day 31. HMRC may assess penalties at intervals, with assessments made 7 days before the 2-year time limit.
VAT Late Payment Penalties Overview in the UK
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Author: Ema Stamenković
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Content accuracy validation date:
26.08.2025
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Late payment penalties for VAT depend on days overdue, determined by the due date for VAT returns, assessments, etc. (per CH193080). Day 1 is the first day after the due date.
First Late Payment Penalty
After Day 15: If VAT remains unpaid and no Time to Pay (TTP) application is made:
- For tax due on/after 31 May 2025 (unless period began before 1 Apr 2025): 3% of amount unpaid on day 15.
- For tax due on/before 30 May 2025 or periods starting before 1 Apr 2025: 2% of amount unpaid on day 15.
After Day 30: If still unpaid and no TTP:
- Due on/after 31 May 2025: 3% of day 15 amount + 3% of day 30 amount.
- Due on/before 30 May 2025 or pre-1 Apr 2025 periods: 2% of day 15 amount + 2% of day 30 amount.
- Penalty charged after day 30, based on one or both percentages.
Second Late Payment Penalty
- From Day 31: If VAT remains unpaid and no TTP:
- Due on/after 31 May 2025: 10% annual rate on outstanding amount.
- Due on/before 30 May 2025 or pre-1 Apr 2025 periods: 4% annual rate.
- Accrues daily from day 31 until full payment or successful TTP proposal.
- HMRC may assess penalties at intervals (per regulations). Under The Penalties for Failure to Pay Tax (Schedule 26 to Finance Act 2021) (Assessments) Regulations 2024 (effective 4 Dec 2024), assessments can be made for unpaid tax from 7 days before the 2-year time limit.
Late Payment Penalties Table (for periods starting after 1 Apr 2025, due after 31 May 2025)
|
Penalty |
|
|
Days Overdue |
Customer Situation |
|
Penalty Position |
|
No Penalty |
|
|
Up to 15 |
Pays in full or proposes TTP* |
|
No penalty charged |
|
First Penalty |
|
|
16–30 |
Pays in full |
|
3% of amount unpaid on day 15 |
|
First Penalty |
|
|
16–30 |
Proposes TTP* |
|
3% of amount unpaid on day 15 |
|
First Penalty |
|
|
16–30 |
No payment or TTP* |
|
3% of day 15 amount + 3% of day 30 amount |
|
Second Penalty |
|
|
31+ |
Pays in full or proposes TTP* |
|
10% annual rate from day 31 until payment/TTP; calculated on final day’s balance |
|
Second Penalty |
|
|
31+ |
No payment or TTP* by 2-year limit |
|
10% annual rate from day 31 until assessment (7 days before 2-year limit); based on final day’s balance |
Note: TTP proposal must be agreed and upheld. For periods starting before 1 Apr 2025 or due on/before 30 May 2025, rates are 2% (first penalty) and 4% (second penalty).
References:
- FA21/SCH26/PARA 4: No penalty
- FA21/SCH26/PARA 7: First Penalty
- FA21/SCH26/PARA 8: Second Penalty
- The Penalties for Failure to Pay Tax (SCH26 FA 21) (Assessments) Regulations 2024
- The Finance Act 2021 (Increase in Schedule 26 Penalty Percentages) Regulations 2025
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