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Late Payment and Filing Penalties
Managing taxes can be daunting, especially when facing penalties for late payments or filings. Here's a breakdown of the penalties you might face across different tax categories in the UK: Self-assessment, Corporation Tax, VAT, and PAYE.
Self-assessment
For those who are self-employed or need to file a self-assessment tax return, missing deadlines can result in penalties.
Late Filing Penalties:
- 1 day - 3 months late: £100 penalty.
- More than 3 months late: Additional penalties and increased fines apply.
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Late Payment Penalties:
- Interest is charged on late payments. They vary between 2% and 9% annually, often changing in line with inflation.
Corporation Tax
If you're running a limited company, timely filing and payment of Corporation Tax are crucial to avoid penalties.
Late Filing Penalties:
- 1 day late: £100
- 3 months late: Another £100
- 6 months late: HMRC estimates your tax bill and adds a 10% penalty on unpaid tax.
- 12 months late: Another 10% of any unpaid tax.
Repeated Late Filings:
- If late 3 times in a row, the £100 penalties increase to £500 each.
Late Payment:
- There are no specific late payment penalties, but interest is charged on any outstanding tax. Interest rates vary monthly (usually between 2% and 9%).
VAT
Starting from 1 January 2023, new penalties for late VAT payments and returns have been introduced, replacing the previous VAT default surcharge.
Late Payment Penalties:
- Payment up to 15 days overdue: No penalty.
- Payment between 16 and 30 days overdue: 2% penalty on the outstanding VAT at day 15.
- Payment 31 days or more overdue: 2% penalty on the VAT outstanding at day 15 plus an additional 2% on the VAT still outstanding at day 30. After 31 days, a daily rate of 4% per year is charged until the balance is paid in full.
Avoiding Penalties:
- Propose a payment plan (Time to Pay arrangement) to potentially lower or avoid penalties.
PAYE (Pay As You Earn)
Late payment penalties also apply to PAYE and National Insurance contributions for employers.
Late Payment Penalties:
HMRC charges late payment penalties on PAYE amounts that are not paid in full and on time. These include:
- Monthly, quarterly or annual PAYE
- Student loan deductions
- Construction Industry Scheme (CIS) deductions
- Class 1 National Insurance contributions (NICs)
- Annual payments of employers’ Class 1A and Class 1B NICs
- Determinations made by HMRC where it appears that there may be further tax payable
- Decisions, for example about a person’s liability to pay NICs and the amount payable
Monthly and Quarterly PAYE Payments:
- First late payment in a tax year: No penalty.
- Subsequent late payments:
o 1 to 3 defaults: 1% penalty on the late amount.
o 4 to 6 defaults: 2% penalty.
o 7 to 9 defaults: 3% penalty.
o 10 or more defaults: 4% penalty.
Additional Penalties:
- If still unpaid after 6 months: An additional 5% of the unpaid amount.
- If still unpaid after 12 months: Another 5% penalty.
Amounts Due Annually or Occasionally:
- 30 days after the due date: 5% penalty.
- After 6 months: Additional 5% penalty.
- After 12 months: Further 5% penalty.
Appealing Penalties:
You can appeal online via HMRC’s PAYE for employers service, and in some cases, HMRC will accept and settle the appeal automatically.
Pro Tip from Blue Rocket Accounting
The sooner you prepare your documents, the faster you can submit them, and the sooner you’ll know how much to pay. Organise your information ahead of time. When you reach the filing window, you'll be ready to send everything to your accountant or start the submission process immediately.
For example, with Corporation Tax, begin gathering your bookkeeping records two weeks before your year-end. This way, you can send everything to your accountant within the first few days after your accounts year-end. If your accountant receives it sooner, they can complete the work faster, giving you plenty of time to review, discuss, make necessary changes, and submit to HMRC.
Need Help?
Blue Rocket Accounting offers a proactive approach to accounting, payroll, and bookkeeping. We’ll remind you at multiple points via phone, text, WhatsApp, and email to ensure we have the documentation we need so that your submissions aren’t late.
Click here to contact us today to arrange an initial meeting so we can discuss your situation, goals, and challenges.
