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HMRC's VAT Penalties and Interest

Late Payment Penalties

HMRC will issue late payment penalties if your VAT liability is not settled on time. VAT must be paid 1 month and 7 days following the end of the quarter. Please see the below table for further details of how late payment penalties will be calculated by HMRC;

To avoid a penalty the liability needs to be paid in full by the due date or you’ll need to contact HMRC to agree a ‘time to pay’ arrangement, in which case the penalty may be reduced or avoided. To contact HMRC to discuss a time to pay arrangement please call them on 0300 200 3835, you will need your VAT number so they can locate your VAT records.

If you cannot pay the full amount and are not able to contact HMRC we would recommend you pay any amount affordable to minimise the penalties that will be applied, and continue to make regular payments until the liability is eventually cleared.


As well as the above penalties HMRC will also charge interest on any amount not paid by the due date. Late payment interest will be charged from the date that the payment was due until the date the payment is received. The interest rate charged by HMRC will be the Bank of England base rate plus 2.5%.

Late Submission Penalties

Each time a VAT return is not filed on time the company will incur a point on their record. A fixed rate penalty of £200 will then be issued once the points threshold has been exceeded. The points threshold for any company making quarterly submissions is 4 points. After the company has a total of 4 points, then a fixed rate penalty of £200 will be issued for each return submitted late after this point. To reset the points to ZERO the following must be completed;

  • Returns submitted on time for the following 12 months
  • All outstanding returns from the previous 24 months are submitted

To avoid any points being issued to your company it is extremely important to ensure we have your up to date bank transactions and that you provide instruction for PayStream to file your return.


HMRC will issue any relevant late payment penalties, late submission penalties and apply any interest as per the above. If you are unable to settle your VAT liability or these penalties then please contact HMRC to arrange a payment plan.


As always your dedicated accounts team are on hand to give you any help and advice you made need, to get in touch call just call 0161 923 0201 (option 3).

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