What are the HMRC VAT penalties for late returns and payments in 2026?

Full answer

The VAT penalty regime changed significantly from 1 January 2023. HMRC replaced the old surcharge system with two separate regimes: a points-based penalty for late submissions and an interest-based penalty for late payments. Points-based late submission penalties Each time you submit a VAT return late, you receive one penalty point. When your points total reaches the relevant threshold, a GBP 200 financial penalty is charged. The threshold depends on your filing frequency: -- Annual returns: penalty triggered at 2 points -- Quarterly returns: penalty triggered at 4 points -- Monthly returns: penalty triggered at 5 points For every further late return above the threshold, an additional GBP 200 penalty applies. The GBP 200 penalty is a flat charge regardless of the size of the VAT liability. Resetting your penalty points Points can be reset to zero if you achieve a period of compliance (filing all returns on time) equal to: -- 24 months for annual filers -- 12 months for quarterly filers -- 6 months for monthly filers All outstanding returns due at the time must also be submitted before the reset takes effect. Late payment penalties Separate from the points system, late payment penalties apply to VAT paid late: -- Up to 15 days late: no penalty if payment is made (or a time-to-pay arrangement agreed) within 15 days -- 16 to 30 days late: 2% of the outstanding VAT -- 31 days or more late: 2% of the VAT outstanding at day 31, plus 2% of the VAT outstanding at day 31 again (effectively 4% of the amount outstanding at day 31), with a further daily rate thereafter Late payment interest HMRC also charges interest on late VAT payments at the Bank of England base rate plus 2.5% per year (calculated daily). This is separate from the fixed penalties above. Repayment supplement If HMRC is late repaying a VAT refund owed to you, you are entitled to repayment interest at the Bank of England base rate minus 1% (with a minimum of 0.5%). This replaced the old 5% repayment supplement. Filing a nil return If you have no VAT to declare, you must still file a nil return on time. Late nil returns count toward your penalty points total.

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