Prepare for new VAT late submission late payment penalties and interest charges

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As part of HMRC’s ambition to become a modern, trusted tax authority, it is changing the way penalties are issued for submitting late VAT returns and paying VAT late, which will affect all VAT registered businesses from 1 January 2023.

For VAT periods starting on or after 1 January 2023, HMRC is replacing the default surcharge with separate penalties for late returns and late payment of VAT. At the same time, HMRC is introducing a new approach to VAT interest.​

The new points-based system for late submissions is designed to be more lenient for the occasional slip-up, whilst still penalising those who repeatedly fail to comply. If you do submit late (which also applies if you submit a nil or repayment return late) - you could face penalty points and a £200 fine. ​

Late payment penalties will be charged at different rates based on when payment is received. This means the penalty is more proportionate to the length of time a payment is outstanding - the sooner you pay, the lower the penalty.​

HMRC is also introducing late payment interest, which means that you’ll be charged interest from the date your payment is overdue, until the date you pay in full.

HMRC is discontinuing repayment supplement and instead will be introducing repayment interest. Customers who make a repayment claim will be paid repayment interest from the day after the due date, or the date of the submission (whichever is later), to the date the repayment is made.

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