Key facts
- No penalty for payments up to 15 days late.
- A 2% charge applies at day 16 (on the outstanding amount at day 15).
- A further 2% charge at day 31 (on the amount still outstanding at day 30).
- After day 31: an ongoing annualised rate of 4% on the balance.
Penalty Timeline
| Days Late | Penalty |
|---|---|
| 1–15 days | No penalty (but interest accrues from day 1) |
| 16–30 days | 2% of VAT outstanding at day 15 |
| 31+ days | Additional 2% of VAT outstanding at day 30, plus ongoing 4% per year |
Late Payment Interest
In addition to penalties, interest is charged from the day after the deadline until full payment. The rate is the Bank of England base rate plus 2.5%.[2]
Time to Pay
If you can’t pay in full, contact HMRC before the deadline to agree a Time to Pay arrangement. If agreed before the due date, the penalty clock may be paused.
Tip: Set up a Direct Debit to avoid accidental late payments. Even partial payment reduces the amount penalties are calculated on.
Frequently Asked Questions
What happens if I pay my VAT bill late?
There is no penalty for the first 15 days, but interest accrues from day 1. At day 16 a 2% charge applies, a further 2% at day 31, and then an ongoing annualised rate of 4% on the remaining balance.
How is late payment interest calculated on VAT?
Interest is charged from the day after the deadline until you pay in full, at the Bank of England base rate plus 2.5%. This is in addition to any late payment penalties.
Can I avoid a VAT late payment penalty by contacting HMRC?
Yes. If you contact HMRC before the payment deadline and agree a Time to Pay arrangement, the penalty clock may be paused while you pay in instalments.
Does paying part of my VAT bill reduce the late payment penalty?
Yes. Penalties are calculated on the outstanding amount at day 15 and day 30, so making a partial payment before those dates will reduce the penalty charged.
Further Reading
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Sources
- Late payment penalties for VAT — GOV.UK
- Late payment interest — GOV.UK
- VAT penalties reform — GOV.UK