VAT late payment penalties
VAT late payment penalties stack: 2% at 15 days, 2% more at 30 days, then daily 4% interest after 30 days.
In one sentence
Pay VAT late and HMRC charges 2% at day 15, another 2% at day 30, then 4% annualised interest from day 31, separate from late filing penalties.
Quick answer
- 0–15 days late: no penalty if paid in full
- 16–30 days late: 2% on the unpaid amount at day 15
- Over 30 days late: another 2% at day 30, plus daily 4% interest from day 31
- Late payment interest applies on top, charged at HMRC's published rate
The new VAT late payment regime
Since 1 January 2023, VAT late payments work on a different system from other taxes. There are two parts: late payment penalties and late payment interest.
Late payment penalties — how they stack
- 0–15 days late: No penalty if you pay in full or set up a Time to Pay arrangement
- 16–30 days late: 2% on the amount unpaid at day 15
- Over 30 days late: Another 2% on the amount unpaid at day 30 (so 4% total), plus daily 4% annualised penalty interest from day 31
So if you owe £10,000 and pay 60 days late, you face £400 in surcharges (4% of £10,000) plus daily interest from day 31.
Late payment interest
Separate from the surcharges above, HMRC charges late payment interest from the day after the deadline at the Bank of England base rate plus 2.5%. This applies on top of any penalty surcharge.
Time to Pay arrangements
If you contact HMRC before day 15 and agree a Time to Pay arrangement, you can avoid the late payment penalty (interest still accrues). HMRC will usually agree a plan if you're a viable business with a temporary cash issue.
You can usually set up a Time to Pay online via the HMRC website if you owe less than £20,000 and are within 30 days of the deadline.
Late filing is separate
Late filing penalties run on a different (points-based) system. See the VAT late filing article for that.
Action plan
- Pay before day 15 — that avoids any surcharge entirely
- If you cannot, contact HMRC immediately to discuss Time to Pay
- Pay what you can: surcharges are calculated on the unpaid amount, so partial payment helps
- Keep evidence — bank statements showing the payment, HMRC reference numbers
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