Quick answer

0–15 days late: no penalty if paid in full

16–30 days late: 3% on the VAT still unpaid at day 15

31+ days late: 3% at day 15 plus 3% on what is still unpaid at day 30

From day 31: a second late payment penalty is calculated daily at a 10% annual rate

Late payment interest applies from the first overdue day at HMRC's published rate

The new VAT late payment regime

For VAT accounting periods starting on or after 1 January 2023, VAT late payments use HMRC's late payment penalty regime rather than the old VAT default surcharge. There are two separate costs to understand: late payment penalties and late payment interest.

Late payment penalties — how they stack

0–15 days late: no first or second late payment penalty if you pay in full.
16–30 days late: the first penalty is 3% of the VAT still unpaid at day 15.
31 days or more late: the first penalty becomes 3% of what was unpaid at day 15 plus 3% of what is still unpaid at day 30.
From day 31: a second penalty is calculated daily at a 10% annual rate on the outstanding balance until the VAT is paid or HMRC assesses the penalty.

So if a VAT bill is still unpaid after day 30, the cost can keep increasing until the balance is cleared or a Time to Pay arrangement is agreed and maintained.

Late payment interest

Late payment interest is separate from the penalties above. HMRC charges interest from the first day the payment is overdue until the VAT is paid in full, using HMRC's published late payment interest rate.

Time to Pay arrangements

If you cannot pay the VAT in full, contact HMRC as soon as possible. GOV.UK says proposing a payment plan can mean lower or no late payment penalties. The earlier you deal with it, the more options you usually have.

A Time to Pay arrangement must be kept. If it is cancelled because the business does not keep to the agreed terms, HMRC can charge penalties as if the arrangement had not existed.

Late filing is separate

Late filing penalties run on a different points-based system. Submitting the VAT return on time does not remove the need to pay on time, and paying the VAT does not remove a late submission point.

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: penalties are calculated on the unpaid amount, so partial payment helps
Keep evidence — bank statements showing the payment, HMRC reference numbers

For the official rules, see GOV.UK guidance on VAT late payment penalties.