VAT late filing penalties

How the points-based system works

Since 1 January 2023, late VAT returns are penalised on a points-based system, replacing the old VAT default surcharge regime.

1. Each late return adds one penalty point
2. Once you reach a threshold (4 for quarterly filers, 5 for monthly, 2 for annual), you receive a £200 penalty
3. Each further late return at or above the threshold = another £200 penalty
4. Points expire after 24 months of compliant filing — but only if you're below the threshold

Thresholds by frequency

• Quarterly returns: 4 points
• Monthly returns: 5 points
• Annual returns: 2 points

Clearing points

To clear all your points and start fresh, you need to:

• File all current and outstanding returns on time
• Stay compliant for the period of compliance (typically 24 months for quarterly filers)

Until you clear them, every single late return triggers a £200 penalty.

If you've stopped trading

You still need to file a final VAT return, even if you have no business activity. A nil return is a return — and the late filing rules apply to nil returns too. File on time then deregister.

Appealing

You can appeal a penalty if you have a "reasonable excuse" — serious illness, bereavement, IT issues with HMRC's systems, or other circumstances genuinely beyond your control. "I forgot" or "I was busy" are not reasonable excuses.

Appeals go in via your Government Gateway or by writing to HMRC within 30 days of the penalty notice.