VAT late submission penalties, late payment penalties and interest

Late submission points thresholds

Annual returns: 2 points (GOV.UK)
Quarterly returns: 4 points
Monthly returns: 5 points
Penalty at the threshold: £200, and a further £200 for each later late return while at the threshold

How points are earned

Each late return earns a point until the business reaches its threshold. Nil returns and repayment returns earn points too (GOV.UK).

The rules do not apply to the first return of a newly registered business, the final return after cancellation, or one-off returns covering a period other than a month, quarter or year.

If a business changes frequency with HMRC's agreement, its points are adjusted. Moving from annual to quarterly adds 2 points, and from quarterly to monthly adds 1.

How points expire

Under the threshold, if the return deadline was not the last day of a month, a point expires on the last day of the month 24 months after the deadline. If the deadline was the last day of a month, it expires on the last day of the month 25 months after (GOV.UK).

At the threshold, points expire only when the business meets two conditions. It must complete a period of compliance: 24 months with 2 returns on time for annual filers, 12 months with 4 for quarterly filers, or 6 months with 6 for monthly filers. It must also have sent every return due in the previous 24 months.

A late submission example

For example, a quarterly client files three returns late in a year and earns three points. A fourth late return takes it to the threshold of 4 and brings a £200 penalty (GOV.UK). Each later late return brings another £200 until it completes 12 months of on-time returns and clears any outstanding returns from the last 24 months (GOV.UK).

Late payment penalties

Paid in full by day 15: no first late payment penalty (GOV.UK).
Paid between day 16 and day 30: a first penalty of 3% of the VAT owed at day 15.
Still unpaid after day 30: a first penalty of 3% of what was outstanding at day 15 plus 3% of what is still outstanding at day 30.
From day 31: a second penalty at a daily rate of 10% a year on the outstanding balance, charged every day until it is paid in full.
A Time to Pay arrangement agreed with HMRC can mean lower, or no, late payment penalties.

A late payment example

For example, a client owes £10,000 and pays nothing by day 15. It pays £4,000 by day 30 and the remaining £6,000 on day 61. The first penalty is 3% of £10,000, which is £300, plus 3% of £6,000, which is £180, making £480 (GOV.UK).

The second penalty runs on the £6,000 from day 31 at 10% a year, which is £1.64 a day. Late payment interest is charged on top, from the first day the payment is overdue.

Late payment interest

Late payment interest is charged from the first day a payment is overdue until the day it is paid in full, at the Bank of England base rate plus 4% (GOV.UK). It is also charged on overdue penalties.

HMRC works it out as the amount, times the rate, times the number of days, divided by 365. On 2 October 2026 HMRC's interest rates page gives a late payment rate of 7.75% from 9 January 2026. The rate moves with the base rate, so check the page for the dates that apply to a client's debt.

When HMRC owes a business money, it pays repayment interest at the base rate minus 1%, with a lower limit of 0.5%. The same page gives 2.75% from 9 January 2026.

Questions

When is a VAT return due?

Usually one calendar month and 7 days after the end of the period, for both the return and the payment, which must clear HMRC's account by then (GOV.UK). Annual accounting returns are due 2 months after the period (VAT Notice 700/12).

Does a repayment return earn a point if late?

Yes. Late repayment returns and nil returns earn points (GOV.UK).

In Accountin

In Accountin, the deadlines dashboard lists each client's VAT return due date, and once the practice is connected to HMRC the HMRC page shows what is owed and the client's penalty points. VAT submission switches on once HMRC recognises Accountin.