The HMRC have released a paper detailing all the changes to the late payment penalty regime for taxpayers.

The intention of the governments’ changes to the late submissions and payments was to make it ‘fairer and more consistent across taxes’. The changes will initially affect VAT and income tax self-assessment, (ITSA).

The changes will see VAT repayment and charges on interest coordinate with other tax regimes, including income tax self-assessment. Meaning there will be two late payment penalties that may apply: a first penalty and then an additional or second penalty, with a yearly penalty rate.

All taxpayers, regardless of the tax regime, have a legal obligation to pay their tax by the due date. The taxpayer will not incur a penalty if the outstanding tax is paid within the first 15 days after the due date. If the tax remains unpaid after day 15, the taxpayer incurs the first penalty.

For VAT, the changes take effect from, April 1st 2022. The changes will take effect for ITSA taxpayers from April 6th 2023 for those with business or property income over £10,000 per year (that is, taxpayers who are required to submit digital quarterly updates through Making Tax Digital for ITSA).

For all other ITSA taxpayers, the reforms will take effect from accounting periods beginning April 6th 2024.

John Stolliday
John Stolliday

John Stolliday runs The Financial Management Centre in Luton East. John is a qualified accountant (FCCA) and bookkeeper (MICB) with UK and Middle East experience in the construction and building services sectors, handling company turnovers up to £100m and staff of 15. John has held senior roles, up to board level, in civil engineering, industrial engineering, pipelines, general building and building maintenance companies.