HMRC has released an important update today (more detailed guidance will be released in December 2022), and this update will concern every taxpayer.

From 1 January 2023 the default surcharge will be replaced by a new penalty if you delay filing your VAT return or paying VAT late.

Who will be affected


Everyone who started filing VAT returns on January 1, 2023.

In addition, you will also receive a penalty if you do not upload a no-tax or repayment VAT return in a timely manner.



What if I submit my VAT return late?


Penalties for late filing will be reflected in the points system (a specific penalty will be charged for each late filing VAT return).

Once the points deducted hit the maximum penalty point, you will start receiving a £200 penalty. It’s worth noting that you’ll need to pay an additional £200 penalty for each late submission thereafter.

The specific maximum penalty points will vary based on the frequency of submissions:



 The good news is that penalty points can be reset to zero, as long as you:

  • Submit your return on or before the deadline for compliance – this will depend on how often you file
  • Make sure HMRC has received all outstanding tax refunds due in the past 24 months

What if I do not pay VAT on time?


The sooner you pay late fees, the lower your penalty interest charges.

  • 1-15 days late, full payment of the VAT owed or the same payment plan will not be penalized.
  • 16-30 days late, pay in full or agree to a payment plan and you will receive a first penalty of 2% of the VAT owed on the 15th day.
  • 31 days late, pay in full or agree to a payment plan, add a 2% penalty to the 15th day penalty.
  • More than 31 days overdue, in addition to the first two fines need to be paid. During the outstanding period, you will receive another penalty at the daily rate of 4% per annum.

Period of familiarisation

Any changes will take some getting used to.

If you can make the full payment within 30 days of the payment due date, the IRS will not charge the first late fee for the first year between January 1, 2023 and December 31, 2023.

Payment interest

From 1 January 2023, HMRC will charge late fees from the date of late payment to the date of full payment.

Late payment interest is calculated at the Bank of England base rate plus 2.5%.

Repayment interest

The repayment grant will be withdrawn from 1 January 2023.

For accounting periods from 1 January 2023, HMRC will pay you interest on the repayment of the VAT you owe.

Repayment interest accrues from the day after the due date or submission date, whichever is later, until HMRC pays you the full VAT refund amount.

Repayment interest is calculated at the Bank of England’s base rate minus 1%. Even if the calculated repayment interest may be lower than 0.5%, the minimum repayment rate is always 0.5%.

Need help?

Although HMRC has given plenty of time for people to adapt to the new changes, there are many details that need special attention.

Considering that different companies have different situations, we will be happy to solve your confusion.

You can leave a message in the background or get in touch with us by email, and we will serve you as soon as possible!