Main Tax Late Filing and Payment Penalties

This article summarises the main tax late filing and payment penalties. In addition, you should be aware there are penalties for providing incorrect information.

As a small business owner you will have to deal with a number of different departments within HMRC. Each department has different forms to complete with different deadlines and different penalties should either your submission or payment be late. The following is a quick guide as to what you need to be aware of when dealing with HMRC and which deadlines you should put in your diary.

PAYE Late Filing

When you have employees, you must operate within the guidelines of PAYE. You must complete an Employer Annual return form (known as a P35) which summarises the deductions you have made throughout the tax year and a P14 form for each employee which summarises the PAYE deductions for each employee. These forms must be submitted by the 19th of May following the end of the tax year. You must file these forms online: penalties are imposed for filing them on paper.

The penalty for late filing of these forms is £100 for every month or part month that you are late for every 50 employees. For example, if you had 10 employees and filed on the 21st of May then the penalty would be £100, but if you have 60 employees and you filed on the 25th of June you would receive a penalty for £400.

HMRC only issue these penalties periodically every four months in September, January and May the following year, so if you forget to file your return the first penalty notice issued will be for £400.

If you feel that a penalty has been issued in error, make sure to appeal against the penalty in writing to HMRC. Details of how to appeal can be found on HMRC’s website.

Late Payment

Interest is payable on every late payment throughout the year. For PAYE purposes periods run from the 6th of the month to the 5th of the following month. If paying by cheque, payment should be made by the 19th whereas if paying electronically the payment has until the 22nd to clear in HMRC’s bank account. HMRC do not accept Faster Payments so make sure to allow for at least 3 working days for the funds to clear.

HMRC charge daily interest on late payments of PAYE using HMRC late payment interest rates which can be found on HMRC’s website at Interest will be backdated at the end of the tax year once you have filed your Employer Annual Return.

Penalty charges may be issued for missed payments of PAYE…

  • Missing one payment in a tax year there is no penalty, as long as the payment is less than six months late.
  • Missing two to four payments, a 1% penalty is issued (of the PAYE due).
  • Missing five to seven payments, the penalty is 2%.
  • Missing eight to ten payments, the penalty is 3%.
  • Missing eleven or more payments, penalties of 4% apply.

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