New penalty regime for VAT and Income Tax Self-Assessment

Historically, VAT surcharges for late submission of VAT returns have been criticised for being disproportionate, and out of line with similar charges for other taxes.

The surcharge level is currently the same (a fixed percentage of the VAT due, from 2% up to 15%) regardless of whether the VAT was paid 1 day or 1 year late.

HMRC are attempting to make the system fairer with a new regime.

What will the new late payment penalties regime look like?

Under the new regime:

  • Penalties will be points-based, with a financial penalty of £200 being issued for every missed submission on and after a relevant points threshold is reached
  • Penalties will be proportionate to the amount of tax owed and how the late payment is
  • No penalty will be chargeable on tax paid up to 15 days after the due date
  • A 2% penalty will be chargeable on tax paid between 16 and 30 days after the due date increasing to a 4% penalty chargeable on tax unpaid after 30 days
  • A further 4% annual penalty rate will be chargeable on outstanding tax due after 30 days

When will the reforms happen?

The reforms come into effect:

  • For VAT taxpayers from periods starting on or after 1 April 2022
  • For taxpayers in income tax self-assessment, from accounting periods beginning on or after 6 April 2023 for taxpayers 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 income tax self-assessment taxpayers, from accounting periods beginning on or after 6 April 2024

The reforms, shaping a fairer system with reduced surcharge penalty percentages will be welcome to both taxpayers and advisers.   With any new system, there are likely to be teething problems and businesses are advised to take advice if surcharges have been issued incorrectly.

Finally, it’s worth a reminder that under both the current and new regime, businesses that have received surcharges may be able to appeal and our team can help with this.

If you need our advice please get in touch at hello@chw-accounting.co.uk

 


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

DID YOU FIND THIS USEFUL?

Share it with your network:  

Want more great content?
Sign up to our newsletter

    Follow us

    Tweets by @CHW-accounting

    CHW-Accounting
    @chw-accounting


    Twitter: chw_accounting

    WHAT'S THE NEWS?

    Grab a biscuit and a brew and read our latest news.

    19 February 2024

    Tax changes – What’s new in 2024?

    by

    We are now well and truly into 2024 and before you know it the end of the 2023/24 tax year on 5 April will be upon…


    Read more >

    12 February 2024

    National minimum wage – a quick guide to the...

    by

    The government sets a national minimum wage and a national living wage to guarantee that workers get a minimum standard of pay. It is a legal…


    Read more >

    7 February 2024

    HMRC to target undeclared dividend payments

    by

    HMRC have advised the Chartered Institute of Taxation (CIOT) that they have commenced a ‘One to Many’ letter campaign directed at taxpayers who HMRC suspect may…


    Read more >

    7 February 2024

    One week on from Self-Assessment deadline

    by

    We are now a week on from the self-assessment filing deadline of 31 January and figures show that more than double the number of taxpayers failed…


    Read more >

    5 January 2024

    Cut to National Insurance from 6th January 2024

    by

    From Saturday 6 January, the average earner will be almost £450 a year better off according to the government.  However, the reality is that due to…


    Read more >

    YOUR CHALLENGES

    No matter what your challenge is, we’ve probably dealt with it before.



    Need an Accountant?

    Get in touch >


    Need an Accountant?

    Get in touch >


    Tax issues?

    Find out more >


    Tax issues?

    Find out more >


    Trying to grow your business?

    We can help >


    Trying to grow your business?

    We can help >


    Managing cashflow?

    We can help >


    Managing cashflow?

    We can help >


    Starting a business?

    We can help >


    Starting a business?

    We can help >


    Looking for funding?

    Need help with funding? >


    Looking for funding?

    Need help with funding? >


    Buying or selling a business?

    We can help >


    Buying or selling a business?

    We can help >


    Adopt the cloud?

    We can help >


    Adopt the cloud?

    We can help >


    What else can we do for you?

    We can help >


    What else can we do for you?

    We can help >
    CONTACT US

    Get in touch, no hard sell, just a brew, a biscuit and a chat.