VAT penalties: points for the return, percentages for the payment

Checked 18 July 2026 · How we check our figures

What it is

Since the FA 2021 reform, VAT runs two separate penalty machines: late returns collect points, with 200 pounds falling due at a threshold, while late payment is priced in percentage steps by how many days the money is late. Traders tend to file the outcome of either machine as a VAT fine. The two do not talk to each other: a return filed on time with the payment late feeds one machine, a payment on time with the return late feeds the other, and the points machine does not care whether the return showed anything to pay (gov.uk, checked 2026-07-18).

Reading the notice

The points machine: 1 point per late return; the threshold is 2 points for annual returns, 4 for quarterly, 5 for monthly; at the threshold 200 pounds falls due, and every further late return while at it costs another 200 with no new points (gov.uk, checked 2026-07-18).

The payment machine: nothing where payment or a Time to Pay request lands within 15 days of the due date; a first percentage from day 16; more at day 31, plus an annualised daily rate from then on; the percentages were raised for periods from spring 2025 and the dated figures live in the calculator at /fines/vat-penalties (gov.uk).

The expiry rule below the threshold: a single point dies at the end of the month, 24 or 25 months after it arose depending on where the original deadline fell (gov.uk).

The decision in front of you

File the return even where the payment must wait: the points machine stops at filing, whatever the return shows, nil and repayment returns included (gov.uk).

Pay in full or ask HMRC for Time to Pay within the first 15 days: the first percentage then never lands, and the arrangement protects only while it is kept (gov.uk).

At the threshold, work the double reset: a full compliance window of on-time returns, 24 months for annual, 12 for quarterly, 6 for monthly, and every return of the previous 24 months submitted; only both together clear the points (gov.uk).

Do nothing and both machines run: points climb toward the 200s, the payment steps fire at day 16 and day 31 with the daily rate beyond, and interest runs underneath it all from day one, the hmrc interest guide's territory (gov.uk).

What happens next

At or above the threshold the individual expiry stops: points no longer die one by one, and only the double reset removes them (gov.uk).

A reasonable excuse can be argued against a point or a penalty within 30 days of the decision, point by point (gov.uk).

The same points blueprint is rolling out to Self Assessment with Making Tax Digital: the self assessment penalties guide covers that side of the border.

The numbers

Thresholds: 2 points annual, 4 quarterly, 5 monthly; 200 pounds at the threshold and 200 for each further late return while at it (gov.uk, checked 2026-07-18).

Point expiry below the threshold: end of the month, 24 or 25 months on, by where the original deadline fell (gov.uk).

The payment percentages and the daily rate, dated: the calculator at /fines/vat-penalties.

The deadlines

Return and payment are usually due 1 month and 7 days after the period's end (gov.uk).

The payment cliffs sit at day 15 and day 30: what happens by then decides which percentages ever exist (gov.uk).

Compliance windows for the reset: 24, 12 or 6 months of on-time returns by return cycle, plus everything from the previous 24 months submitted (gov.uk).

What people get wrong

Treating a point like a fine: the point itself costs nothing, the threshold costs 200 pounds, and from there every late return costs 200 more (gov.uk).

Waiting at the threshold for points to age away: they stop expiring individually once the threshold is reached, and only the double reset clears them (gov.uk).

Missing the day 15 door: a Time to Pay request made inside the window holds the first percentage off entirely, one made on day 20 does not undo what day 16 started (gov.uk).

Authority

FA 2021 penalty reform (late submission and late payment); gov.uk, VAT penalties and interest harmonisation