There are new penalties for submitting VAT returns or paying VAT late, which came into effect on 1 January 2023.

The new penalties replace the default surcharge and now also apply to customers who submit nil or repayment returns.

To avoid penalties, you must submit your VAT returns on time using software that is compatible with Making Tax Digital (unless you are exempt from Making Tax Digital) and pay your VAT on time

The way we calculate interest on late VAT payments and repayments of VAT that we owe you has also changed for VAT periods starting on or after 1‌‌‌ ‌‌January 2023.

What will happen if you submit a VAT return late?

For VAT periods starting on or after 1‌‌‌ ‌‌January 2023, penalties for submitting VAT returns late will work on a points-based system. One penalty point will be given for each VAT return submitted late.

If you reach your points threshold, you will have to pay a fixed £200 penalty. You will also have to pay another £200 penalty, each time you submit your VAT return late while you are at the threshold. Your points threshold will depend on how often you need to submit a VAT return.

You can find more information on how late submission penalties work, the points threshold and how to avoid a penalty on GOV‌‌‌.UK. There’s also information on how to remove penalty points you’ve received after submitting your VAT return late.

What will happen if you do not pay your VAT on time?

If your payment is more than 15 days overdue, you will have to pay a first late payment penalty. If your payment is more than 30 days overdue, you will also have to pay a second late payment penalty.