Use this guide if you're an employer to find out about late payment penalties and how to avoid them in the future.
What penalties are charged
HM Revenue and Customs (HMRC) charge late payment penalties on PAYE amounts that aren’t paid in full and on time.
- monthly, quarterly or annual PAYE
- student loan deductions
- Construction Industry Scheme (CIS) deductions
- Class 1 National Insurance contributions (NICs)
- annual payments of employers’ Class 1A and Class 1B NICs
- determinations made by HMRC where it appears that there may be further tax payable
- decisions, for example about a person’s liability to pay NICs and the amount payable
How much you pay
Late monthly and quarterly PAYE payments
The first failure to pay on time doesn’t count as a default.
|Number of defaults in a tax year||Penalty percentage applied to the amount that is late in the relevant tax month (ignoring the first late payment in the tax year)|
|1 to 3||1%|
|4 to 6||2%|
|7 to 9||3%|
|10 or more||4%|
Daily interest will continue to build up on all unpaid amounts from the due and payable date to the date of payment.
You’ll be charged a late payment penalty if you pay less than is actually due.
If you still haven’t paid a monthly or quarterly payment in full after 6 months, you’ll be charged an additional penalty of 5% of the amounts unpaid.
A further penalty of 5% will be charged if you haven’t paid after 12 months.
These additional penalties apply even where only one payment in the tax year is late.
End of year adjustments
If you pay an adjustment after the end of the year under a special arrangement you won’t be charged late payment penalties, as long as you keep to the terms of the arrangement.
Examples of these are the ‘Intermediaries’ rules (often referred to as IR35) or a formal modified PAYE arrangement known as ‘Employment Procedures Appendix 6’.
Amounts due annually or occasionally
You may have to pay a penalty if you haven’t paid the full amount by the date known as the ‘penalty date’.
For payments such as Class 1A and Class 1B NICs, HMRC determinations and assessments, amendments or corrections to returns the ‘penalty date’ is 30 days after the due date. For these payments you may have to pay:
- a 5% penalty if you haven’t paid the full amount within 30 days of the due date
- an additional 5% penalty if you haven’t paid the full amount within 6 months of the due date
- a further 5% penalty if you haven’t paid the full amount within 12 months of the due date
In most other cases, the penalty date is the day after the due date.
If you get a penalty
A notice will include what you owe, how to pay and what to do if you don’t agree with HMRC’s decision to charge you.
You can appeal online against the late payment penalties for tax year 2015 to 2016 onwards.
In some cases, HMRC will accept and settle the appeal automatically.
These are some of the reasons you can give as grounds for appeal:
- data on the returns was incorrect
- death or bereavement
- fire or flood or natural disaster
- ill health
- information technology difficulty
- no longer have any employees
- no payments to employees
- paid on time
- theft or crime
- time to pay arrangement in place
You can also send your appeal in writing to:
DM PAYE Late Payment Penalties
HM Revenue and Customs
The Notice of Penalty Assessment will contain a ‘Unique ID’ for each penalty shown on the notice.
You must include the Unique ID to identify which penalty you wish to appeal against.