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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Penalties for Failure to Pay on Time: Rules for specific taxes: Pay As You Earn (PAYE) and National Insurance Contributions (NIC): Penalties: annual payment obligations - overview

Where the employer has an annual payment obligation, the total penalties for a tax year consist of

  • an initial penalty of 5% for tax unpaid at the penalty date, see CH152800, and
  • two further penalties of 5% each for tax unpaid at 5 and 11 months, after the penalty date, see CH152850.

So a continuing failure to pay can incur all of these penalties on the same unpaid tax.

Note that this applies to those employers who have an annual obligation to pay Class 1A/1B NIC and PAYE Settlement Agreements. It also applies to Regulation 80 and Section 8 NIC decisions. It does not apply to those who have monthly tax periods but choose to make one annual payment.

It is important to distinguish between

  • the due date - the date when the employer needs to pay the tax, see CH152200, and
  • the penalty date - which is 31 days after the due date and the date on which a penalty is chargeable for a tax period.

If the employer fails to make payment by the due date, they will be liable to a penalty on any amount that remains unpaid on the penalty date.