In an attempt to encourage prompt payment of taxes and enhance the consequences of late payment, HMRC have introduced a new penalty structure, but only for certain taxpayers initially.
The government will increase late payment penalties imposed by schedule 26 to the Finance Act 2021 on unpaid tax liabilities for VAT and Making Tax Digital for Income Tax Self Assessment taxpayers. It includes increases in penalties from:
- 2 percentage points to 3 percentage points at 15 days
- 2 percentage points to 3 percentage points at 30 days
- 4 percentage points to 10 percentage points per annum from day 31
These changes will take effect from 1 April 2025 for taxpayers who the new penalty regime in schedule 26 already applies to. At the moment this only includes VAT taxpayers and volunteers testing the Making Tax Digital system.
HMRC have stated that the changes will also apply in the future to any tax regime that enters schedule 26, which in plain english means, we will eventually see the same rules applied to late PAYE payments. Watch this space!