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Month: May 2025

Time To Pay? New VAT Late Payment Penalties

Written by admin on . Posted in Insolvency, Time To Pay Arrangements, Winding Up Petitions. No Comments on Time To Pay? New VAT Late Payment Penalties

It is now more expensive to be late when it comes to making a VAT payment. The slowest payers now face a 250% increase to an annualised rate. In addition, the rate of late payment interest has also increased.

Late payment penalties

Payment for each VAT return is considered separately, and penalties can be avoided if a payment is made within 15 days of the due date. Keep in mind:

  • An initial 3% penalty is charged if payment is made more than 15 days late (previously 2%).
  • If more than 30 days late, a further 3% penalty is charged – so, a 6% penalty in total (previously 4%).

Furthermore, a daily penalty at an annualised rate of 10% is charged immediately after the initial 30-day period (previously 4%).

Late payment interest

Interest is charged from the due date until the date VAT is paid. This means that interest can be due even when no penalty has been incurred, because of the requirement to pay within 15 days. From 6 April 2025, HMRC has added a further 1.5% surcharge to the late payment interest rate, so it now stands at 8.5%.

With the bank base rate currently at 4.5%, the daily penalty rate of 10% and the late payment interest rate of 8.5% are somewhat punitive.

Preventative measures

Simply burying your head in the sand over an overdue VAT liability will just see the debt spiral as penalties and interest are added on.

Setting up a time to pay arrangement will avoid penalties being charged. However, such an arrangement will not retrospectively remove any penalties already incurred, and late payment interest will still be charged. An arrangement cannot be set up by those using either the cash accounting or annual accounting schemes.

If some funds are available, it is better to make a payment on account by the due date, leaving only the balance to be paid late. This will avoid late payment interest as well as (if no arrangement is in place) penalties on the amount paid on time.

Details about setting up a payment plan can be found here.

Photo by Justus Menke on Unsplash

Paying the high income child benefit charge

Written by admin on . Posted in Employment Tax, High Income Child Benefit Charge, self-assessment. No Comments on Paying the high income child benefit charge

From this summer, employed taxpayers who have to pay the high income child benefit charge (HICBC) will no longer need to complete a self assessment tax return. Instead, they can report the charge using HMRC’s new online service.

When the HICBC is payable

The HICBC only comes into play when an individual – or their partner – receives child benefit and their annual income exceeds £60,000. This means:

  • The charge removes 1% of child benefit for every £200 of income over £60,000.
  • Once income reaches £80,000 the charge is 100%, so the amount of child benefit is essentially reduced to nil.

For those with several children, the HICBC can result in a high effective marginal tax rate.

For 2025/26, child benefit of £26.05 a week is paid for a first child, with £17.25 a week paid for each subsequent child.

New online service

 Employed taxpayers will be able to use HMRC’s new digital service to report the amount of child benefit received. This will give them the option of paying the HICBC through PAYE:

  • Unless the taxpayer has any other income or chargeable gains, there will be no need to submit a tax return following the end of the tax year.
  • Taxpayers who are required to file a tax return for another reason will still need to report the HICBC on their return.
  • Anyone who has previously submitted a tax return needs to be careful because HMRC will continue to issue a notice to make a return. Penalties will be incurred if the notice is ignored.

It remains to be seen whether the new online service will alleviate the problems associated with the HICBC. One of the main issues continues to be a lack of awareness, despite the charge being in place for more than ten years. Also, most employed taxpayers are not used to dealing with HMRC.

Photo by Markus Spiske on Unsplash