United Kingdom / Guides / VAT late-submission penalty points, explained
United Kingdom · guideVAT late-submission penalty points, explained
The short answer
Since VAT accounting periods starting on or after 1 January 2023, HMRC has run late submission and late payment of VAT as two separate penalty regimes. Late submission works on a points system: one point per late VAT Return, with a threshold that depends on filing frequency — 5 points for monthly filers, 4 for quarterly filers, 2 for annual filers. Reaching the threshold triggers a fixed £200 penalty, and a further £200 for every subsequent late return while at the threshold, on top of the points already accrued. Late payment of VAT itself is charged separately, on a percentage of the tax outstanding rather than a points count.
Key facts — verified dates on each
Two regimes, not one
The VAT default surcharge that used to cover both a late return and late payment together was replaced, for VAT accounting periods starting on or after 1 January 2023, by two separate systems: a penalty points regime for late submission of VAT Returns, and a percentage-based penalty regime for late payment of the VAT owed. A business can be late submitting a return without owing any VAT for that period — a nil or repayment return still has to go in on time — and a submission penalty point can be triggered even when no payment penalty applies.
Because the two regimes run independently, a single late return can generate a submission penalty point and, if the payment is also late, a separate late payment penalty on its own timeline. "VAT penalty" is not one number; it is two different triggers with two different mechanics.
How the points system works
A VAT-registered business gets one penalty point for each VAT Return submitted after its deadline, whatever the reason for the delay. Points accumulate against the business, not against an individual return, and the threshold at which a fixed penalty is charged depends on how often the business is required to file — that is, its VAT accounting period, not how many returns happen to be late in a given calendar year.
The current thresholds are 5 points for a business that files monthly, 4 points for quarterly filers, and 2 points for annual filers. A monthly filer that has been late five times reaches its threshold well before an annual filer that has only had two annual returns to be late with in the first place — the thresholds are calibrated to filing frequency for that reason.
- Monthly VAT Returns — threshold is 5 points
- Quarterly VAT Returns — threshold is 4 points
- Annual VAT Returns — threshold is 2 points
What happens once the threshold is reached
Reaching the applicable points threshold triggers a fixed £200 penalty. Every further VAT Return submitted late while the business remains at the threshold also triggers its own separate £200 penalty — the fixed charge is not a one-off; it repeats for each late return until the points are cleared. The points themselves are not removed by paying the £200 penalty; the penalty and the points are two different consequences of the same late submission.
Below the threshold, a single late return simply adds one point with no monetary penalty attached, which is why the points system is often described as a warning mechanism that only starts costing money once a pattern of late filing has been established, rather than penalising a single isolated lapse.
How points expire
Points that never reach the threshold expire automatically. Each individual point lapses on the last day of the month, 24 months after the point was added if the missed deadline fell before the end of a month, or 25 months after if the missed deadline was itself the last day of a month. A business that has one or two late returns spread out over several years, without ever reaching its threshold, will simply see those old points drop off on their own timetable.
Once a business has reached its threshold, the points do not expire on that same rolling basis — they are instead cleared all at once by completing a defined "period of compliance." That period runs for 6 months (6 on-time monthly returns) for monthly filers, 12 months (4 on-time quarterly returns) for quarterly filers, and 24 months (2 on-time annual returns) for annual filers. Clearing the points at the threshold also requires that every VAT Return due in the preceding 24 months has actually been submitted — a business cannot complete the compliance period while an older return is still outstanding, even if that older return falls outside the compliance period itself.
- Below threshold — each point expires 24 (or 25) months after the missed deadline, automatically
- At threshold, monthly filer — 6 consecutive on-time monthly returns clears points to zero
- At threshold, quarterly filer — 4 consecutive on-time quarterly returns clears points to zero
- At threshold, annual filer — 2 consecutive on-time annual returns clears points to zero
- At threshold, any frequency — all returns due in the previous 24 months must also be filed
Late payment penalties: a different set of numbers entirely
Late payment of VAT is not measured in points at all. No penalty applies if the outstanding VAT is paid in full, or a Time to Pay arrangement is agreed with HMRC, within 15 days of the payment due date. If VAT is still unpaid after day 15, a first penalty applies at a percentage of the amount outstanding at that point; if it remains unpaid after day 30, a further percentage applies to what is still outstanding at day 30, on top of the day-15 charge. If VAT remains unpaid beyond day 30, a second penalty then accrues daily, calculated as an annualised percentage rate on the outstanding balance, for as long as the debt remains unpaid. Interest also runs separately on any VAT paid late, in addition to both penalties.
These late-payment percentage rates have changed since the regime started in January 2023, and HMRC's own guidance flags that the rates were increased for VAT payments due from a later date — a reminder that a percentage quoted from an older article, or from a source that has not specified which payment date it is describing, should not be relied on without checking the current official page.
Why this matters operationally
Because the two regimes are independent, one late return carries two separate risks: a submission penalty point that only becomes expensive once its filing-frequency threshold is crossed, and — if payment is also late — a payment penalty on its own day-15/day-30 schedule, unrelated to the points count. A business on time with payment but occasionally late filing the return will accumulate points without ever seeing a late-payment penalty, and the reverse is equally possible.
CapEasy serves accounting and compliance clients in the United States and Australia today. UK services, including VAT compliance support, are under consideration but not currently offered; this guide is provided for orientation only.
The figures, and when we checked them
These numbers change by year or by notification. Each one shows the date we last verified it against the source — if that date looks old, check the source before relying on it.
Questions on this
Do I get a penalty point for every late VAT Return, even the first one?
Yes. A penalty point is added for every VAT Return submitted after its deadline, including the first. Points only start costing money once the filing-frequency-specific threshold is reached — a single point below that threshold carries no fixed penalty on its own.
How many late returns before I get charged a fixed penalty?
It depends on filing frequency: 5 late monthly returns, 4 late quarterly returns, or 2 late annual returns reach the threshold. Reaching it triggers a £200 penalty, and each further late return at the threshold triggers another £200 charge.
Does paying the £200 penalty remove the points?
No. The £200 fixed penalty and the points are separate consequences of the same late return. Paying the penalty does not clear the points — points at the threshold are only cleared by completing the period of compliance.
How do I get my points back to zero once I have reached the threshold?
By submitting every return on time through a defined period of compliance — 6 consecutive monthly returns, 4 consecutive quarterly returns, or 2 consecutive annual returns, depending on filing frequency — and by having filed every VAT Return that was due in the preceding 24 months, including any older outstanding returns.
If I never reach the threshold, do my points ever disappear?
Yes. A point that never contributes to reaching the threshold expires automatically 24 months after the missed deadline, or 25 months after if the deadline itself fell on the last day of a month.
Is a late payment penalty the same as a penalty point?
No. Penalty points apply to late submission of the VAT Return itself. Late payment of the VAT owed is a separate regime charged as a percentage of the tax outstanding, with its own day-15 and day-30 milestones, and does not add to the points count.
What happens if I pay within 15 days of the due date?
No late payment penalty applies if the outstanding VAT is paid in full, or a Time to Pay arrangement is agreed with HMRC, within 15 days of the due date. A late submission penalty point can still apply separately if the return itself was filed late.
What is charged if VAT is still unpaid after 30 days?
A first penalty applies as a percentage of what was outstanding at day 15 plus a further percentage of what remains outstanding at day 30. From day 31, a second penalty then begins accruing daily, calculated as an annualised percentage rate on the remaining balance, until the VAT is paid.
Does a nil or repayment VAT Return still need to be filed on time?
Yes. A penalty point applies to a late VAT Return regardless of whether any VAT is owed for that period, because the points regime is triggered by the submission deadline, not by a payment being due.
Since when have these VAT penalty rules applied?
Both the points-based late submission regime and the percentage-based late payment regime apply to VAT accounting periods starting on or after 1 January 2023, replacing the previous VAT default surcharge. The late payment percentage rates have since been increased for payments due from a later date, so the current rate should always be checked against HMRC's current guidance rather than an older source.
Primary sources
- HMRC — Penalty points and penalties if you submit your VAT Return late
- HMRC — Remove penalty points you've received after submitting your VAT Return late
- HMRC — How late payment penalties work if you pay VAT late
Last reviewed 2026-08-14. Statutes and schedules change — the sources above are authoritative, this page is orientation.
Related
This page is information, not an offer of services. CapEasy serves the US and Australia today; UK services are under consideration.