Late Tax Payments: How to Avoid Penalties after Legislation Changes  

Late Tax Payments: How to Avoid Penalties after Legislation Changes  

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With the release of the draft legislation for the Finance Bill 2019, alterations to the penalty system for tax payment have been announced, including an inaugural penalty applying to corporation Tax. Late payments will also result in a penalty from HMRC for income tax, capital gains tax, and VAT.

While there has been no official date determined for these changes thus far, it is believed that the new system will be introduced gradually, beginning with VAT from 1st April 2020.

15 Day Late Payment Period

After the due date, there is a 15-day window whereby late-payers will avoid receiving the sanction. You can also arrange a ‘time to pay’ agreement with HMRC, which, if successful, means exemption from the penalty. 

30 Day Reduced Penalty

After 15 days, if you have not paid or proposed a time to pay agreement, 2.5% of tax outstanding (half of the full penalty) will be charged, as long as you do either of the aforementioned within the following 15 days.  

Paying in Full

After this period, the full penalty – 5% of tax outstanding – will be issued unless a time to pay agreement has been arranged. When receiving the penalty, you are able to appeal on the grounds of reasonable excuse – but this is only applicable for certain personal issues, technical issues, unpreventable delays and damages to your property. 


The Low Incomes Tax Reform Group (LITRG) have argued that a ‘familiarisation period’ should be introduced, or at least a single phase of 30 days for late payment as the different time periods can cause confusion, especially with this system commencing alongside Making Tax Digital. While this is a topic for debate, the reservations stem from the concern that genuine taxpayers attempting to pay on time could receive unfair charges due to honest mistakes. 

Latest Update 

  • Originally, no interest would have to be paid where there were other outstanding returns, however, VAT repayment will now accrue from the same date of submission for other outstanding returns. 


  • The effective date for Time to Pay agreements will be the date of contact with HMRC, as the initial proposal didn’t account for the time period required to finalise these agreements.  

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