Penalties for VAT return late submission and late VAT payment are changing from 1 January 2023 – are you prepared?

Insight /  14 November 2022

As of 1 January 2023, new penalties will replace the default surcharge for the late submission of VAT returns and the late payment of VAT. The way in which VAT interest is calculated is also set to change. Everyone who submits VAT returns will be affected.

This new point-based system is designed to be less harsh than the current system, which does not differentiate on the degree of lateness.

Key takeaways:

  • The new system is proportional and more sympathetic to occasional lateness, whilst still penalising repeat offenders.
  • A £200 late filing penalty is based on a totting up procedure – it’s important to note that nil returns and repayment returns now count in the totting up procedure (they didn’t before).
  • Initial 2% and 4% penalties for the first month, together with a 4% per annum penalty after 30 days late.
  • Interest charge at base plus 2.5% (this is new but follows suit with other taxes).
  • Repayment interest will be automatically awarded for repayment returns, calculated from the later of due date/filing date up to the point the repayment is made (base minus 1%).

HMRC have created a video ahead of the change which can be viewed here.


If you would like more information about this, or any other VAT related matter, please contact one of our dedicated VAT specialists:

Mark Hetherington
VAT Partner
T: 07715 704 739

Ian Coulthard
VAT Senior Manager
T: 0191 243 6017

VAT and Customs at UNW VAT and Customs