For accounting periods starting on or after 1 January 2023 there are two separate penalties, and keeping them apart is the key to the whole regime: one for submitting the return late, one for paying late. You can be caught by either on its own. The late-submission penalty is not a fine per return at all, it is a points system, which makes a single slip much cheaper than it used to be and a habit much more expensive.
Late returns earn points, not fines
Each VAT return you send late earns a penalty point, and that includes nil returns where you have nothing to declare. Nothing is charged until you reach the points threshold, which is set by your accounting period, whether you file monthly, quarterly or annually. At the threshold you get a £200 penalty, and a further £200 for each subsequent late submission while you remain at it. The points are visible in your VAT online account, and submitting future returns on time removes them.
Late payment is charged separately, and interest runs from day one
A late payment penalty can apply to the VAT on your return, on an amendment or correction, or on an assessment HMRC issued. How much depends on how late you are: the amount goes up after 16 days and again after 31 days. Separately from any penalty, late payment interest is charged from the first day the payment is overdue until it is paid in full, and that applies even if you are paying in instalments. Paying part of the bill on time reduces both.
The older surcharge regime, and the paper-return penalty
For accounting periods starting on or before 31 December 2022 the old default surcharge applies instead: a default puts you in a twelve-month surcharge period and a further default within it can bring a surcharge calculated as a percentage of the outstanding VAT. It still surfaces on old periods. Separately and often forgotten: HMRC can charge a penalty of up to £400 for sending a paper VAT return when you are not exempt from Making Tax Digital.
Questions people ask about vat penalties
How much is a VAT penalty for a late return?
Nothing for the first late returns; each earns a penalty point. At the points threshold, which depends on your filing frequency, the penalty is £200, with a further £200 for each later late submission while you stay at the threshold.
Is there a penalty for a late nil return?
Yes. A nil return is still a return and a late one still earns a penalty point.
Does interest apply as well as a late payment penalty?
Yes. Late payment interest runs from the first day the payment is overdue until it is paid in full, separately from any penalty, and it applies while you are paying in instalments.