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What Happens if Your VAT Return Is Late?

4 minute read

Whether you’re self-employed or a small business owner, it’s your responsibility to make sure all your tax returns are submitted accurately and on time. With deadlines and new schemes coming into play, you may be thinking... 


‘What Happens If My VAT Return Is Late?’ 

If you don’t submit your VAT return to HMRC on time, you’re not just liable for a late payment penalty. You’ll also have to pay interest on that too until you pay it. However, depending on your previous VAT payment history, you could receive a Surcharge Liability Notice (SLN) instead.




Surcharges and Penalties

HMRC issue a ‘default’ if:


  • They don’t receive your accurate VAT return by the deadline. You can learn more about the due date of VAT Returns in the UK here. 
  • Full payment for the VAT due hasn’t reached their account by that deadline.


This table shows how much they’ll charge you default within that surcharge period.

Amount of late payments

Surcharge amount if annual turnover below £150,000

Surcharge amount if annual turnover above £150,000


No penalty

No penalty


No penalty (SLN)

2% if more than £400


2% if more than £400

2% if more than £400


5% if more than £400

10% or £30 (whichever is greater) 


10% or £30 (whichever is greater) 

15% or £30 (whichever is greater) 

Sixth and subsequent

15% or £30 (whichever is greater) 

15% or £30 (whichever is greater) 


In addition to a late payment penalty, HMRC also charges daily interest on the late payment by applying a daily rate of 2.75%.


First Default

HMRC aren’t all bad and will extend some understanding when it comes to late payments, especially if this is your first late VAT payment within 12 months. Instead, they’ll send a reminder letter detailing the amount that’s overdue, giving you a nudge to bring your account up to date. 


In terms of penalties for late VAT payments, if your business’ turnover exceeds £150,000, you only get one ‘grace’ period where no surcharges will be attached. However, a company with a smaller turnover is first offered help before getting to that stage. Their intention is to support small businesses during their early stage of growth.


Second Default

An SLN is issued to companies with a turnover below £150,000 after their second VAT default. This letter will notify you that they have placed you in what is known as a ‘surcharge period’ and you’ll remain in there for the next 12 months.  


If you miss another deadline within that time, you can expect to accumulate fines (depending on your company’s turnover) and additionally, they might extend the surcharge period.


 The surcharge amount directly relates to the VAT remaining outstanding during that accounting period. It’s also affected by the level of your company’s annual turnover as featured in the table.


How Can I Prevent Late VAT Returns? 

There are always reasons behind a missed or late VAT payment and you must get to the root of what is causing it. Were the errors careless and non-deliberate? Or were they deliberate with intent to conceal?


  • Thoughtless errors may result in a penalty of 30% potential lost revenue. 
  • Deliberate errors increase to 70%.
  • Deliberate and intent to conceal could incur a 100% penalty.


You’ll be aware of MTD and how it aims to make it easier for businesses to submit taxes. If you haven’t already, you should invest in MTD-compatible accounting software, so when it's time to file to HMRC, you can do so directly from within the app.


Not only is this more efficient, but it significantly decreases the chances of errors. Also, because all your records are digital it’s easier to submit VAT returns on time without the hassle. 


However, if you still prefer having complete control over your VAT filing on your usual and familiar platform, you can use our helpful resource.


Use Our VAT Return Template to Prevent Late Submissions

We know it can be easier to continue doing VAT returns in a way with which you are familiar. That’s why we designed our VAT return templates to be used on spreadsheets. You can download our simple to use template and keep track with ease, you’ll also have a complete overview of the numbers.


It’s user-friendly and completely free to download.  

Download our latest resource

VAT return template

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Download your free VAT template to help you calculate your VAT with accuracy.
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