In times of global uncertainty, worry about the economy and the nation’s public finances, there was only one (not very exciting) mention of VAT hidden among the details of the Chancellor’s Spring Statement. The measure appears to be a strengthening of previous pledges to crack down on unpaid tax liabilities.
Penalties for the late payment of VAT will be increased from April 2025 onwards. The new rates will also apply to income tax Self-Assessment taxpayers as they join MTD from April 2025.
The new penalty rates will be 3% of the tax outstanding where it is overdue by more than 15 days, plus 3% where it is overdue by more than 30 days, plus 10% per annum where tax is overdue by 31 days or more. There will still be no penalty for payments that are up to 15 days late.
In comparison, the current rates are 2% for payments that are between 16 and 30 days late, plus 2% for payments that are more than 31 days late and an additional 2% penalty calculated based on the amount outstanding at day 30 (i.e. a total of 4% if nothing has been pad. From day 31) and there is also a second penalty calculated at a daily rate of 4% per annum for the duration of the outstanding balance.
In addition to the penalty, interest on overdue tax is and will continue to be charged from the due date, at the bank of England base rate plus 2.5%.
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