Late Payment Penalties for PAYE

May 2010

From 6th April 2010, penalties will be charged to employers for late payment of tax and National Insurance paid under PAYE.

The first time the employer defaults, there will not be penalty, but you will receive an automatically generated warning letter. Each subsequent late payment is charged a penalty that increases on a scale that depends on the number of late payments made during the year and the actual delay incurred. The penalty is calculated as a percentage of the tax due.

The following table shows the penalty charges:

Number of times in year payments are late during a tax year	Percentage Penalty
First late payment	0%
2nd, 3rd and 4th late payment	1%
5th, 6th and 7th late payment	2%
8th, 9th and 10th late payment	3%
11th and subsequent late payment	4%

If the tax remains outstanding for more than six months, an additional penalty of 5% is due.

These penalties can be appealed on the grounds of a “reasonable excuse”, as long as HM Revenue & Customs (HMRC) accept the circumstances. There is no clear guidance regarding what HMRC will accept as a reasonable excuse, but it would have to involve an unusual or unexpected event that could not be prevented. Lack of funds is not enough reason to not make the payment.

If you think you might have difficulty making the payment of PAYE, you can contact HMRC’s Business Payment Support Service to request additional time to pay. If this has been agreed, no penalties will be due for late payments made under this arrangement.