VAT late payment penalty and interest calculator
Pay a VAT bill late and HMRC adds two things on top of the tax: a late payment penalty and late payment interest. The penalty depends on how many days late you are, with a short grace period at the start, while the interest runs from the very first day overdue. The rates went up in 2025, so older guidance can leave you short. This page sets out how the charges work in 2026 and gives you a free calculator to estimate what you owe in a few seconds.
Grace before a penalty
15 days
First penalty
3% + 3%
Second penalty
10% a year
Interest rate now
7.75%
Enter what you owe and the two key dates below. The calculator estimates the first penalty, the second penalty and the interest, and adds them to your VAT to show the total. It uses the current HMRC rules for VAT periods that started on or after 1 January 2023.
Free calculator
Estimate your VAT penalty and interest
Fill in the amount and dates. The figures update as you type.
The deadline shown on your VAT return.
The day the money reaches HMRC.
HMRC rate, base rate plus 4%, currently 7.75%.
Enter an amount and both dates to see your estimate.
This is an estimate for guidance, not tax advice or a formal HMRC calculation. It assumes the full amount stays unpaid until the date you pay.
How VAT late payment penalties work
There are two separate late payment penalties, and which ones apply comes down to how many days past the due date you settle the bill. The clock starts the day after your payment deadline.
| How late the payment is | What HMRC charges |
|---|---|
| Up to 15 days | No late payment penalty, as long as you pay in full or agree a payment plan by day 15. Interest still runs from day one |
| 16 to 30 days | A first penalty of 3% of the VAT that was unpaid at day 15 |
| 31 days or more | The 3% from day 15, plus a further 3% of what is still unpaid at day 30, and the second penalty starts to build |
So if the whole bill is still outstanding after 30 days, the first penalty works out at 6% of the VAT, made up of 3% measured at day 15 and 3% measured at day 30. On top of that, the second penalty is charged at 10% a year on the balance you still owe, added daily from day 31 until you clear it. The longer the money is outstanding, the more the second penalty grows.
How the interest works
Late payment interest is separate from the penalties and it is simpler. HMRC charges it from the first day your payment is overdue until the day it is paid in full, so it applies even inside the 15 day grace period where no penalty is due. The rate is the Bank of England base rate plus 4%, a margin that rose from 2.5% in April 2025. With the base rate at its current level, the late payment interest rate is 7.75%, in force from 9 January 2026. If HMRC changes the rate, you can type the new figure into the calculator above.
A worked example
Say you owe £10,000 of VAT and you pay 45 days after the due date, with the whole amount outstanding the entire time. Here is how the charges stack up.
- First penalty, £600. 3% of £10,000 at day 15 is £300, and another 3% at day 30 is £300.
- Second penalty, about £41. 10% a year on £10,000 for the 15 days from day 31 to day 45.
- Interest, about £96. 7.75% a year on £10,000 for the full 45 days you were late.
That comes to roughly £737 in extra charges, turning a £10,000 bill into about £10,737. The calculator does this maths for you and updates the moment you change a figure.
How to avoid or reduce the charges
The cheapest bill is the one paid on time, but if money is tight there are still ways to keep the cost down.
- Pay within 15 days. Settle inside the grace period and you dodge the penalty entirely. Interest still applies, but it is small over a short window.
- Set up a Time to Pay arrangement. If you cannot pay in full, propose a payment plan to HMRC. Doing this by day 15 can keep the first penalty away, and once a plan is agreed the second penalty stops building, as long as you keep to it.
- Get the figure right first. Work out the VAT you owe to the penny with our VAT calculator, so a maths slip does not leave part of the bill unpaid without you noticing.
- File and pay together. Filing your return through Making Tax Digital and paying at the same time removes the gap where a deadline can slip past.
Late returns are penalised separately
It is easy to mix these up, so it helps to keep them apart. The penalties above are for paying late. Filing your VAT return late is a different system, based on points. You get a point each time a return is late, and once you reach the threshold for how often you file, HMRC charges a fixed £200 penalty, then a further £200 for each late return after that. You can be charged under both systems at once if a return is both filed late and paid late, which is another reason to keep the two deadlines in view. Our guide on how to do a VAT return covers the filing side.
Want the wider picture on rates and deadlines? Our current VAT rate page lists the standard, reduced and zero rates, and the VAT for sole traders and freelancers guide walks through when smaller businesses have to register and file.
Frequently asked questions
Nothing for the first 15 days if you pay or agree a plan in time. Pay between 16 and 30 days late and the first penalty is 3% of the VAT unpaid at day 15. Pay after 30 days and it becomes 3% at day 15 plus another 3% at day 30, and a second penalty of 10% a year starts building daily from day 31.
Yes. Late payment interest is charged on top of the penalties, from the first day your payment is overdue until the day it is paid in full. It applies even in the 15 day grace period where no penalty is due.
The rate is the Bank of England base rate plus 4%, which currently works out at 7.75%, in force from 9 January 2026. The margin over the base rate rose from 2.5% to 4% in April 2025, so the interest cost of paying late is higher than it used to be.
There is a 15 day grace period for the penalty only. Pay in full, or agree a Time to Pay arrangement, by day 15 and no late payment penalty is charged. Interest is not part of the grace period and runs from the first day the payment is overdue.
A Time to Pay arrangement can help. If you propose one by day 15 and HMRC agrees it, you can avoid the first penalty. Once any plan is agreed, the second penalty stops building, provided you keep to the terms. Interest still runs on the balance until the VAT is paid in full.
No. Filing a return late uses a separate points system. You collect a point per late return, and at the threshold for your filing frequency HMRC charges a £200 penalty, then £200 for each further late return. That is different from the late payment penalties, and both can apply to the same period.
They apply to VAT accounting periods that started on or after 1 January 2023, which covers every current return. The penalty amounts increased in 2025, so the figures on this page are the ones in force for 2026.
Figures and rules checked against gov.uk and HMRC guidance on VAT late payment penalties and interest, current for 2026. The late payment interest rate of 7.75% applies from 9 January 2026 and changes with the Bank of England base rate. This page is general information, not tax advice. Confirm your own position with HMRC or an accountant.