Understanding VAT Late Payment Interest

1 min read•Penalties

Understanding VAT Late Payment Interest

HMRC charges interest on late VAT payments to encourage timely payment and compensate for delayed revenue.

Interest Calculations

Current Rates

  • Base rate plus 2.5%
  • Applied daily
  • Calculated on outstanding amount

When Interest Applies

  • From payment due date
  • Until payment received
  • Including partial payments

Minimizing Interest Charges

  1. Set up payment reminders
  2. Maintain cash reserves
  3. Consider Time to Pay arrangements
  4. Keep accurate records