MTD VAT Return Deadlines and Penalty Points System
From January 2023, HMRC introduced a new points-based penalty system for late VAT returns[1], replacing the previous default surcharge regime. This article explains the deadlines for VAT return submission, how the penalty points system works, and the separate rules for late payment interest.
VAT Return Deadlines
According to HMRC's guidance on VAT return deadlines, most VAT-registered businesses submit returns quarterly. However, some businesses submit monthly or annually. The deadlines are as follows:
- Quarterly returns – The VAT return and any payment due must reach HMRC by one calendar month and seven days after the end of the VAT period[2]. For example, if your VAT quarter ends on 31 March, your return and payment are due by 7 May.
- Monthly returns – The same one-month-and-seven-days deadline applies. A return for January would be due by 7 March.
- Annual returns – Businesses on the Annual Accounting Scheme submit one return per year. The return is due two months after the end of the VAT period[3].
If the deadline falls on a weekend or bank holiday, HMRC must receive the return and payment by the last working day before the deadline if paying by post, or by the deadline date itself if paying electronically (which effectively extends the deadline to the next working day for electronic payments).
The Points-Based Late Submission Penalty
Under the new penalty system, each late VAT return adds one penalty point to your account. When you reach the penalty points threshold, you receive a £200 penalty[4]. The thresholds depend on your submission frequency:
- Annual returns: 2 points
- Quarterly returns: 4 points
- Monthly returns: 5 points[5]
Once you have reached the threshold, every subsequent late return also triggers a £200 penalty[4] until you bring your compliance up to date.
Resetting Your Penalty Points
Your penalty points can be reset to zero if you meet two conditions, as described in HMRC's late submission penalties guidance:
- You submit all outstanding returns.
- You submit all returns on time for a set compliance period. The compliance period depends on your submission frequency: 24 months for annual returns, 12 months for quarterly returns, and 6 months for monthly returns[6].
Points below the threshold also expire automatically after a period of compliant behaviour: 24 months for annual filers, 12 months for quarterly filers, and 6 months for monthly filers.
Late Payment Penalties
Separate from late submission penalties, there are penalties for paying VAT late. These work as follows:
- Up to 15 days late: No penalty, provided you pay in full or agree a payment plan with HMRC.
- 16 to 30 days late: A first penalty is calculated at 2% of the VAT owed at day 15.
- 31 days or more late: The first penalty increases to 2% of the VAT owed at day 15 plus 2% of the VAT owed at day 30. An additional daily penalty accrues at an annual rate of 4% on the outstanding balance from day 31 until payment is made.[7]
Late Payment Interest
In addition to penalties, HMRC charges late payment interest from the date the payment was due until the date it is received. The late payment interest rate is set at the Bank of England base rate plus 2.5%[8]. This interest applies from the first day after the payment deadline, regardless of whether a penalty has been triggered.
Repayment Interest
If HMRC owes you a VAT repayment and it is late, you are entitled to repayment interest at the Bank of England base rate minus 1%, with a minimum rate of 0.5%[9]. Repayment interest starts from the later of the due date or the date you submitted your return.
How to Stay Compliant
The best way to avoid penalties is to submit your VAT return and pay any VAT owed on time. Using a regular bookkeeping routine with your DIY Accounting spreadsheet and submitting through the free service at submit.diyaccounting.co.uk makes it straightforward to meet your deadlines every period.
Article generated by Claude Code for DIY Accounting, February 2026. All information sourced from GOV.UK and HMRC guidance linked inline.
Tax reference: VAT penalties and deadlines – Sources: GOV.UK: Penalties for late submission, GOV.UK: VAT return deadlines (applicable tax year 2025/26)
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