HMRC Imposed Nearly 600,000 Fines on UK Businesses for Late VAT Payments
satindersohal, 20 April 2026
satindersohal, 20 April 2026
582,000 fines were levied on businesses for the late payment of VAT last year*, up from 569,000 over the previous 12 months, according to HM Revenue & Customs data obtained for our research.
The data from HMRC shows that businesses were hit with late payment penalties last year worth £302 million, up from £294 million in the previous year.
Our VAT partner Jaspal Dhillon said that the increase in the number of fines being issued by HMRC for late payment of the tax shows how businesses are struggling under growing costs, regulatory burdens and an uncertain economic environment.
He pointed out that another factor was the introduction of a new VAT late payment penalties system in 2023. Under this system companies face more regular fines. They get a penalty equal to 3% of the outstanding VAT after 16 days overdue, then a further penalty worth 3% at 31 days.
Jas said that businesses feeling financial pressure and unable to pay their VAT bill must go to HMRC and negotiate a Time To Pay Arrangement (TTPA) with them as soon as possible, in order to give them breathing space.
“If you’re a struggling business, the first thing you need to do is make sure your returns are filed on time and that you have requested a Time To Pay Arrangement from HMRC, as it can be the difference between survival and failure” he said.
Jas added that with HMRC investing £629 million in improving its debt management and recovery capabilities, businesses cannot afford to dither over their VAT debts: “Ultimately, HMRC will be much tougher with businesses that hide their head in the sand and ignore their overdue tax bills.”
He explains that one of the reasons why HMRC has been so liberal with fines for late paid VAT is because it is determined to reduce the mountain of overdue tax debt that its owed. According to HMRC, overdue tax debts owed to it amounted to £42.8 billion for the 2024/25 financial year. It has only agreed, with taxpayers, to reschedule £5.7 billion of that debt.
As HMRC continues to step up its enforcement and debt recovery activity, early professional advice can help businesses protect cash flow, avoid unnecessary penalties and prevent VAT debts from escalating into enforcement action.
Lubbock Fine advises UK businesses on managing VAT liabilities, responding to late payment penalties and negotiating with HMRC where financial pressure makes payment difficult. Get in touch with our VAT partner, Jaspal Dhillon, for a confidential conversation.
