PAYE Penalties – The Grace Period is Up

SMEs Payments

In April 2013 HM Revenue and Customs (HMRC) introduced Real Time Information (RTI), where employers are expected to report PAYE information on or before the date payment is made, and report any changes as soon as they occur. Failure to provide this information results in penalties against the employer. However, in order to get companies with fewer than 50 employees comfortable with the scheme, a year’s grace period was given. This grace period has been extended for two years for employers with nine or fewer employees, but for all other employers the respite has ended and the penalties will be introduced from 5 April 2014. HMRC want all employers to report PAYE information in real time. To ensure companies are given the best opportunity to adapt to the scheme, the level of penalty applied to an employer will be staggered throughout 2014/ 2015 and 2015/ 2016 tax years. As of April 2014 Interest Penalties will begin, but only on late PAYE amounts. The penalty applied will be a percentage of the missed or late payment.

From October 2014, Late Filing Penalties will be applied on top of the Interest Penalty for late payments. Then, from April 2015, Late Payment Penalties will be applied on top of the Late Filing and Interest Penalties. This charge will be based on the number of late payments made in the tax year. It is important to note that if only one PAYE amount is late in a tax year, unless that payment is over 6 months late, no charge will be applied. However, if you miss two or three PAYE payments, once all three charges have been applied, the penalty is going to be significant.
The tables below outline the two late penalty charges.

Late Filing Penalties

Number of missed employee payments Monthly filing penalty per missed payment
1-9 £100
10-49 £200
50-249 £300
250 or more £400

Late Payment Penalties

Number of late payments in tax year Penalty percentage
1-3 1%
4-6 2%
7-9 3%
10 or more 4%