SolvedCH152425 | Penalties for Failure to Pay on Time: Rules for specific taxes: Pay As You Earn (PAYE) and National Insurance Contributions (NIC): Penalties: overview
From HM Revenue & Customs · Compliance Handbook
A person incurs different penalties for failing to pay amounts deducted on time depending on
whether they have monthly, quarterly or annual tax periods, and
the length of time the payment is outstanding.
| Time that tax is outstanding | Type of penalty | Monthly or quarterly tax periods | Annual tax periods |
|---|---|---|---|
| Unpaid at penalty date | Initial penalty | 5% of tax unpaid at due date | |
| Unpaid at penalty date | Default penalty | Rate varies depending on the number of defaults | |
| Unpaid 5 months after the penalty date | Further penalty | 5% of tax unpaid at 5 months | |
| Unpaid 6 months after the penalty date | Further penalty | 5% of tax unpaid at 6 months | |
| Unpaid 11 months after the penalty date | Further penalty | 5% of tax unpaid at 11 months | |
| Unpaid 12 months after the penalty date | Further penalty | 5% of tax unpaid at 12 months |
A person is treated as having paid the full amount of tax on time if the difference between the amount paid by the due date and the tax due is £100 or less. This person would not be liable to a penalty for failing to pay on time.
Note that late payment penalties for failing to make monthly and quarterly PAYE and NIC payments and student loan deductions by the due date are calculated using the same method as the late payment penalties for CIS payments, see CH153200.
Also note that PAYE, NIC, SL and CIS are treated as the same tax when calculating the default penalties for failing to pay on time. This means that where a person is liable to make PAYE, NIC, SL payments and also CIS payments, then a failure to pay one or more elements of the combined amount by the due date counts as one failure. The late payment penalty for a default is calculated on the combined amount of PAYE, NIC, SL and CIS in the default. See CH152700 for an example.