Your business may well be stretched right now, the NMW rates rose by over 10% from 1 April and other input costs have increased by even more, particularly food and energy. It is tempting to use the amounts deducted from your payroll to pay pressing bills, but that is not a good idea.
Where the payroll deductions are not paid over to HMRC on time – by 22nd of each month – late payment interest is charged at 7%.
In addition to the late payment interest, late payment penalties are charged as follows:
| Number of late payments in tax year | First penalty | Additional penalty after 6 months | Additional penalty after 12 months |
| 1 | none | 5% | 5% |
| 2–4 | 1% | 5% | 5% |
| 5–7 | 2% | 5% | 5% |
| 8–10 | 3% | 5% | 5% |
| 11 or more | 4% | 5% | 5% |
You won‘t receive a penalty if you are late with just one PAYE payment to HMRC in the tax year, as long as the amount due is paid within six months of the due date. But if you need to make monthly payments the penalties will soon mount up where the timing of the regular payments slip for even one day.
Where you are struggling to pay over your PAYE to HMRC on time, you should apply for a time to pay (TTP) agreement through your online business tax account on gov.uk. This can help you spread your PAYE debt over six months.
The TTP agreement will be granted automatically if the following conditions are met:
- All PAYE and CIS returns have been submitted;
- PAYE debt is less than £15,000;
- No other tax debts exist;
- The application is made within 35 days of the date the PAYE was due; and
- TTP plan will pay off the debt within six months.
If the above conditions can‘t be met you should contact HMRC on the payment support service: 0300 200 3825 to negotiate a TTP agreement.
