From the tax year 2010/11 HMRC are introducing penalties for all employers and contractors who do not pay PAYE on time. This means it will affect in-year payments due from May 2010 onwards and class 1A NICs payments due in July 2011.
PAYE payments include:
- Income tax deducted from employees’ earnings
- Class 1, Class 1A and 1B National Insurance contributions (NICs)
- Deductions made under the Construction Industry Scheme (CIS)
- Student loan amounts deducted from earnings
Employers with over 250 employees
These new penalties will replace the current Mandatory Electronic Payment surcharges which apply to employers with over 250 employees. The percentages that will be used to calculate the penalty will be different to those used to calculate the surcharge and will apply to the amount late each month, rather than the total tax due on the P35.
PAYE payments for tax years before 2010/11
The new rules will not apply to any payments that you should have made before 20 or 23 April 2010 (or before July 2011 for Class 1A NICs).
Payment dates
The PAYE payment dates are not changing.
Penalty calculation
The table below shows how the penalties will be calculated:
Any payment that has not been paid after six months may incur a 5% penalty and a further penalty of 5% if it is still not paid after 12 months.
Class 1A and 1B NICs
A penalty of 5% of the amount that is late may be charged if it is not paid in full within 30 days of the day it is due.
A further penalty of 5% of any amount that is late may be charged if it is still not paid six months after the due date, and a further penalty of 5% if it is still not paid 12 months after the due date.
Payments arriving just a day or two late
Even if your payments are just a little bit late penalties may still be charged.
When penalties will not be payable
A penalty will not be charged if:
- there is only one late payment in the tax year (unless you are more than six months late) or
- there is a reasonable excuse.
