What is a VAT Surcharge

What is a VAT Surcharge?

A VAT Surcharge is a type of penalty levied by HMRC under two circumstances:

  1. When a business does not submit their VAT return on time
  2. If full payment for VAT due on a particular return has not reached HMRC by the deadline.

How are VAT Surcharges Calculated

HMRC calculates the amount of surcharge due as a percentage of the VAT outstanding for the VAT quarter that is in question.

Here is how VAT surcharges are calculated:

Defaults within 12 months Surcharge if annual turnover is less than £150,000 Surcharge if annual turnover is £150,000 or more
2nd No surcharge 2% (no surcharge if this is less than £400)
3rd 2% (no surcharge if this is less than £400) 5% (no surcharge if this is less than £400)
4th 5% (no surcharge if this is less than £400) 10% or £30 (whichever is more)
5th 10% or £30 (whichever is more) 15% or £30 (whichever is more)
6 or more 15% or £30 (whichever is more) 15% or £30 (whichever is more)

There’s no surcharge if you submit a late VAT Return and:

  • pay your VAT in full by the due date
  • have no tax to pay
  • are due a VAT repayment

It is also worth nothing that you DO NOT pay a surcharge if you submit a late VAT return or VAT payment for the first time. 

Related:

A Complete Overview of VAT Penalties. Surcharges & Interest

Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.