— hmrc penalties
HMRC late payment penalties for PAYE: what they cost and how to avoid them
PayrollSmart guides · Updated 7 July 2026
PAYE penalties are the most avoidable cost in payroll — they arrive automatically, they escalate the more often you're late, and HMRC doesn't need to lift a finger to charge them. Here's how the system works, and how to make sure it never applies to you.
When PAYE is actually due
PAYE and National Insurance deducted from wages must reach HMRC by the 22nd of the following tax month if you pay electronically (the 19th if you still pay by post). Miss it and interest starts running immediately — penalties follow.
Late filing penalties (RTI)
Every pay run must be reported to HMRC on or before payday via a Full Payment Submission (FPS). File late more than once in a tax year and monthly penalties apply, scaled to your headcount:
- 1–9 employees — £100 per month
- 10–49 employees — £200 per month
- 50–249 employees — £300 per month
- 250+ employees — £400 per month
Late payment penalties
Paying the PAYE bill itself late attracts percentage penalties that escalate with repeat defaults in the same tax year — from 1% of the late amount up to 4% for persistent lateness, with additional 5% charges when amounts remain unpaid after 6 and 12 months. Interest is charged on top for every day the money is outstanding.
How to never pay a penalty again
The fixes are unglamorous but total: file the FPS with every pay run without exception, pay electronically by the 22nd, and reconcile what you pay against what you've reported so surprises can't build up. This is exactly what a managed payroll service does for you — our clients' RTI goes in on time, every time, as standard.
Already behind? Don't wait for the penalty letters to stack up — HMRC agrees Time to Pay arrangements for viable businesses, and we can negotiate one on your behalf.
Common questions
What is the penalty for filing PAYE late?
After your first late FPS in a tax year, HMRC charges monthly penalties of £100–£400 depending on how many employees you have, plus percentage penalties and interest if payment itself is late.
Can PAYE penalties be appealed?
Yes — if you have a reasonable excuse or the penalty is wrong, you can appeal online or by post. We prepare and submit appeals for clients where there are genuine grounds.
What if I can't pay my PAYE bill?
Contact HMRC early — or have us do it for you. Time to Pay arrangements spread the bill over months and stop enforcement while you keep to the plan.
Want the numbers for your business? Get a free payroll review — or call 020 4621 4008 / WhatsApp 07490 536908. *Savings depend on your eligibility and payroll setup.