CH141140 - Interest: Late Payment Interest: General rule - examples

You must check whether, and from which date, the FA 2009 interest rules apply to the tax or duty you are dealing with. See CH140160 for full details. 

Example 1 - one late payment 

Bela is required to pay £10,000 on 31 January 2023. She pays £10,000 on 5 March 2023. 

Late payment interest runs from the late payment interest start date of 31 January 2023 to the late payment interest end date of 5 March 2023.  

Bela will be charged late payment interest on £10,000 for 33 days (1 February 2023 to 5 March 2023 inclusive). We calculate the number of days following the guidance at CH140220 

Example 2 - late payment paid in instalments 

Kevin is also required to pay £10,000 on 31 January 2023. He cannot pay the full amount on the due date. He pays £5,000 on 31 January 2023, £2,000 on 1 May 2023 and £3,000 on 24 May 2023. 

The £5,000 is not late so no late payment interest applies to that payment. 

The late payment interest start date for each late payment is 31 January 2023. The late payment interest end date is the date of each payment, which is 1 May 2023 for £2,000 and 24 May 2023 for £3,000. 

We charge late payment interest as follows. 

Period for which interest is charged	Number of days	Amount on which interest is charged
31 January 2023 - 1 May 2023	90	£2,000
31 January 2023 - 24 May 2023	113	£3,000

 Example 3 late payment paid on VAT annual accounting scheme

Alex was late paying his VAT annual accounting instalments due on the last day of the fourth and eighth months of his annual accounting year.  When his final payment is due after the end of his annual accounting period, he also needs to pay any outstanding amounts from his unpaid instalments.  
 

Interest would accrue on the total outstanding balance from the due date of the balancing payment up to and including the date Alex makes his payment in full.