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Because of a significant customer’s late payment, your business is facing a temporary shortage in its cash flow. Delaying the payment of the PAYE for a few days might be one approach to get around this problem. However, what are the repercussions of acting in this manner?
Electronic payments for PAYE and NI must be received at HMRC’s bank by the 22nd of the month following their due date for most employers. If the 22nd falls on a Sunday, the payment must be made by the final working day before the 22nd. For example, in October 2022, the 22nd occurs on a Saturday; thus, you must pay by Friday, October 21.
When making a payment early or late, you must provide an additional four numbers at the end of your 13-character accounts office reference to designate the month and year. In addition, the HM Revenue and Customs (HMRC) provides employers with a calculator to determine which reference should be used for payments that are not on the regular schedule.
Employers can make PAYE payments quarterly following months 3, 6, 9 and 12 if they anticipate that the average monthly PAYE payment would be less than £1,500 (less than £18,000 for the entire tax year). This limit is calculated by adding income tax, national insurance contributions, student loans, and CIS deductions.
Interest on the delayed PAYE is the first consequence of paying the PAYE late. Starting on July 5, 2022, the interest rate for payments received after the due date is 3.75 %, which is determined daily.
The penalty system for late payments of PAYE and NI is outlined in Schedule 56 of the Finance Act of 2009, which went into effect on April 6, 2010. Not making a payment on time once does not constitute a default.
If there are one to three defaults of late payments, a 1% penalty will be applied to the outstanding balance; if there are four to six, a 2% penalty will be used; if there are seven to nine defaults of late payments, a 3% penalty will be applied; and if there are ten or more defaults of late payments, a 4% penalty will be applied. After six months, HMRC will impose a penalty of 5% of the unpaid PAYE if it has not been paid in full. After 12 months, an additional penalty of 5% will be added to the total. Additional fees will be assessed even if only one payment is late throughout the tax year.