PAYE Late Filing Penalties | What Should you do now

What is a PAYE Late Filing Penalty?

A PAYE late filing penalty is a fine HMRC issues if you don’t send your FPS (or EPS, if applicable) on time.

Every time you pay employees, you are required to file real time information (RTI) with HMRC. If you miss the deadline, HMRC treats it as late and depending on your company size and filing history, you could be fined.

The Difference Between HMRC and Companies House Penalties

HMRC and Companies House are not the same.

• HMRC deals with PAYE (Pay As You Earn) and Corporation Tax.
• Companies House looks after annual company accounts and confirmation statements.

So if you’ve missed a PAYE deadline, it’s HMRC who will contact you not Companies House. And if you’ve missed filing your accounts, it’s Companies House who will issue a fine.

When Do PAYE Late Filing Penalties Apply?

HMRC may not charge a penalty for your first late FPS in a tax year but this is discretionary and depends on the circumstances. Repeated late filing is very likely to attract penalties.

You may face a penalty if:

• Your FPS is not submitted by the due date (on or before the day staff are paid)
• You submit an EPS late where it’s required (e.g., no employees paid in a month)
• You repeatedly file late over several months

How Much is the Penalty?

The amount depends on the size of your payroll:

• 1–9 employees: £100 per month
• 10–49 employees: £200 per month
• 50–249 employees: £300 per month
• 250 or more employees: £400 per month

And if your report is over 3 months late HMRC can issue an extra penalty of 5% of the tax and NICs due. Further 5% penalties may apply at 6 and 12 months if it still hasn’t been filed.

Common Reasons for Late Filing

It’s easy to see how businesses slip up. Some common causes include:

• Technical issues with payroll software
• Forgetting to file when no staff were paid
• Incorrectly setting pay dates in the system
• Not understanding HMRC’s RTI rules
• Staff changes or sickness affecting payroll admin

What Should You Do If You Receive a Penalty?

Getting that dreaded HMRC letter can be stressful but don’t panic. Here’s what you should do:

Step 1: Check the Details

Sometimes penalties are issued in error. Double-check the dates and confirm whether your FPS was late. You can view your PAYE submissions in your HMRC online account.

Step 2: Pay or Appeal

If the penalty is correct, you’ll need to pay it by the date HMRC specifies. If you believe it’s unfair, you can appeal (we’ll cover this in detail below).

Step 3: Fix the Issue

Resolve whatever caused the delay, whether that’s software problems, lack of reminders or a misunderstanding of the deadlines.

Appealing a PAYE Late Filing Penalty

You do have the right to challenge a penalty if you think HMRC shouldn’t have applied it. Appeals are submitted online via your HMRC PAYE account.

Valid Reasons for Appeal

HMRC may consider cancelling the penalty if you had a reasonable excuse, such as:

• Illness that prevented you from filing (e.g., hospitalisation)
• Technical failures with HMRC’s own systems
• Fire, flood, or another unexpected disaster
• Death of a close partner or key staff member at the time of filing
• Other exceptional circumstances outside of your control

Reasons That Are Not Accepted

Not every excuse will get you off the hook. HMRC usually rejects appeals for reasons like:

• Forgetting to file
• Not knowing the deadline
• Staff holidays or being too busy
• Payroll software issues you could have resolved in time

How to Submit Your Appeal

You can appeal directly through your HMRC online PAYE account. You’ll need to provide:

• The date and type of submission
• The penalty reference number
• A clear explanation of your reason for appeal
• Any supporting documents (medical notes, technical reports, etc.)

HMRC will review and confirm whether your penalty is cancelled or upheld.

Can You Pay in Instalments?

If paying in full is difficult, HMRC may let you set up a Time to Pay arrangement. This allows you to spread the cost over monthly installments. You’ll need to apply quickly and show that your business is struggling financially.

How to Avoid PAYE Late Filing Penalties in the Future

Prevention is always better than dealing with penalties later. Here are some practical tips:

• Use reliable payroll software with automatic reminders
• Set calendar alerts for filing dates
• File earlier than payday if possible, to avoid last-minute problems
• Keep backup staff trained to handle payroll if the usual person is away
• Check HMRC updates regularly, as rules and deadlines can change

Don’t Forget About P11Ds: Another Area Where Penalties Can Hit

When people think about PAYE penalties they often focus only on monthly FPS and EPS filings. But HMRC also requires separate reporting if you give employees perks or benefits outside of their salary. This includes things like company cars, private medical cover, or cheap loans. These are reported on the P11D form.

Alongside that you may also need to file a P11D(b) to show the Class 1A National Insurance contributions that are due on those benefits. Missing these forms carries its own late filing penalties.

Final Thoughts

PAYE penalties might seem like small amounts at first but they add up quickly, especially for larger employers. The good news is that with the right systems in place, they’re totally avoidable.

If you’ve received a penalty, don’t ignore it. Check whether it’s valid, pay or appeal on time, and take steps to prevent future mistakes.

A little organisation now can save a lot of money and stress later on.