PAYE for employers: in-year interest on late payments

15 May 2014

HMRC has published a What’s New message containing important information on how to avoid late payment interest and what to expect if a 2014 to 2015 PAYE or CIS payment is late.

As announced in the What's New of 19 March 2014, HMRC now charges interest on any late PAYE and Construction Industry Scheme (CIS) payments. For employers that pay monthly, the first payment of 2014 to 2015 is due on 19 May (or 22 May for employers who pay electronically).

To avoid an interest charge employers should pay by the due date, the difference between the following:

  • what they report on their Full Payment Submission(s) (FPS) received by the 19th of the month following the end of the tax month it relates to, together with any CIS charges for that tax month
  • any deductions reported on an Employer Payment Submission (EPS), again received by the 19th of the month following the end of the tax month it relates to

If employers make a correction on an FPS that HMRC receives after the 19th of the month following the end of the tax month it relates to, the correction will be included in the following month’s charge. In these circumstances, the amount payable for the tax month is the amount actually reported by the 19th (rather than the corrected amount).

Interest Charges

HMRC will charge interest on all unpaid:

  • PAYE tax, Class 1 National Insurance and Student Loan deductions, including specified charges (estimates HMRC makes in the absence of a PAYE submission)
  • Construction Industry Scheme charges
  • In-year late filing penalties, which start from October 2014
  • In-year late payment penalties, which will be charged automatically from April 2015

HMRC will charge interest daily, from the date a payment is due and payable to the date it is paid in full.

Accruing Interest and the Business Tax Dashboard

Employers will be able to see an estimate of the interest building up on the Business Tax Dashboard.

Please note that:

  • Accrued interest is only a guide to what may be due. HMRC will only seek payment of interest when the amount due is settled.
  • The Business Tax Dashboard will only show interest as accruing in the current month, regardless of when the payment was due.
  • It will show interest as accruing from the 19th of each month, regardless of how the employer pays. Employers who pay electronically should not worry if they see an accrued interest entry between 19th and 22nd of a month. Once the electronic payment is received, the calculation will correctly use the 22nd as the due date, and any interest charge generated between the 19th and 22nd will be cancelled.

Currently, there is an HMRC systems error which results in the Business Tax Dashboard showing interest accruing despite the employer having submitted an EPS that clears the original charges. This error will be corrected shortly. In the meantime, HMRC will not pursue this charge and employers do not need to contact HMRC about this.

Further information

HMRC's At a glance: interest from 2014 to 2015 helpsheet has more detail on:

  • The due dates of payment
  • How in-year interest is calculated
  • Interest on overpayments
  • How HMRC will calculate interest on a charge that employers didn't agree with
  • What an employer should do if they cannot pay.