Why am I being charged Class 2 National Insurance in my 2024/25 Self-Assessment?

Some self-employed taxpayers are mistakenly charged Class 2 NICs due to an HMRC IT issue. If your profits exceed £12,570, you should only pay Class 4 National Insurance, not Class 2. Always check your self-assessment 2024/25 calculation to ensure it is correct.

Do I need to pay Class 2 NICs through Self-Assessment for 2024/25?

No. From 6 April 2024, Class 2 NICs are voluntary for self-employed individuals with profits below £6,725. Voluntary contributions can help build qualifying years for your State Pension, but if your profits are above this threshold, Class 2 should not appear on your self-assessment.

What should I do if my Self-Assessment shows the wrong Class 2 NIC charge?

If you’ve filed your 2024/25 self-assessment and notice an incorrect Class 2 NIC charge, contact HMRC to request a correction. If you haven’t filed yet, consider waiting until HMRC resolves the issue (expected by September 2025).

What happens if I already paid the incorrect Class 2 NICs through Self-Assessment?

HMRC will refund or credit any incorrect Class 2 NIC payments to your self-assessment account once the error is fixed. Keep proof of payment and HMRC correspondence for reference.

When is the deadline for submitting my 2024/25 Self-Assessment?

The online filing and payment deadline for 2024/25 self-assessment is 31 January 2026. The HMRC Class 2 NIC error does not affect this deadline. Submit on time to avoid late filing penalties.

VAT Penalty Regime 2025: Avoid Fines & Stay Compliant

Understanding the New VAT Penalty Regime: What It Means for Your Business

The new VAT Penalty Regime is now in full effect, making it more important than ever for businesses to stay on top of both VAT filing and payment deadlines.

Under this updated regime, even small delays can trigger heavier penalties and higher interest charges.

If your business is VAT-registered (or will be subject to Making Tax Digital for VAT), this reform demands careful attention.

The Origins of the VAT Penalty Regime and Why It Changed

When HMRC reformed its approach to VAT non-compliance in January 2023, it replaced the old “default surcharge” system with a more modern, points-based and penalty-based regime.

But while that change was designed to be fairer and more transparent, the government has now tightened the rules further through the VAT Penalty Regime to discourage repeated late payments.

The revised VAT Penalty Regime gives HMRC more scope to penalise late payments through fixed sums (for return submissions) and escalating penalties and interest for delayed payments.

How the VAT Penalty Regime Penalises Late Submissions (Points System)

One arm of the VAT Penalty Regime is the points system for late VAT returns (i.e. late filing). Under this system:

You incur a penalty point each time you file late (beyond submission deadlines).
Once you hit the threshold for your filing frequency, HMRC may impose a fixed penalty (currently £200) each time you submit a return late beyond that threshold.

Infographic explaining the VAT Penalty Regime with sections on what it is, penalties for late submissions and payments, and compliance tips. Uses blue, white, and orange icons and headings for clarity.

The thresholds and reset periods differ by filing frequency:
• Annual returns: 2 points threshold, reset after two consecutive on-time returns
• Quarterly returns: 4 points threshold, reset after four on-time quarters
• Monthly returns: 5 points threshold, reset after six consecutive on-time monthly returns

This part of the VAT Penalty Regime encourages timely filing, separate from the payment obligations.

Penalties for Late Payment

The more serious side of the VAT Penalty Regime comes into play when VAT is not paid on time. From 1 April 2025, the following changes apply:

Overdue period	Penalty under new regime	Notes
Up to 14 days	No direct penalty (but interest accrues)	As before — the grace window remains in place
Day 15 (i.e. 15 days late)	3 % of the outstanding VAT	Increased from 2 % previously
Day 30	Additional 3 % on outstanding VAT	Total fixed penalty of 6 % if still unpaid by day 30
From day 31 onward	Daily penalty at an annualised rate of 10 %	Escalates daily until cleared

In short, the VAT Penalty Regime now imposes higher fixed penalties earlier, and a more aggressive daily rate for sustained non-payment.

Interest Charges

In addition to fixed penalties, HMRC also charges interest on any overdue VAT (and on outstanding penalties).

From 6 April 2025, the interest rate applied under the regime increases to Bank of England base rate + 4 % (up from base + 2.5 %).

Interest starts accruing from the first day the VAT payment is overdue, and continues until the balance (plus penalties) is fully satisfied.

What the VAT Penalty Regime Means for Your Cash Flow and Risk

Under this tougher VAT Penalty Regime:

Even moderate delays of 15 or 30 days now incur more severe penalties than before.
If you let a VAT payment go beyond 31 days, the daily accruing penalty (10 % p.a.) plus interest combine to impose a steep cost.
Repeated late filings (and payments) can degrade your compliance record, risking further HMRC scrutiny.
For businesses with tight cash flow or in cyclical industries, the new regime heightens the importance of proactive cash flow planning and discipline.

Strategies to Stay Compliant under the VAT Penalty Regime

To avoid falling foul of the VAT Penalty Regime, consider the following best practices:

Automated reminders & calendar alerts
Schedule reminders ahead of both return-submission and VAT-payment deadlines.
Use Direct Debit / standing orders
If possible, set up payments to clear by the due date (or just before) to reduce late-payment risk.
Monitor cash flow around VAT due dates
Set aside a contingency buffer to cover VAT liabilities in months when incoming receipts are slow.
Submit the return even if you can’t pay fully
Under the regime, missing the submission deadline triggers points or penalties; submitting on time helps mitigate that side, even if you negotiate a payment arrangement for the VAT unpaid.
Contact HMRC early for a Time to Pay arrangement
If you foresee difficulty paying, approach HMRC before penalties are triggered — if accepted and adhered to, late-payment penalties may be waived (though interest typically still applies).
Maintain accurate, timely records
Errors or misstatements can lead to underpayments, triggering exposure under the VAT Penalty Regime.
Review your VAT accounting scheme
If you’re on schemes (e.g. flat-rate, annual accounting, etc.), ensure they remain suitable under the stricter penalty regime.

How Trueman Brown Can Help You

Dealing with the VAT Penalty Regime—especially in light of the April 2025 changes—can be challenging.

That’s where Trueman Brown comes in.

We can:

Review your current compliance and penalty risk under the new regime,
Help you set up robust systems (reminders, workflows, payment scheduling) to guard against lateness,
Assist in liaising with HMRC to arrange Time to Pay agreements when needed, and
Offer ongoing VAT planning and advisory support to minimise exposure.

If you’d like help tailored to your circumstances, please get in touch with us. Email mark@truemanbrown.co.uk or call 01708 397262 and we’ll be happy to discuss how to keep your business safe under the VAT Penalty Regime.

Frequently Asked Questions (FAQ)

Q: When did the updated VAT Penalty Regime come into force?
A: The more severe penalty structure, as part of the revamped VAT Penalty Regime, came into effect on 1 April 2025 for VAT payments. Interest changes (under the regime) took effect from 6 April 2025.

Q: Does the VAT Penalty Regime replace the old default surcharge entirely?
A: Yes. The default surcharge system was abolished, and the VAT Penalty Regime (including both the points/fixed penalty system for submissions and the escalating penalty/interest structure for payments) is now the framework for VAT non-compliance.

Q: If I pay late but have a Time to Pay agreement, will the VAT Penalty Regime still penalise me?
A: If HMRC grants a Time to Pay arrangement before penalties apply and you adhere to it, the penalty element (under the VAT Penalty Regime) may be waived. However, interest under the regime typically continues to accrue.

Q: Can I appeal a penalty under the VAT Penalty Regime?
A: Yes — as with prior systems, you can appeal or request review of a penalty if you have what HMRC considers a “reasonable excuse” (e.g. serious illness, systems failure). You must follow the appeals process and act promptly.

Q: How harsh can the penalties under the VAT Penalty Regime get?
A: For a VAT debt still unpaid by day 30, you face a 6 % fixed penalty (3 % at day 15 + 3 % at day 30). If the payment remains overdue from day 31 onward, a daily penalty accrues at a rate of 10 % per annum, along with interest at base + 4 %.

Q: Does the VAT Penalty Regime apply to repayment traders (businesses that usually reclaim VAT)?
A: Yes. Unlike older systems, the VAT Penalty Regime applies to all VAT-registered businesses, including repayment traders.

Q: How can I best avoid penalties under the VAT Penalty Regime?
A: The best defence is disciplined planning: set reminders, ensure timely filing, arrange payments in advance (or via direct debit), maintain cash buffers, and if trouble arises, contact HMRC early for a payment arrangement.

If you want to discuss your specific VAT position and ensure you’re operating safely under the VAT Penalty Regime, reach out to us at mark@truemanbrown.co.uk or phone 01708 397262 — we’re here to help.