Advanced Taxation (UK) · Tax administration and the UK tax system

VAT Registration, Rates and Late Payment Penalties for ATX-UK

Updated 11 October 2026 · Fact-checked

VAT is charged at a standard rate of 20%. A trader must register when taxable supplies pass £90,000 and may deregister below £88,000. Late VAT payments attract no penalty up to 15 days, 3% for 16 to 30 days, and 6% plus a daily penalty over 30 days. Interest on underpaid tax is 8.50%.

Understand VAT Registration, Rates and Late Payment Penalties

VAT is a tax on taxable supplies made by VATregistered businesses. Registration decides whether you must charge VAT to customers and account for it to HMRC. The ATX-UK tax tables give the standard rate of 20%, the registration limit of £90,000 and the deregistration limit of £88,000.

The two limits differ on purpose. The gap stops a business whose turnover hovers around one figure from registering and deregistering repeatedly. You register when you pass the higher limit and you can leave only when you fall below the lower one.

The tax tables also give the penalty for late VAT payment. It depends on how late the payment is. Up to 15 days late there is no penalty. Between 16 and 30 days the penalty is 3%. More than 30 days late it is 6% plus a daily penalty at an annual rate of 10%.

Interest is separate from penalties. The tables give an assumed rate of 8.50% on underpaid tax and 3.50% on overpaid tax. In an exam you must state which of these applies and compute it for the period involved.

The exam rarely asks you to recite these rules. It gives a scenario, often a client who is close to the limit or has paid late, and asks you to advise. You need to pick the right figure, apply it to the facts and explain the consequence in plain language.

Key rules to remember

VAT standard rate: VAT on a standard-rated supply = net price × 20%; VAT-inclusive price ÷ 1.2 gives the net price; VAT is 1/6 of the gross amount.
Registration limit: Register when taxable supplies exceed £90,000; Given in the tax tables. The exam question will tell you the period and the supplies to be tested.
Deregistration limit: May deregister where taxable supplies are expected to fall to £88,000 or below; The tables give £88,000. State it as the lower limit that gives a gap with registration.
Late payment penalty: Up to 15 days: none | 16 to 30 days: 3% | More than 30 days: 6% plus daily penalty at an annual rate of 10%; Penalty is a percentage of the VAT unpaid. Check the number of days late carefully.
Interest on underpaid tax: Interest = tax unpaid × 8.50% × (months or days late ÷ period); Use the assumed rate in the tables. Overpaid tax uses 3.50%.

How to solve VAT Registration, Rates and Late Payment Penalties questions

Use the same steps for any registration, deregistration or late payment question.

1Read the requirement and note what is asked: a registration date, a penalty, interest or advice.
2Identify the figures needed from the tax tables: 20%, £90,000, £88,000, the penalty bands or the interest rates.
3For registration or deregistration, compare the relevant taxable turnover with the limit and state the conclusion clearly.
4For penalties, count how many days late the payment is and pick the correct band.
5Calculate the penalty or interest on the VAT unpaid, not on the turnover, and show the working to the nearest £.
6State the conclusion in a sentence and add any practical advice, such as paying on time or notifying HMRC.

Quickest way: Table-first check

When to use it: Use this when time is short and the question asks for a single figure or decision.

Write the three numbers you need: 20%, £90,000, £88,000.
Write the penalty bands: 15 days none, 16 to 30 days 3%, over 30 days 6% plus daily.
Underline the days late or the turnover in the question and match it to a band or limit.
Multiply the VAT unpaid by the percentage.
Write one sentence stating the result and what the client should do.

Common mistakes in VAT Registration, Rates and Late Payment Penalties

Using £90,000 as the deregistration limit.
Students remember one threshold and use it for both purposes.
Fix: Write both numbers together: register above £90,000, deregister at £88,000 or below.
Charging a 3% penalty for a payment 15 days late.
Students read 'up to 15 days' as a trigger rather than a safe period.
Fix: Up to 15 days late has no penalty. The 3% band begins at 16 days.
Applying the penalty percentage to turnover rather than the VAT unpaid.
The question gives turnover and VAT figures together.
Fix: Underline the VAT liability paid late and use only that amount.
Forgetting that over 30 days the penalty has two parts.
Students stop after the 6% figure.
Fix: State the 6% plus the daily penalty at an annual rate of 10%, and compute the daily part if the days are given.
Mixing up the interest rates.
Three rates sit in the tables: the official rate 3.75%, underpaid 8.50% and overpaid 3.50%.
Fix: Interest on tax owed to HMRC is 8.50%. The 3.75% official rate is for benefits in kind loans.

Worked examples

Example 1

A business has paid VAT of £24,000 for the quarter 20 days after the due date. Calculate the late payment penalty.

Show the solution

The payment is 20 days late.
This falls in the 16 to 30 days band, so the penalty rate is 3%.
Penalty = £24,000 × 3% = £720.

Answer: The penalty is £720.

Example 2

Rohan is a sole trader whose taxable turnover has grown to £91,500 over the past 12 months. His turnover was £80,000 the year before. Explain whether he must be registered. Later his turnover is expected to fall to £87,000. Explain whether he can deregister.

Show the solution

The registration limit is £90,000.
His turnover over the past 12 months is £91,500, which is above the limit, so he must register.
The deregistration limit is £88,000.
Expected taxable turnover of £87,000 is below £88,000, so he may apply to deregister.

Answer: Rohan must register because turnover of £91,500 exceeds £90,000. If turnover is expected to fall to £87,000, which is below £88,000, he may deregister.

Exam tips

Copy the VAT figures from the tax table onto your answer plan before you start calculating.
Count days late carefully. Fifteen days and sixteen days fall in different bands.
Always show the working for the penalty, as the supplementary instructions require all workings to be shown.
If the question asks for advice, add a professional skills point such as paying within 15 days to avoid any penalty.
Round to the nearest £ as instructed.

Practice questions from Tax administration and the UK tax system

VAT Registration, Rates and Late Payment Penalties in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Applied SkillsVAT Default Surcharge and Late Payment Penalties

VAT Registration, Rates and Late Payment Penalties: frequently asked questions

What is the VAT registration limit for ATX-UK?

It is £90,000, as given in the ACCA tax tables for June 2026 to June 2027. A trader whose taxable supplies exceed this must register.

Why is the deregistration limit lower than the registration limit?

The limits are £90,000 and £88,000. The gap prevents a trader near the threshold from registering and deregistering repeatedly. A trader may deregister when taxable supplies are expected to be £88,000 or below.

How does the VAT late payment penalty work?

There is no penalty up to 15 days late. At 16 to 30 days it is 3%. Over 30 days it is 6% plus a daily penalty at an annual rate of 10%.

Which interest rate applies to unpaid VAT?

Use the rate for underpaid tax given in the tables, which is 8.50%. The 3.50% rate is for overpaid tax.