HMRC are keen that employers pay their PAYE in full and on time. To encourage compliance and to penalise those who pay late, a new PAYE late payment penalty regime applies in respect of periods starting on or after 6 April 2010.

As far as monthly or quarterly payments of PAYE are concerned, the penalty that is charged depends on the number of times that payment has been made late during the tax year. As a result, the penalties are not levied until after the end of the tax year. The employer is allowed one 'penalty free' late payment each tax year, provided payment is made no more than six months late. Thereafter, penalties are charged depending upon the number of late payments made during the year.

It is therefore very important that PAYE is paid in full on time to avoid these new penalties.