HMRC interest rates for late payments will increase again this month to their highest level since 2001.
Late payment interest is payable on tax bills covering income tax, National Insurance contributions, capital gains tax, corporation tax pay and file, stamp duty land tax, stamp duty and stamp duty reserve tax.
The latest rise was triggered by the increase in the Bank of England base rate to 5.25 per cent and set in legislation.
What are the increases?
The interest rates will increase as follows:
- The rate of interest for the overdue payment of tax bills is calculated as base rate plus 2.5, so will increase to 7.75 per cent.
- The rate of interest on unpaid instalments of corporation tax liabilities is calculated as base rate plus one. It will increase to 6.25 per cent.
- The rate of interest paid by HMRC on the overpayment of tax is calculated as base rate minus one. It will increase to 4.25 per cent.
What does the Government say about late payment and repayment interest?
The Government said the rate of late payment interest “encourages prompt payment” and ensures fairness for those who pay their tax on time.
Meanwhile, the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay. It also said the differential between overdue payment interest and repayment interest is “in line” with the policy of other tax authorities worldwide. And it compares “favourably” with commercial practice for interest charged on loans or overdrafts and interest paid on deposits,
The Bank of England Monetary Policy Committee announced an increase to the Bank of England base rate from 5.00 per cent to 5.25 per cent on August 3.
The UK’s central bank continues to respond to persistent high inflation, bringing interest rates to their highest level since prior to the 2008 financial crisis.
Taxpayers can find more detailed information on the current interest rates for payments on the official Government website.
Need support or advice with tax repayments? We can help.