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HMRC raises interest rates on late payments from 22 November
HM Revenue & Customs (HMRC) will raise the interest rates on tax debt from 22 November following the 0.75 per cent increase in the Bank of England base rate.
Following the latest increase of 0.75 per cent, interest rates for late payments and repayments will increase.
From that date, the changes are:
- The late payment interest rate will rise to 5.5 per cent
- The repayment interest rate rises to two per cent
This means that the late payment interest rate will increase by 0.75 per cent from 4.75 per cent.
The last increase was on 11 October and the latest rise means it is now at its highest rate since the financial crash in 2009.
Late payment interest is payable on late tax bills covering Income Tax, National Insurance contributions, Capital Gains Tax and Stamp Duty Land Tax. The Corporation Tax pay and file rate also rises to 5.5 per cent.
The interest paid on overpaid quarterly instalment payments and early payments of Corporation Tax not due by instalments, rises to two per cent from 1.25 per cent.
How interest rates are set
HMRC interest rates are set in legislation and are linked to the Bank of England base rate. There are two levels:
- Late payment interest. This is set at base rate plus 2.5 per cent
- Repayment interest. This is set at base rate minus one per cent, with a lower limit of 0.5 per cent (known as the ‘minimum floor’)
HMRC says the late payment interest rate encourages prompt payment and displays fairness to those who pay their tax on time.
It adds that the repayment interest rate compensates taxpayers when they overpay or pay early, for loss of use of their money.
Need help with late payments or other taxation matters? Contact us today.
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