On 22 June 2023, the Bank of England base rate increased from 4.5% to 5%.
HMRC’s interest rates are linked to the base rate. Therefore, the recent rise has inevitably resulted in higher interest rates for late payments to HMRC.
These changes apply from:
- 3 July 2023 for quarterly instalment payments
- 11 July 2023 for non-quarterly instalments payments
HMRC sets its late payment interest at base rate plus 2.5%. Repayment interest is set at base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%. This approach is in line with the tax authorities of other countries and falls beneath the interest charged by commercial practices.
“The rate of late payment interest encourages prompt payment and ensures fairness for those who pay their tax on time, while the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay, “ explains HMRC.
Would you like to avoid late payment charges? Talk to the team at re:accounts. Tax is a specialist focus of ours. We’ll minimise your tax liability ad help you avoid late payment charges with timely, accurate submission of tax returns.
