Following the Bank of England’s announcement on 3 August 2023 that the base rate will rise to 5.25%, HMRC's interest rates are also increasing by 0.25%, to 7.75% for late payment interest and 4.25% for repayment interest, from 22 August 2023.
The rates, which apply to the main taxes and duties administered by HMRC, track the Bank of England base rate. The late payment rate is set at 2.5% above the base rate. The repayment rate is set at the base rate minus 1% with a 'minimum floor' of 0.5%.
The last time the late payment interest rate was this high was in January 2008. This is the first time the repayment interest rate has exceeded 4% in over 20 years.
- For companies in the Corporation Tax quarterly instalment payment regime, the rate of interest on underpaid instalment payments increases to 6.25% from 6%. Repayment interest rises to 5% from 4.75%. These changes take effect from 14 August 2023.
- For all other payments, the increase to 7.75% takes effect from 22 August 2023, as does the rise in the repayment interest rate to 4.25%.
- The Official rate of interest which is most commonly seen in relation to Employment-related loans has been set at 2.25% for 2023-24.
Editorial note: this is not bad news if you have overpaid tax or are due a refund as the repayment interest is as good as is paid by many banks.
Useful guides on this topic
Penalties: Late Payment
What penalties are charged when tax is paid late?
Penalties: Late Payment MTD
Penalties for late payment of tax under Making Tax Digital for VAT and Income Tax.
External link
HMRC late payment interest rates to be revised after Bank of England increases base rate
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