HMRC late payments interest rates revised

Following the Bank of England’s decision to increase its base interest rate to 4.25%, HMRC has confirmed that interest on late payments will also increase.

HMRC interest rates are linked to the Bank of England base rate, and set at the base rate plus 2.5%. Repayment interest is set at the higher of the base rate minus 1% or a minimum floor of 0.5%.

These changes will come into effect on:

• 3 April 2023 for quarterly instalment payments
• 13 April 2023 for non-quarterly instalments payments

The rate of late payment interest is aimed at encouraging 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.

The Bank of England base rate was uplifted on 23rd March by 0.25 percentage points, and followed a small rise in inflation to 10.4% that was contrary to economists predictions and ended three months of consecutive falls in the CPI measure of price rises.