HMRC late payments interest rates revised following base rate rise

Following the Bank of England’s decision to increase its base interest rate to 4.5%, 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%. Information on the interest rates for payments will be updated shortly on the government website.

These changes will come into effect on:

• 22 May 2023 for quarterly instalment payments
• 31 May 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 11th May by 0.25 percentage points, as the UK’s central bank continues to respond to persistent high inflation, which has remained ahead of previous predictions at 10.1% according to the latest CPI data for March, published last month by the ONS. April data is due to be released later this month.