HMRC revises interest rates following Bank of England rate cut

Following the Bank of England’s decision to cut its base interest rate to 4.25%, HMRC is advising that its interest rates on late payments and repayments will also change.

HMRC interest rates are set in legislation and are linked to the Bank of England base rate.

Late payment interest is currently set at base rate plus 4.00%. The new rate of 8.25% will come into effect on 19th May 2025 for quarterly instalment payments, and 28th May 2025 for non-quarterly instalments.

Repayment interest is set at base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%. Dates of when the new rate will take effect has yet to be confirmed.

The differential between late payment interest and repayment interest is in line with the policy of other tax authorities worldwide and compares favourably with commercial practice for interest charged on loans or overdrafts and interest paid on deposits.

The rate of late payment interest is set to aim to encourage 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.