HMRC updates interest rates for late payments

Following the Bank of England’s decision to increase its base interest rates to 4%, HMRC has revised its interest rates for late payments.

Changes to HMRC’s interest rates, which are linked to the Bank of England’s base rate, will come into effect on 16 November 2026 for quarterly instalment payments, and 24 November 2026 for non-quarterly instalments payments.

Late payment interest is currently set in legislation at the base rate plus 4%. Repayment interest is set at base rate minus 1%, with a lower limit — or ‘minimum floor’ — of 0.5%.

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.

The Bank of England increased interest rates to 4% from 3.75% on Thursday 5th November, the first rise in over three years. The decision came in response to rising inflation that is being driven by the ongoing US-Iran conflict and its impact on oil prices, with other central banks around the world also raising interest rates in recent weeks.

Inflation in the UK rose to 3.5% in September, remaining above the Bank of England’s 2% target, with estimates that the rate of price rises could reach as high as 4.9% by the middle of 2027, or, should the conflict escalate, more than 6%.