HMRC updates late payment interest rates

Following the decision by the Bank of England on 3rd August to increase its base rate, HMRC is advising customers its interest rates on late payments will also rise.

HMRC interest rates are set in legislation and linked to the Bank of England base rate. Late payment interest is set at base rate plus 2.5%. Repayment interest is set at base rate minus 1% with a lower limit, or ‘minimum floor’, of 0.5%.

Because the base rate has changed, HMRC interest rates for late payment and repayment will increase from 14th August for quarterly instalment payments, and 22nd August for non-quarterly instalments payments.

As a result of the latest base rate rise, HMRC will now charge 7.75% interest on late payments.

HMRC is also updating its rate of repayment interest, paid on money being refunded to taxpayers who have overpaid. Repayment interest is set at base rate minus 1% with a lower limit, or ‘minimum floor’, of 0.5%; it is now set it 4.25%.

The Bank of England base rate was uplifted on 3rd August by 0.25 percentage points from 5% to 5.25%, as the UK’s central bank continues to respond to persistent high inflation, bringing interest rates to their highest level since prior to the 2008 financial crisis.