HMRC interest rates for late payments will be revised following the Bank of England interest rate rise to 4%.
The Bank of England Monetary Policy Committee announced on 2nd February 2023 an increase to the Bank of England base rate to 4% from 3.5%.
HMRC interest rates are linked to the Bank of England base rate. As a consequence of the change in the base rate, HMRC interest rates for late payment and repayment will increase.
These changes will come into effect on:
- 13th February 2023 for quarterly instalment payments
- 21st February 2023 for non-quarterly instalments payments
Information on the interest rates for payments will be updated..
How HMRC interest rates are set
HMRC interest rates are set in legislation and are 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%.
The differential between late payment interest and repayment interest is claimed to be in line with the policy of other tax authorities worldwide and is considered to compare favourably with commercial practice for interest charged on loans or overdrafts and interest paid on deposits.
The rate of late payment interest is to encourage prompt payment and ensures fairness for those who pay their tax on time, while the rate of repayment interest is considered to fairly compensates taxpayers for loss of use of their money when they overpay.
PAYadvice.UK 3/2/2023
