HMRC interest rates

HMRC interest rates

HMRC interest rates on late payment of tax will rise from the 22nd of November 2022. This follows the 0.75% increase in the Bank of England base rate.

The current late payment of tax and repayment interest rates charged by HMRC on the main taxes and duties will be:

  • late payment interest rate — 5.5% from the 22nd November 2022
  • repayment interest rate — 2.0% from the 22nd of November 2022

The late payment of tax interest rate last increased to 4.75% on the 11th of October 2022. This is now the highest rate since the height of the financial crisis in January 2009.

Late payment interest is payable on late tax bills covering

  • income tax,
  • National Insurance contributions,
  • capital gains tax,
  • stamp duty land tax,
  • stamp duty, and;
  • stamp duty reserve tax.

The corporation tax ‘pay and file’ rate will also increase to 5.5% on the same date.

And the repayment interest rate will be increased from the current 1.25% repayment interest rate to 2.0%.

Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments rises to 5.5%, up from 4.75%.

The interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments rises to 2% from 1.25%.

How HMRC interest rates are set

HMRC interest rates are set in legislation and are linked to the Bank of England base rate. There are 2 rates:

  • late payment interest, set at base rate plus 2.5%
  • repayment interest, set at base rate minus 1%, with a lower limit of 0.5% (known as the ‘minimum floor’)

The late payment interest rate encourages prompt payment. It ensures fairness for those who pay their tax on time.

The repayment interest rate compensates taxpayers fairly, when they overpay or pay early, for loss of use of their money.

Get support from a Licensed Accountant

Getting a licensed accountant to help with tax returns can actually save you money.  It can free up your valuable time which you can use to concentrate on your business.  You can also benefit by knowing it has been done correctly and on time. Mistakes can be costly.  As can missing the deadline.

If you need to complete a self assessment tax return for the first time or have decided that you need some assistance, as your HMRC registered agent, I can help.