HMRC late payment interest rates to be revised after Bank of England cuts base rate

HMRC late payment fees will be adjusted after the Bank of England interest rate was reduced to 5%.

The Bank of England's committee in charge of monetary policy decided on August 1, 2024 to lower the base rate from 5.25% to 5%.

HMRC interest rates are connected to the base rate set by the Bank of England.

Due to the adjustment in the base rate, there will be a decrease in HMRC's interest rates for late payments and repayments.

These modifications will take place on:

Details about the current interest rates for payments will be available soon.

Understanding HMRC Interest Rates

The interest rates established by HMRC are determined by law and are tied to the base rate of the Bank of England.

Interest charged for late payments is calculated at the base rate plus 2.5%. For repayments, the interest is calculated at the base rate minus 1%, with a minimum floor or lower limit of 0.5%.

The difference between the interest charged for late payments and the interest earned on repayments follows the same guidelines as other tax agencies globally and aligns well with standard practices in the commercial lending industry.

The interest charged for late payments serves as a way to incentivize people to pay their taxes on time and to ensure that everyone is treated fairly. On the other hand, the interest paid on overpayments helps to fairly compensate taxpayers for not being able to use their money when they've paid too much.

Posted on August 1, 2024