The interest rates for late payment of taxes are linked to the Bank of England Base Rates, and as a result there is an interest rate rise coming in August 2023 for late payers and for over-payments along the following lines:
- 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’)
According to HMRC the late payment interest rate encourages prompt payment, and the repayment interest rate compensates taxpayers fairly, when they overpay, for loss of use of their money.
The current late payment and repayment interest rates applied to the main taxes and duties that HMRC currently charges and pays interest on are:
- late payment interest rate — 7.75% from 22 August 2023
- repayment interest rate — 4.25% from 22 August 2023
The above is in comparison to 4.25% and 0.75% respectively a year ago.
Contact us today if you need assistance with your tax return.