The Bank of England’s Monetary Policy Committee met on 3 November 2022 and agreed to raise the base rate by three quarters of a per cent from 2.25% to 3%. Because HMRC links its interest rates to the Bank of England’s base rate, the interest rates for late payments and repayments will also rise.
HMRC late payment interest covers income tax, national insurance contributions (NICs), capital gains tax, stamp duty land tax and stamp duty reserve tax.
What are the current late payment interest rates?
On 22 November 2022, the HMRC late payment interest rate increased to 5.50%.
On the same date, the rate of interest paid by HMRC on the overpayment of tax increased to 2%.
These latest news rises comes after previous increases in August and October this year. The HMRC late payment interest rate went up by half a per cent to 4.75% from 11 October 2022, the highest rate since the financial crisis in January 2009.
How are HMRC interest rates calculated?
HMRC interest rates are linked to the Bank of England base rate. The late payment interest rate is set at 2.5% above the base rate. Repayment interest is set at base rate minus 1%, with a lower limit of 0.5%.
According to the Treasury, the difference between late payment interest and repayment interest is similar to tax authorities in other countries, and “compares favourably” with commercial loans or overdrafts.
HMRC imposes a rate of late payment interest to encourage tax payers to pay what they owe on time. It also brings an element of fairness for tax payers who do pay the tax due on or before the deadline.
Need advice?
If you have any questions about the HMRC late payment interest rate, please contact our friendly team of tax and business advisors. Call us on 01462 687333 or email letchworth@uhy-uk.com
