HMRC Late Payment Interest Rates Revised After Cut to Base Rate

HMRC interest rates for late payments have been revised following the Bank of England’s recent decision to cut interest rates to 5%.

The Bank of England Monetary Policy Committee announced on 1 August 2024 to reduce the base rate to 5% from 5.25%.

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 reduce.

These changes will come into effect on 12 August 2024 for quarterly instalment payments and 20 August 2024 for non-quarterly instalments payments.

Information on the interest rates for payments will be updated shortly, the tax authority said.

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%.

HMRC said: “The differential between late payment interest and repayment interest is in line with the policy of other tax authorities worldwide and compares favourably with commercial practice for interest charged on loans or overdrafts and interest paid on deposits.

“The rate of late payment interest encourages prompt payment and ensures fairness for those who pay their tax on time, while the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay.”