{"id":6304,"date":"2025-04-09T09:35:48","date_gmt":"2025-04-09T08:35:48","guid":{"rendered":"https:\/\/www.bainesjewitt.co.uk\/blog\/?p=6304"},"modified":"2025-04-09T08:35:50","modified_gmt":"2025-04-09T08:35:50","slug":"late-tax-payments-now-charged-at-8-5-per-cent-as-hmrc-hikes-interest-rate","status":"publish","type":"post","link":"https:\/\/www.bainesjewitt.co.uk\/blog\/late-tax-payments-now-charged-at-8-5-per-cent-as-hmrc-hikes-interest-rate\/","title":{"rendered":"Late tax payments now charged at 8.5 per cent as HMRC hikes interest rate"},"content":{"rendered":"<p>Following changes to legislation, HM Revenue &amp; Customs (HMRC) has revised the way it calculates interest on late and early payments, linking it more closely with the Bank of England base rate.<\/p>\n<p><!--more--><\/p>\n<p>The change increases the cost of missing a payment deadline, something every taxpayer should take seriously.<\/p>\n<h3><strong>What is the new late payment interest rate?<\/strong><\/h3>\n<p>HMRC interest rates are set in legislation and move in line with the Bank of England base rate.<\/p>\n<p>As of 6 April 2025, the late payment interest rate was increased to:<\/p>\n<ul>\n<li>Base rate + four per cent (Previously \u2013 Base rate + 2.5 per cent)<\/li>\n<\/ul>\n<p>This new rate will apply to most taxes, including Income Tax, Corporation Tax, VAT, and others where HMRC charges interest on late payments.<\/p>\n<p>In real terms, with the base rate currently at 4.5 per cent, this puts the late payment interest rate at 8.5 per cent, a considerable cost for missing deadlines.<\/p>\n<h3><strong>What about repayment interest?<\/strong><\/h3>\n<p>If you overpay your tax or are due a repayment from HMRC, the interest you receive is also linked to the base rate, but at a much lower margin:<\/p>\n<ul>\n<li>Base rate &#8211; one per cent, with a minimum floor of 0.5 per cent<\/li>\n<\/ul>\n<p>This means that you will continue to receive 0.5 per cent unless the base rate rises above 1.5 per cent.<\/p>\n<p>While this protects taxpayers from earning nothing when base rates are low, it also means that, even with interest rates at a multi-year high, HMRC repayments remain relatively meagre in comparison to the cost of paying late.<\/p>\n<h3><strong>What about Corporation Tax instalments?<\/strong><\/h3>\n<p>For large companies paying Corporation Tax by quarterly instalments, the interest charged on underpaid instalments has risen too.<\/p>\n<p>Previously 5.5 per cent, this rate is now seven per cent.<\/p>\n<p>This change reinforces the need for careful planning and accurate forecasting when it comes to Corporation Tax obligations.<\/p>\n<h3><strong>Why has HMRC made these changes?<\/strong><\/h3>\n<p>The Government aims to encourage prompt payment and ensure fairness for those who meet their tax obligations on time.<\/p>\n<p>The increased penalty margin is designed to act as a deterrent for late payment.<\/p>\n<p>At the same time, the repayment interest is deliberately lower, in line with how many tax authorities operate internationally, and broadly consistent with commercial borrowing and deposit rates.<\/p>\n<h3><strong>What should taxpayers do now?<\/strong><\/h3>\n<p>With interest rates at their highest levels in years and HMRC tightening its grip on late payments, this is the time to:<\/p>\n<ul>\n<li>Check your payment schedules and diarise key deadlines<\/li>\n<li>Ensure you have sufficient cash flow to meet tax obligations on time<\/li>\n<li>Review your approach to instalment payments if you are affected by Corporation Tax changes.<\/li>\n<\/ul>\n<p>The cost of delay is higher than ever and avoidable in many cases.<\/p>\n<p>Need help reviewing your tax deadlines or planning your payments more effectively?<\/p>\n<p><strong>Our team is here to help. Contact us today for tailored advice and support.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Following changes to legislation, HM Revenue &amp; Customs (HMRC) has revised the way it calculates interest on late and early payments, linking it more closely with the Bank of England base rate.<\/p>\n","protected":false},"author":2,"featured_media":6307,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,125],"tags":[],"_links":{"self":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6304"}],"collection":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=6304"}],"version-history":[{"count":1,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6304\/revisions"}],"predecessor-version":[{"id":6305,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6304\/revisions\/6305"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media\/6307"}],"wp:attachment":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=6304"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=6304"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=6304"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}