HM Revenue & Customs (HMRC) will once again increase the interest rate applied to late tax payments following the latest hike in the Bank of England base rate.
On 22September 2022, the Bank of England voted in favour of another 0.5 percentage point increase, taking the base rate from 1.75 per cent up to 2.25 per cent.
This comes just a matter of weeks after HMRC increased its rates when the base rate increased by 0.5 percentage points in early August.
Effective 23 August, the late payment interest rate increased to 4.25 per cent – the highest rate since the height of the financial crisis in January 2009. Now, from 3 October 2022 (for quarterly instalment payments) the late payment interest rate will rise to 4.75 per cent.
For non-quarterly instalments payments, the changes will come into effect on 11 October.
It will put further pressure on those struggling to pay their tax bills in the face of the cost-of-living crisis.
Late payment interest is payable on late tax bills, including:
- Income Tax
- Capital Gains Tax
- Stamp Duty Land Tax
For businesses subject to Corporation Tax, the pay and file rate will also be upped to 4.75 per cent.
What is HMRC repayment interest?
If you, your company, or organisation pays too much Corporation Tax, HMRC will repay what you have overpaid and may also pay you interest on it.
The repayment interest rate will increase for the second time in a year, to 1.25 per cent, up from 0.75 per cent.
Interest rates set in legislation
HMRC interest rates are set in legislation and are linked to the Bank of England base rate, so the rise is automatically triggered.
How can George Hay help?
For professional advice on this and other tax-related matters, please contact me or a member of our team on 01767 315010.
