HMRC late payment interest revised

By psimonparsons on 1st August 2024

HMRC interest rates for late payments will be revised following the Bank of England interest rate cut to 5%.

The Bank of England Monetary Policy Committee announced on 1st August 2024 to reduce the Bank of England 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:

12th August 2024 for quarterly instalment payments
20th August 2024 for non-quarterly instalments payments

HMRC indicate that the Information on the interest rates for payments will be updated shortly.

How HMRC interest rates are set

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%.

The differential between late payment interest and repayment interest is stated to be in line with the policy of other tax authorities worldwide and is claimed to compare favourably with commercial practice for interest charged on loans or overdrafts and interest paid on deposits.

The rate of late payment interest is claimed to encourage prompt payment and ensures fairness for those who pay their tax on time, while the rate of repayment interest is to to fairly compensate taxpayers for loss of use of their money when they overpay.

PAYadvice.UK 1/8/2024