Later this month the late payment interest rate charged by HMRC is set to rise as the organisation reacts to the Bank of England’s MPC decision to hike interest rate to 4%.
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%.
These changes will come into effect on 13 February for quarterly instalment payments, and on 21 February 2023 for non-quarterly instalments payments.
A spokesman for 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.”
