Following the Bank of England‘s interest rate increase to 5.25%, the interest rates HMRC charges for late payments will also increase.

The Monetary Policy Committee of the Bank of England has announced that the Bank of England base rate will increase from 5.00% to 5.250% on 3 August 2023.

The interest rates charged by HMRC are tied to the Bank of England’s base rate.

As a result of the change in the base rate, HMRC will increase its interest rates for late payments and repayments.

These modifications will become effective on:

  • 14 August 2023 is the due date for quarterly instalments.
  • 22 August 2023 for payments other than quarterly instalments.

How HMRC determines interest rates

The legislation establishes the HMRC interest rates correlated to the Bank of England base rate.

The interest rate for delinquent payments is a base rate plus 2.5%. Repayment interest is set at a base rate minus 1%, with a lower limit or minimum floor’ of 0.5%. The differential between late payment interest and repayment interest is consistent with the policies of other tax authorities worldwide and corresponds favourably to commercial practice regarding interest charged on loans or overdrafts and interest paid on deposits.

The rate of late payment interest encourages swift payment and ensures fairness for taxpayers who pay on time, whereas the rate of repayment interest compensates taxpayers for the loss of use of their money when they overestimate.