{"id":3281,"date":"2025-04-09T09:35:48","date_gmt":"2025-04-09T08:35:48","guid":{"rendered":"https:\/\/www.robbtax.co.uk\/blog\/?p=3281"},"modified":"2025-04-09T08:36:06","modified_gmt":"2025-04-09T08:36:06","slug":"late-tax-payments-now-charged-at-8-5-per-cent-as-hmrc-hikes-interest-rate","status":"publish","type":"post","link":"https:\/\/www.robbtax.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":1,"featured_media":3284,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11,89],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Late tax payments now charged at 8.5 per cent as HMRC hikes interest rate - Accountants in Sutton Coldfield<\/title>\n<meta name=\"description\" content=\"Robb &amp; Co is an independent firm of chartered accountants and specialist tax advisors based in Sutton Coldfield, West Midlands.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.robbtax.co.uk\/blog\/late-tax-payments-now-charged-at-8-5-per-cent-as-hmrc-hikes-interest-rate\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Late tax payments now charged at 8.5 per cent as HMRC hikes interest rate\" \/>\n<meta property=\"og:description\" content=\"Following changes to legislation, HM Revenue &amp; 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