UK’s HMRC will reduce interest rates for late tax payments and repayments following the Bank of England’s base rate cut.
UK’s HM Revenue & Customs (HMRC) has announced that interest rates for late tax payments and repayments in the UK will be reduced, following the Bank of England’s cut to the base rate.
The rates, which are set in legislation and linked directly to the Bank of England base rate, were confirmed by HMRC on 19 December 2025.
The Bank of England’s Monetary Policy Committee lowered the base rate to 3.75% from 4.00% on 18 December 2025.
Late payment interest is currently charged at the base rate plus 4%. Repayment interest is set at the base rate minus 1%, subject to a minimum floor of 0.5%. HMRC stated that the differential between the two rates aligns with the approach used by other tax authorities worldwide and is broadly consistent with commercial practices for loans and deposits.
HMRC explained that the late payment interest rate encourages prompt payment and ensures fairness for taxpayers who pay on time, while the repayment interest rate compensates taxpayers for the loss of use of their money when tax has been overpaid.
The revised rates will take effect on different dates depending on the type of payment:
| Payment type | Effective date |
| Quarterly instalment payments | 29 December 2025 |
| Non-quarterly instalment payments | 9 January 2026 |
Earlier, HMRC published updated interest rates for late and early payments on 8 August 2025, following the Bank of England’s 7 August decision to lower the base rate.
