The UK tax authority, His Majesty’s Revenue and Customs (HMRC), has announced a reduction in interest rates for late payments and repayments of tax, setting them at 7.25% (down from 7.5%) and 3.75% (down from 4.0%), respectively.
This adjustment comes after the Bank of England’s announcement that it had lowered the base rate from 5% to 4.75%.
HMRC interest rates are set in legislation and are linked to the Bank of England base rate.
Late payment interest is currently 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 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.
The revised interest rates will be implemented on 18 November 2024 for payments made in quarterly instalments, and on 26 November 2024 for payments made in non-quarterly instalments.
Summary of new HMRC interest rates
|
Tax Type |
Previous Rate (from Aug 2024) | New Rate (from Nov 2024) |
Effective Date |
| General Late Payment Interest | 7.5% | 7.25% | 26 November, 2024 |
| General Repayment Interest | 4.0% | 3.75% | 26 November, 2024 |
| Late Payment (Corporation Tax Quarterly) | 6.0% | 5.75% | 18 November, 2024 |
| Repayment (Corporation Tax Quarterly) | 4.75% | 4.5% | 18 November, 2024 |
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