The UK’s tax, payments and customs authority (HMRC) has published a policy paper on 26 March 2025 outlining an increase in the late payment interest rate for unpaid tax liabilities by 1.5 percentage points.
This change will take effect from 6 April 2025 and will apply to both any outstanding amounts and future payments from that date onward.
Changing late payment interest rates on unpaid tax liabilities
Who is likely to be affected
Taxpayers who do not pay their tax at the required time will incur higher interest charges.
General description of the measure
The government will increase the rates charged by HMRC on unpaid tax liabilities by 1.5 percentage points (ppts) from 6 April 2025.
Policy objective
Increasing late payment interest encourages taxpayers to pay on time, helps raise vital revenue for public services, and ensures fairness for those who pay on time.
This forms part of a wider package of measures to close the gap between tax owed and tax paid.
Background to the measure
The government announced at Autumn Budget 2024 that the late payment interest rate would increase by 1.5 ppts.
Interest is charged on:
- late paid tax at Bank of England rate (BR) + 2.5 ppts, increasing to BR + 4 ppts
- late paid Quarterly Instalments of Corporation Tax at BR + 1 ppt, increasing to BR + 2.5 ppts
- late paid Customs Duty at BR + 2 ppts, increasing to BR + 3.5 ppts
HMRC keeps its interest rates under review and following this increase the late payment interest rates remain low compared to commercial borrowing.
This rate increase is an essential part of a package of measures to drive down the debt balance.
