HMRC raises late payment interest rates
Following the recent Bank of England interest rate rise, late payment interest rates levied by HMRC have been revised again.
On 22 September 2022 the Bank of England base rate increased to 2.25%. Because HMRC interest rates are linked directly to the base rate, the latest rise has been automatically triggered. This means that the HMRC late payment interest rate will increase to 4.75% from 11 October 2022. HMRC late payment interest rates have now been raised seven times during 2022, from 2.6% at the start of the year to the current rate.
Late payment interest is payable on late tax bills covering income tax, national insurance contributions (NICs), capital gains tax (CGT), Stamp Duty Land Tax (SDLT) and stamp duty reserve tax. The file and pay rate for Corporation Tax also increases to 4.75 per cent with effect from 11 October 2022. You can see details of all rates here.
The rate last increased to 4.25% on 23 August following the last Bank of England base rate decision. This is the highest rate since the height of the financial crisis in January 2009.
Who will be affected by the new HMRC interest rates? If you are not up to date with tax payments, you will be required to pay the higher interest rates on top of any outstanding taxes. Interest is charged daily from the date that a payment becomes overdue until the date that it’s paid off in full.
The interest rate rises do have a positive side if your business has overpaid much tax. Anyone who has overpaid taxes will earn more interest on repayments, meaning you’ll receive more money back from HMRC. The repayment interest rate is set at base rate minus 1% (with a lower limit of 0.5%) so will increase to 1.25% on 11 October 2022.
Late payment fees can be avoided with proper planning. So if you need more information or think you could benefit from further tax advice please get in touch. Our Partners and expert Tax Team are here to help.