HMRC interest charges on late tax payments

HMRC charges interest in relation to payments of tax made late, and (rather begrudgingly it seems) pays interest on tax overpaid.

The rates of interest applicable are set out in legislation and are linked to the Bank of England base rate.

Unsurprisingly, with the latest increases to the base rate, HMRC's rates of interest are set to change.

From 11 July 2023 and onwards (at least until further base rate changes are announced) the rate of repayment interest (on tax overpaid) will be a more generous 4%. However, late payment interest will also increase to a substantial 7.5%.

Late payment interest is charged on a daily basis, on any balances unpaid as at the statutory due dates. This includes self-assessment balances (due no later than 31 January following the end of the tax year) and payments on account which are due each 31 January and 31 July that an individual is both within the self-assessment system, and meets criteria for payments on account.

With the July payments just around the corner, and late payment interest reaching it's highest rate in around 22 years…make sure you check your balances and make payment on time. Don't rely on statements being received from HMRC, take matters into your own hands and make use of your personal tax account instead to avoid paying more than necessary!

If you require any further assistance regarding this matter, please don't hesitate to contact one of our team who will be happy to help.