HMRC has confirmed it will raise interest rates on late tax bills by 0.25 percentage points after the Bank of England increased the base rate of interest to 1%.
The announcement means the late payment interest rate and corporation tax pay and file rate will increase to 3.5% from 24 May 2022 (16 May 2022 for quarterly instalment payments) after the Government increased it to 3.25% on 5 April – the highest rate since the height of the financial crisis in January 2009.
Late payment interest is payable on late tax bills including income tax, National Insurance contributions, capital gains tax, and stamp duty land tax.
HMRC interest rates are set in legislation and are linked to the Bank of England base rate, which the Bank increased from 0.75% to 1% on 5 May 2022.
There are two main rates:
• late payment interest, which is set at the base rate plus 2.5%
• repayment interest, which is set at the base rate minus 1%
with a lower limit of 0.5%.
Corporation self-assessment interest rates relating to interest charged on underpaid quarterly instalment payments rose to 2% on 16 May 2022, up from 1.75%.
Meanwhile, the repayment interest rate remains unchanged at 0.5%, the same level it’s been set at since 29 September 2009.