The Bank of England Monetary Policy Committee announced on 1 August 2024 a reduction in the base rate from 5.25% to 5%.
HMRC interest rates, which are linked to the Bank of England base rate, will subsequently be reduced for both late payment and repayment of taxes.
The new HMRC interest rates will take effect on:
a. 12 August 2024 for quarterly instalment payments
b. 20 August 2024 for non-quarterly instalment payments
HMRC interest rates are established by legislation and are tied to the Bank of England base rate. Late payment interest is calculated at the base rate plus 2.5%, while repayment interest is set at the base rate minus 1%, with a minimum floor of 0.5%.
This differential between late payment and repayment interest aligns with the policies of other tax authorities globally and is comparable to commercial practices for interest on loans or overdrafts and interest paid on deposits.
The late payment interest rate is designed to encourage timely payment and ensure fairness for those who pay their taxes on time. Conversely, the repayment interest rate compensates taxpayers fairly for the loss of use of their money when they have overpaid.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.
