HMRC raises late payment interest from 11 October 2022

Following the Monetary Policy Committee decision to increase the Bank of England base rate to 2.25%, HMRC announced increases to both interest charged on late paid tax and the rate paid on repayments of tax.

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

There are 2 rates:

• late payment interest, set at base rate plus 2.5%

• repayment interest, set at base rate minus 1%, with a lower limit of 0.5% (known as the ‘minimum floor’)

From 11 October 2022 HMRC raised interest rates on tax debt. This will see the late payment interest rate increase to 4.75%. The last rate increase was on 23 August from 3.75% to 4.25%. This latest increase is the highest rate since January 2009. The rate remained static throughout 2021.

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 (SDRT).

The repayment interest rate will also be increased from the current 0.75% repayment interest rate to 1.25%.

Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments have also been raised to 3.25%, up from 2.75% from 3 October 2022 (with the higher rate above applying from the normal due date).

The interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments rises to 2% from 1.5% from 3 October 2022.

Source: Gov, ICAEW

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