HMRC late payment interest cut by 0.25%

HMRC late payment interest cut by 0.25%

The Bank of England cut the base rate to 5.0% on 1 August, which was the first reduction for over four years.

This has triggered a cut in HMRC interest rates which are linked to the base rate, although this will take a few days to filter through the system.

Therefore, with effect from 20 August, the late payment interest rate will be cut to 7.5% from 7.75%, where it has been for the last 12 months.

The repayment interest rate will reduce to 4.0% from 4.25% also from 20 August.

HMRC late payment interest is set at base rate plus 2.5%. Repayment interest is set at base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%.

Corporation tax self-assessment interest rates relating to interest charged on underpaid quarterly instalment payments drops to 6.0% from 6.25% from the earlier date of 12 August.

With late payment interest now 2.5% above the Bank of England base rate, HMRC continues to pay lower interest to taxpayers affected by overpayments of tax at 4.75% from 12 August, down from 5.0%.

The interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments is down by 0.25% to 4.75% from 5% from 12 August.