HMRC has increased late payment interest

HMRC has increased late payment interest

HMRC has updated its guidance to reflect the 1.5% increase in the late payment interest percentage that is now in force.

Late payment interest is charged from the first day that a tax debt is overdue until the day it is paid in full. It has been calculated at the Bank of England base rate plus 4% as of 6 April 2025.

The decision to increase the late payment interest rate was taken at the Budget last autumn, up until this time the interest was only 2.5%.

This means that each time the Bank of England changes the base rate, it will reflect on the amount charged in late payment interest.

However, while taxpayers are charged an increased rate for late payments, HMRC will continue to enjoy a favourable position where it only pays out 3.5% if tax is overpaid, for example for tax refunds.

Although it is not possible to appeal against late payment interest charges, taxpayers can object if HMRC has made a mistake or caused an unreasonable delay, which has contributed to the build-up of interest; for example, if the relevant date or effective date of payment is disputed.