Following the Monetary Policy Committee decision to increase the Bank of England base rate to 5%, HMRC has announced increases to both the interest charged on late paid tax and the rate paid on repayments of tax.
As HMRC interest rates are linked to the Bank of England base rate, the 22 June 2023 increase from 4.5% to 5% has triggered another increase in rates for late payments and repayment of tax.
HMRC has announced that the rate will increase with effect from 3 July 2023 for late quarterly instalment payments. Late payment interest for other late payments will increase from 11 July 2023.
The rate of interest on unpaid instalments of corporation tax liabilities is calculated as base rate plus one. It will increase to 6% from 3 July 2023.
The rate of interest for the late payment of other taxes is calculated as base rate plus 2.5, so will increase to 7.5% from 11 July 2023.
The rate of interest paid by HMRC on the overpayment of tax is calculated as base rate minus one. It will increase to 4% on 11 July 2023.
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