HMRC to increase interest charged on late paid tax
HMRC is to raise the interest it charges on late paid tax following the Bank of England’s Monetary Policy Committee decision to increase the bank rate to 0.5%.
HMRC’s rates of interest are linked to the Bank of England base rate, so the rise in the base rate from 0.25% to 0.5% on 3 February 2022 has triggered a hike in rates for late payments.
It will increase from 14 February 2022 for late quarterly instalment payments; interest for other late payments will increase from 21 February 2022.
The rate of interest on unpaid instalments of corporation tax liabilities will also increase, to 1.5% from 14 February 2022.
The rate of interest for the late payment of other taxes is calculated as base rate plus 2.5, so will increase to 3% from 21 February 2022. Self assessment taxpayers who missed the 31 January 2022 payment deadline will find their late payment interest costs rising if their tax is still unpaid on 21 February 2022.
The rate of interest paid by HMRC on the overpayment of tax remains unchanged at 0.5% as this rate is calculated as the higher of 0.5% and base rate minus one.