Late payment interest rates on underpaid taxes will soon decrease again due to the recent reduction in the Bank of England’s base rate. The new charges are as under:
On 7 November 2024 an announcement confirmed a reduction in the Bank of England base rate to 4.75% from 5.0%. As HMRC’s late payment and repayment interest rates are linked to the base rate, it has confirmed by HMRC publication that they will also come down.
From 18 November 2024 the following rates will apply:
Late corporation tax paid quarterly – 5.75%
Interest on overpaid corporation tax – 4.5%
From 26 November, the rates for other taxes will be:
Late payment interest – 6.75%
Interest on overpaid tax – 3.75%
Penalty interest can be avoided by paying your tax bill on time. As an added bonus to anyone expecting to receive interest on overpaid taxes, note that such interest is free from income tax.
How HMRC interest rates are set
HMRC interest rates are set in legislation and are linked to the Bank of England base rate.
Late payment interest is currently 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%.
The differential between late payment interest and repayment interest is in line with the policy of other tax authorities worldwide and compares favorably with commercial practice for interest charged on loans or overdrafts and interest paid on deposits.
The rate of late payment interest encourages prompt payment and ensures fairness for those who pay their tax on time, while the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay.
For further details contact Amin & Co Accountants at 0161 224 3510
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