HMRC Late Payment Interest Rates Reduced – What You Need to Know
HM Revenue & Customs (HMRC) has announced a reduction in late payment interest rates, following the recent cut in the Bank of England base rate. If you owe tax or are due a repayment, these changes could impact you.
What Are the New HMRC Interest Rates?
From February 2025, HMRC’s interest rates will be adjusted as follows:
- Late payment interest will decrease from 7.25% to 7%.
- Repayment interest (paid on tax refunds) will drop from 3.5% to 3.25%.
When Will the Changes Take Effect?
The new rates will apply from:
- 17 February 2025 for quarterly instalment payments.
- 25 February 2025 for non-quarterly instalment payments.
How Do These Changes Affect Taxpayers?
- If you have overdue tax, you will pay a lower interest rate on late payments, helping to reduce financial penalties.
- If you are due a tax refund, the repayment interest rate will also decrease, meaning you will receive less interest on any repayments from HMRC.
Why Are HMRC Interest Rates Changing?
HMRC’s interest rates are linked to the Bank of England base rate, which influences the cost of borrowing. When the base rate falls, HMRC adjusts its rates accordingly to align with market conditions.
What Should You Do?
- If you owe tax, consider making payments before 17 February 2025 to minimize interest costs.
- If you’re expecting a tax refund, be aware that repayment interest will be lower from 25 February 2025.
- Stay updated with HMRC tax rate changes to effectively manage your tax obligations.
For the official HMRC announcement, visit:https://www.gov.uk/government/news/hmrc-late-payment-interest-rates-to-be-revised-after-bank-of-england-lowers-base-rate–2
If you need guidance on tax payments, late payment penalties, or tax refunds, contact our expert team for tailored advice!