HMRC has increased the interest rate on tax that is paid late. As the Bank of England increased its own rates, so did HMRC and it is now at its highest for many years ...
Since the beginning of 2022, HMRC's interest rate has increased by 1.5%!
Currently, the late payment and repayment interest rates applied to the main taxes and duties that HMRC charges are:
late payment interest rate - 4.75% from the 11th of October 2022
repayment interest rate - 0.75% from the 11th of October 2022
HMRC sets interest on tax paid late via legislation which is linked to the Bank of England base rate. These two rates are:
late payment interest rate - BoE base rate plus 2.5%
repayment interest rate - BoE base rate minus 1% (0.5% minimum)
According to HMRC, the late payment interest rate encourages prompt payment and ensures fairness for those who pay on time. The repayment interest rate compensates taxpayers fairly when they overpay or pay early.
Since the beginning of 2022, HMRC's interest rate has increased by 1.75% which is the equivalent of an extra £175 per year on a £10,000 tax liability. This equates to £475 of interest per year!
If the Bank of England increases the base rate further to something like 2.5%, which is entirely possible, HMRC could increase its late-paid tax interest rate to a whopping 5% by the end of the year.
"It's one rule for us and one rule for them!"
A great number of taxpayers have seen long delays for the past few years as HMRC continues to move very slowly to make repayments, but is incredibly quick to demand taxpayers pay what they owe.
Until next time ...
HELEN BEAUMONT
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about these new HMRC interest rates and how it may affect any late tax you owe, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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