HMRC has increased the interest rates for late payments of tax following the Bank of England’s decision on 5 May 2022 to increase the bank base rate from 0.75% to 1%.
The rate of late-payment interest for most taxes is increased to 3.5% from 24 May 2022, while the rate of interest on underpaid quarterly instalment payments is increased to 2% from 16 May 2022. The repayment interest rate remains at 0.5%.
The increased interest on late payments of taxes will hit taxpayers who are not up to date with their taxes, with bills potentially growing quickly – particularly where taxpayers are struggling to pay outstanding taxes following the impact of the pandemic.
Commenting on the rise, Nimesh Shah, CEO at Blick Rothenberg said: ‘Someone that owes £5,000 to HMRC now faces an annual interest cost of £163 – this is compared to an annual cost of £130 in April 2020 at the start of the pandemic, when HMRC had reduced the late-payment interest rate to 2.6%.’
Noting the disparity between interest on payments due to HMRC and interest paid by HMRC to taxpayers, Shah notes: ‘HMRC’s meagre 0.5% repayment supplement rate means there is not any great incentive for HMRC to release repayments. There appears to be one rule for money owed to HMRC and another for taxpayers who are owed a refund. Many taxpayers have seen significant delays to repayments over the last 12 months, but HMRC can continue to be tardy at little cost to the Treasury.’
The position for businesses owed amounts of VAT by HMRC will also change from 1 January 2023, when the repayment supplement is replaced by repayment interest. Rather than benefiting from the 5% supplement, businesses will instead receive 0.5% repayment interest.
HMRC has increased the interest rates for late payments of tax following the Bank of England’s decision on 5 May 2022 to increase the bank base rate from 0.75% to 1%.
The rate of late-payment interest for most taxes is increased to 3.5% from 24 May 2022, while the rate of interest on underpaid quarterly instalment payments is increased to 2% from 16 May 2022. The repayment interest rate remains at 0.5%.
The increased interest on late payments of taxes will hit taxpayers who are not up to date with their taxes, with bills potentially growing quickly – particularly where taxpayers are struggling to pay outstanding taxes following the impact of the pandemic.
Commenting on the rise, Nimesh Shah, CEO at Blick Rothenberg said: ‘Someone that owes £5,000 to HMRC now faces an annual interest cost of £163 – this is compared to an annual cost of £130 in April 2020 at the start of the pandemic, when HMRC had reduced the late-payment interest rate to 2.6%.’
Noting the disparity between interest on payments due to HMRC and interest paid by HMRC to taxpayers, Shah notes: ‘HMRC’s meagre 0.5% repayment supplement rate means there is not any great incentive for HMRC to release repayments. There appears to be one rule for money owed to HMRC and another for taxpayers who are owed a refund. Many taxpayers have seen significant delays to repayments over the last 12 months, but HMRC can continue to be tardy at little cost to the Treasury.’
The position for businesses owed amounts of VAT by HMRC will also change from 1 January 2023, when the repayment supplement is replaced by repayment interest. Rather than benefiting from the 5% supplement, businesses will instead receive 0.5% repayment interest.
