HMRC has added a new guidance section to its tables of repayment and late-payment interest rates. The new guidance ‘How interest rates are set’ clarifies that:
– late-payment interest is set at bank base rate plus 2.5%; and
– repayment interest is set at bank base rate minus 1%, but subject to a minimum rate of 0.5%.
The late-payment interest rate ‘encourages prompt payment’ and ‘ensures fairness for those who pay their tax on time’. The repayment interest rate compensates taxpayers when they overpay or pay early.
HMRC points out that, although the rate of repayment interest is lower (ie where HMRC pays interest to the taxpayer), the minimum 0.5% rate ensured taxpayers continued to receive some interest when the bank base rate fell to 0.1%.
The repayment interest rate will remain at 0.5% until the Bank of England raises the base rate above 1.5% and it will then increase at base rate minus 1%.
HMRC has added a new guidance section to its tables of repayment and late-payment interest rates. The new guidance ‘How interest rates are set’ clarifies that:
– late-payment interest is set at bank base rate plus 2.5%; and
– repayment interest is set at bank base rate minus 1%, but subject to a minimum rate of 0.5%.
The late-payment interest rate ‘encourages prompt payment’ and ‘ensures fairness for those who pay their tax on time’. The repayment interest rate compensates taxpayers when they overpay or pay early.
HMRC points out that, although the rate of repayment interest is lower (ie where HMRC pays interest to the taxpayer), the minimum 0.5% rate ensured taxpayers continued to receive some interest when the bank base rate fell to 0.1%.
The repayment interest rate will remain at 0.5% until the Bank of England raises the base rate above 1.5% and it will then increase at base rate minus 1%.
