HMRC late payment interest rates to be revised after Bank of England cuts base rate (2024)

The Bank of England Monetary Policy Committee announced on 1 August 2024 to reduce the Bank of England base rate to 5% from 5.25%.

HMRCinterest rates are linked to the Bank of England base rate.

As a consequence of the change in the base rate,HMRCinterest rates for late payment and repayment will reduce.

These changes will come into effect on:

• 12 August 2024 for quarterly instalment payments
• 20 August 2024 for non-quarterly instalments payments

Information on the interest rates for paymentswill be updated shortly.

HowHMRCinterest rates are set

HMRCinterest rates are set in legislation and are linked to the Bank of England base rate.

Late payment interest is 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 favourably 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.