HMRC - 07.09.2022

HMRC late payment interest rates increase again

How HMRC interest rates are set

HMRC interest 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%.

What are the new rates?

As the Bank of England base rate was increased by 0.5% to 1.75% in August 2022, the late payment interest rate was increased on 23 August 2022 from 3.75% to 4.25%. For the first time since January 2009, the repayment interest rate went above the 0.5% minimum floor to 0.75%.

Tip. If your current account is paying less than 0.75% interest on money on deposit, see if you can pay PAYE early to take advantage of the higher repayment interest rate.

Calculating the late payment interest

The interest of 4.25% per annum is applied daily to late payments of PAYE from the date the payment becomes overdue to the day it’s paid in full. The due date for payments is the 19^th of the month if paying by cheque and by the 22^nd of the month if paying electronically.

Note. If you pay electronically, interest on your payment does start to accrue in HMRC systems from the 19^th if you haven’t paid it by that date, but the interest is then cancelled when the payment clears, as long as it’s paid on or before the 22^nd .