HMRC INTEREST RATES REDUCED - RECAP

ASESA Solutions Ltd - HMRC INTEREST RATES REDUCED - RECAP

On 6 February 2025, the Bank of England reduced the base rate from 4.75% to 4.5%. In response, HMRC has revised its interest rates for both late tax payments and repayments of overpaid tax.

New Effective Dates:

• 17 February 2025 – for quarterly instalment payments

• 25 February 2025 – for all other tax payments

How HMRC Interest Works:

HMRC interest rates are legally tied to the Bank of England base rate:

• Late payment interest = Base rate + 2.5%

• Repayment interest = Base rate − 1%, with a minimum floor of 0.5%

  
  

This structure ensures:

Prompt payment is incentivised by charging interest on overdue taxes.

Fair compensation is given to taxpayers when HMRC owes refunds.

Why This Matters to You?

• If you have outstanding tax liabilities, your interest cost will now be slightly lower.

• If HMRC owes you a repayment, the interest paid to you will also be reduced.

• If you're paying tax in instalments (e.g. Corporation Tax), the new rates apply based on the above dates.

Planning Tip: Even with this rate reduction, late payment interest still adds up. Paying on time remains the most cost-effective option.