HMRC interest rates are linked to the Bank of England base rate. Late payment interest is set at the base rate plus 2.5%. Repayment interest is set at the base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%.

The latest increase in the Bank of England base rate from 4.5% to 5% means that interest on late paid tax will increase to 7.5% for most taxes and the rate of repayment interest will increase to 4% if you overpay.

These changes came into effect on 11 July 2023.

For those companies that must pay their corporation tax by quarterly instalment payments, the rate increased to 6% from 3 July 2023.

If you are late with your self-assessment payment on account for 2022/23 that was due on 31 July 2023, you should pay as soon as possible to avoid incurring further interest charges. Note that there is a 5% surcharge added to any tax still outstanding on 28 August 2023 unless you have agreed on a payment plan with HMRC.