HMRC bringing in 'new charges' for thousands of workers next week

James Rodger
·2-min read
The late payment rate will drop from 7.5 per cent down to 7.25 percent while the repayment rate will fall from 4 percent down to 3.75 per cent in the wake of the base rate decision.
-Credit: (Image: Reach Publishing Services Limited)


New HMRC charges are set to hit thousands of people from next week. The late payment rate will drop from 7.5 per cent down to 7.25 percent while the repayment rate will fall from 4 percent down to 3.75 per cent in the wake of the base rate decision.

The new rates imposed by the tax authority will come into force on Monday, 18 November, applying to quarterly instalment payments. HMRC interest rates are set in legislation and are linked to the Bank of England base rate. There are 2 rates - the late payment interest, set at base rate plus 2.5% - and repayment interest, set at base rate minus 1%, with a lower limit of 0.5% (known as the ‘minimum floor’)

The late payment interest rate encourages prompt payment. It ensures fairness for those who pay their tax on time. The repayment interest rate compensates taxpayers fairly, when they overpay, for loss of use of their money, HMRC states.

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"HMRC interest rates are set in legislation and are linked to the Bank of England base rate. Late payment interest is currently set at base rate plus 2.5 per cent. Repayment interest is set at base rate minus 1 per cent, with a lower limit - or ‘minimum floor’ - of 0.5 per cent," HMRC said.

The difference between rates is in line with the policy of other tax authorities worldwide. It compares favourably with commercial practice for interest charged on loans or overdrafts and interest paid on deposits. The lower limit for repayment interest made sure that taxpayers continued to get 0.5% even when the base rate fell to 0.1%.

Repayment interest will be paid at 0.5% until the Bank of England raises the base rate above 1.5%. Then it will increase with the base rate, it says.

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