Warning over new HMRC rules around late tax coming 'within weeks'
HMRC is set to rake in millions through what has been branded a "blatant cash grab". HM Revenue & Customs (HMRC) will rake in an additional £200 million per year by hiking interest payments on late tax, according to Price Bailey, the Top 30 firm of accountants.
Andrew Park, Tax Investigations Partner at Price Bailey, comments: “The interest rates being charged on late tax are now a form of double punishment. Taxpayers are already charged statutory late payment penalties, late filing penalties and heavy penalties for underpaid tax."
The amount of interest charged on unpaid tax liabilities will increase by 1.5 percentage points to Bank Rate plus 4 percentage points. Late payment interest is currently charged at the Bank Rate plus 2.5 percentage points. This measure will be effective from 6 April 2025.
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Andrew said: "This is a worrying shift from charging enough to deny taxpayers an advantage in paying late to creating another punishment by the backdoor. It’s a blatant cash grab by the taxman and one which comes without any safeguards. Existing penalties come with legal protections and can be appealed or mitigated, late payment interest cannot.
"HMRC has long claimed that the interest rates on tax owed and overpaid are fair, but this is now manifestly untrue.” Andrew said:
“Most individuals and businesses pay tax late because they are experiencing financial distress and are simply unable to pay. It’s not a question of them needing an incentive to pay tax on time.
"If punitive interest rates discourage late payment, one would expect the amount HMRC rakes in from late payments to fall but instead they are forecasting a windfall.” He adds: “If businesses or individuals go bust, tax debts can be written off entirely. HMRC is walking a fine line between, on the one hand allowing distressed taxpayers extra time to pay, and on the other squeezing more money out of those already experiencing financial difficulties.”