HMRC will raise its late payment interest rate to 8.00% from 7.75% on 24 November, after the Bank of England lifted Bank Rate to 4.00% from 3.75% on Thursday.
Repayment interest, which HMRC pays on overpaid tax, rises to 3.00% from 2.75% on the same date, HMRC said on Friday.
Both rates are set in legislation and tied to the base rate. HMRC said late payment interest “encourages prompt payment” and ensures fairness for those who pay their tax on time.
Late payment interest is set at base rate plus 4%. Repayment interest is base rate minus 1%, subject to a lower limit, known as the minimum floor, of 0.5%. Each rate therefore moves by the same 0.25 percentage points as the base rate.
Companies paying Corporation Tax by quarterly instalments are affected earlier. The rate charged on underpaid instalments rises to 6.50% from 6.25% on 16 November, according to the published rate tables. Interest paid on overpaid instalments goes to 3.75% from 3.50% on the same day.
The 24 November date applies to non-quarterly payments. The same 8.00% rate applies to Income Tax, National Insurance contributions, Capital Gains Tax, Stamp Duty Land Tax, VAT for periods starting on or after 1 January 2023, and Corporation Tax on the normal due date.
The tables show 8.00% for interest on judgment debts in tax matters too.
The floor has no effect at current levels. Repayment interest will be paid at 0.5% until the base rate rises above 1.5%, and will then move with it. HMRC said the floor ensured taxpayers continued to receive 0.5% when the base rate fell to 0.1%.
At 3.00%, the repayment rate is now 2.5 percentage points above that minimum.
The late payment margin was raised from 2.5% to 4% from 6 April 2025. The new rate of 8.00% matches the level set on 27 August 2025, and compares with 8.50% when the wider margin first took effect on 6 April 2025.
The Bank of England said it raised Bank Rate by 0.25 percentage points because conflict in the Middle East has disrupted energy transport and supply and raised prices. Inflation has risen to 3.5% and the Bank expects about 5% by mid-2027, against its 2% target.
Andrew Bailey, governor of the Bank of England, said the rise “shouldn’t be seen as the first in an inevitable long sequence of hikes”. He added that, unless the conflict is resolved, it does not seem likely to be the last increase either.
HMRC said the gap between late payment and repayment rates is in line with the policy of other tax authorities worldwide. It added that the gap compares favourably with commercial practice on loans, overdrafts and deposits.
HMRC said information on the interest rates for payments will be updated shortly.
