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The government has announced an increase in late payment interest charged by HMRC on late tax payments. HMRC interest rates are set in legislation and are linked to the Bank of England base rate. The late payment interest rate was previously set at base rate plus 2.5%. The announcement today confirms that this will be increased by 1.5% to the Bank of England base rate plus 4%.
The purpose of this is to encourage prompt payment of tax liabilities, with a view to ensuring fairness for taxpayers who pay their tax on time.
Individuals and businesses who do not pay their tax liabilities at the required time.
These changes will take effect from 6 April 2025.
This announcement was not expected and whilst may help to tackle the issue of taxpayers not prioritising HMRC debts, will equally impact taxpayers who are unable to pay their tax liabilities on time. Late payment interest is automatically charged and continues to run on an unpaid tax liability from the tax due date to the date that the liability is paid.