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TAX NEWS

Latest interest rate change increases tax repayment rate

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Published: 09 Aug 2022 Update History

Following the Monetary Policy Committee decision to increase the Bank of England base rate to 1.75%, HMRC has announced increases to both interest charged on late paid tax and the rate paid on repayments of tax. ICAEW’s Tax Faculty highlights what is changing and from when.

As HMRC interest rates are linked to the Bank of England base rate, its 4 August increase from 1.25% to 1.75% has triggered another increase in rates for late payments.

HMRC has announced that the rate will increase with effect from 15 August 2022 for late quarterly instalment payments, and that late payment interest for other late payments will increase from 23 August 2022.

The rate of interest on unpaid instalments of corporation tax liabilities is calculated as base rate plus one. It will increase to 2.75% from 15 August 2022.

The rate of interest for the late payment of other taxes is calculated as base rate plus 2.5, so will increase to 4.25% from 23 August 2022.

The rate of interest paid by HMRC on the overpayment of tax will also increase to 0.75% on 23 August 2022 – the first change since 29 September 2009. The repayment rate is calculated as the higher of:

  • 0.5%; and
  • base rate minus one.
 
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