Following the Bank of England’s announcement on 8 May 2025 that the base rate would decrease to 4.25%, HMRC's interest rates are also decreasing by 0.25%, to 8.25% for late payment interest and 3.25% for repayment interest, from 28 May 2025.
The rates, which apply to the main taxes and duties administered by HMRC, track the Bank of England base rate.
From 6 April 2025, the late payment rate is set at 4% above the base rate. This was 2.5%, before 6 April 2025. The repayment rate is set at the base rate minus 1% with a 'minimum floor' of 0.5%.
- For companies in the Corporation Tax quarterly instalment payment regime, the rate of interest on underpaid instalment payments decreases to 6.75% from 7.00%. Repayment interest falls to 4.00% from 4.25%. These changes take effect from 19 May 2025.
- For all other payments, the decrease to 8.25% takes effect from 28 May 2025, as does the fall in the repayment interest rate to 3.25%.
The Official rate of interest, which is most commonly seen in relation to Employment-related loans, currently stands at 3.75%.
- From 6 April 2025, this rate is reviewed quarterly, with any changes in the rate occurring following a quarterly review, where appropriate.
- If there are any in-year changes to the rate, these will take effect on 6 July, 6 October and 6 January.
Useful guides on this topic
Penalties: Late Payment
What penalties are charged when tax is paid late?
Penalties: Late Payment MTD
Penalties for late payment of tax under Making Tax Digital for VAT and Income Tax.
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