Base rate increases again
The Bank of England raised the base rate of interest to its highest level since 2009. What is the full story and what does this mean for payments due to HMRC?
At 1 December 2021, the BoE base rate was 0.1%. It has already been increased three times since. The BoA has now announced that the rate is increased to 1%, which is a 13-year high. Of course, a number of other rates that affect individuals are pegged to the base rate – including HMRC’s penalty interest rate that applies to tax paid late. The late payment tax rate is set at the BoE base rate plus 2.5%. Unfortunately, this interest applies to all late payments, even where a time to pay arrangement has been agreed. Anyone on such a plan may wish to accelerate payments, as the instalments will be more expensive once HMRC increases the rate to 3.5%. This is also unlikely to be the last rate hike, with the next review due on 16 June.
The rate of repayment interest, i.e. where HMRC owe the taxpayer money, remains at 0.5%. This is set at the base rate minus 1%, with a lower limit of 0.5%. This will not increase until the base rate increases above 1.5%.
Related Topics
-
Cut your losses to get a tax refund
You invested in a company that’s now in dire straits and your shares are worth next to nothing. Selling them isn’t an option so how do you go about getting some tax back on your bad investment?
-
HMRC updates advisory fuel rates from 1 March 2026
HMRC has published the latest advisory fuel and electric rates (AFRs) for company cars, effective from 1 March 2026. Several rates have changed since the previous quarter. What should employers be aware of?
-
5 April deadline approaching for key tax relief claims
With the end of the 2025/26 tax year now less than seven weeks away, business owners and company directors should remember that several valuable reliefs and elections must be made before 5 April. Which opportunities are about to close?