A further increase on interest paid to HM Revenue & Customs (HMRC) for late payment of taxes will hit taxpayers who are not up-to-date, and their bills could grow very quickly.
Our CEO Nimesh Shah said: “Following another Bank of England base rate increase to 1.75%, HMRC has confirmed that it will raise interest rates on late tax bills to 4.25% on 23 August – a level not seen since January 2009.
“Since the start of 2022, HMRC’s interest rate has increased by 1.5% – that’s the equivalent of an extra £225 per annum on a £15,000 tax liability. On the same £15,000 tax liability, you would suffer almost £650 of interest per annum.
“With costs continuing to rise across the board, HMRC have hiked up interest on late tax payments at the latest opportunity. It sets a worrying trend for some taxpayers who are struggling to pay their outstanding taxes, against the backdrop of other rising costs.
“The worst is yet to come on this front, with some economists projecting the Bank of England could decide to increase the base rate to 2.5% by the end of 2022. This could see HMRC increasing their interest rate on late paid tax to 5% by the end of the year. Taxpayers who have outstanding tax liabilities should be mindful to settle as much as they can afford before there are further rate rises.
“HMRC have also finally increased the repayment supplement rate from 0.25% to 0.75% – the first increase in this rate in over a decade. It’s quite shocking that HMRC have quickly increased the rate on late paid tax by six times the amount the equivalent repayment interest rate has gone up by this year.
“HMRC’s 0.75% repayment supplement rate means there is not any great incentive for HMRC to release repayments. There continues to be one rule for money owed to HMRC and another for taxpayers who are due a refund. Many taxpayers have seen significant delays to repayments over the last 12 months, but HMRC can continue to drag their heels with little cost to the Treasury.”
Would you like to know more?
If you would like further information on this topic including how we can help you prepare for these changes, please contact Nimesh Shah using the details on this page or the form below.