HMRC late payment interest rates have now been raised six times during 2022 – from 2.6% at the start of the year to a current rate of 4.25%. However, at least there’s some good news, with an uplift to the tax repayment rate.
The charge for late payment is set at base plus 2.5%. So, with the Bank of England base rate going up from 1.25% to 1.75%, HMRC’s late payment rate has correspondingly gone up from 3.75% to 4.25%. The increased rate applies from 23 August and covers almost all taxes and duties – the exception being quarterly instalment payments of corporation tax, for which the rate has risen from 2.25% to 2.75% since 15 August.
Unfortunately, current predictions have the base rate peaking at 2.25% or 2.5% by the end of 2022, so further late payment interest rate hikes should be expected.
Get up to date
The latest late payment rate increase will hit taxpayers who are not up to date with their tax payments. Many will be struggling to pay outstanding taxes -–particularly the latest self-assessment payment on account due on 31 July – against the backdrop of rising living costs.
- Banks and building societies have generally not passed on the latest 0.5% base rate increase to savers, so it makes sense to use savings to repay, or at least reduce, tax debt.
- For a tax liability of, say, £15,000, the annual late payment interest cost has already risen by nearly £250 to almost £650 during 2022.
Repayment rate
The one piece of good news is that the repayment rate on overpaid tax has gone up by 0.25% to 0.75%, being the first increase in over a decade.
However, the still meagre repayment rate means there is little incentive for HMRC to make prompt repayments, with taxpayers often encountering significant delays.
If you need advice with your income tax contact our Sheffield based Financial Advisers on 01142 664 432 or info@smhca.co.uk
Comments are closed.