HMRC will lower late payment and repayment interest rates for the first time in a year. The Bank of England (BoE) cut the base rate to 5.0% on 1 August, the first reduction in over four years. This change has prompted HMRC to adjust its rates, which are tied to the base rate, though the changes will take effect on 20 August.
From 20 August, the late payment interest rate will decrease to 7.5% from 7.75%, where it has remained for the past 12 months. The repayment interest rate will drop to 4.0% from 4.25%.
HMRC interest rates were last at this level in January 2008. Late payment interest is set at the base rate plus 2.5%, while repayment interest is set at the base rate minus 1%, with a lower limit of 0.5%.
Additionally, on 12 August, the corporation tax self-assessment interest rate for underpaid quarterly instalments will decrease to 6.0% from 6.25%.
As a result, HMRC will continue to pay lower interest on overpayments, with the rate decreasing to 4.75% from 5.0%. Similarly, the interest on overpaid quarterly instalments and early payments of corporation tax not due by instalments will also drop to 4.75% from 5.0%.
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