HMRC interest rate changes
Over the past two years, the Bank of England base rate has been steadily increasing. From an all-time low of just 0.10% during the bulk of the pandemic, the base rate has now increased to 5.25% as the Bank of England try to tackle inflation and reduce it down towards its 2% target.
Whilst this is still somewhat short of the 1979/80 all-time high of 17.00%, attention has naturally been drawn to the impact on those with mortgages. Savers will have also noticed interest rate rises, though these have not kept up with inflation.
Less noted in the wider media, however, is the impact this has had on interest rates for late payment of tax to HM Revenue & Customs. The rate is set out in legislation as the base rate plus 2.5%.
Late payment of tax (both income tax and corporation tax) in the majority of 2020 and 2021 would have only incurred late payment interest of 2.60%. On 22 August 2023 this increased to 7.75%, which is almost three times as high as two years ago. Such a high late payment interest rate has not been seen in the UK since the 2008 banking crisis.
Having your accounts and tax return prepared timeously will help to provide advance notice of tax liabilities and reduce your risk of incurring late payment interest. Should you require assistance with your company’s accounts or personal tax return, please contact your local Perrys branch.