Unpaid Taxes: Interest Rates
The question
To ask the Chancellor of the Exchequer, if she will review the adequacy of the 7.75% rate of interest chargeable on unpaid income tax after each January deadline.
Answered by Dan Tomlinson
Late payment interest is charged whenever tax is paid late or paid where amounts have been overpaid.
The interest charged ensures people aren’t encouraged to overpay their tax to secure a higher interest rate than available commercially. It also ensures those paying late don’t get an unfair advantage over those paying on time.
The rates operated by HMRC are linked to the Bank of England Base Rate, with late payment interest set at Base Rate +4% and repayment interest set at Base Rate – 1%.
The rates of interest operated by HMRC are set in legislation following consultation with stakeholders. HMRC does not charge or pay interest for a commercial purpose.
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