In 2016 the interest rates that are applied to HMRC late payments and surcharges were revised for the first time since September 2009 in response to the cut to the Bank of England base rate. The late payment interest rate was cut from 3 percent to 2.75 percent.
Interest is charged by HMRC on both the late payment of tax and the unpaid penalties that apply to these payments. The interest rate applies to all the main taxes and duties. That includes self-assessment tax, corporation tax, PAYE, National Insurance contributions, income tax and VAT.
How are the Interest Charges Applied?
HMRC charges daily interest on the late payment of taxes and unpaid penalties at a rate of 2.75 percent. The interest is charged on all unpaid amounts from the due and payable date until the time the payment is made. In the past, HMRC used to apply the charge after the end of the tax year, but now all interest charges are raised when payment, in full, has been received.
Detailed calculations of the interest owing are not included on Statements of Account so it is worth making payments as quickly as you can and keeping a check on the amount you owe. While interest is payable on late-paid penalties and surcharges, it is not payable on the interest itself!
If you have substantial tax arrears, surcharges or penalties and you cannot pay them when HMRC want this can have serious consequences. We can usually help negotiate a settlement. For help call 08000 746 757.