The Bank of England (BoE) has raised the base rate of interest to its highest level since 2009. What is the full story and what does this mean for payments due to HMRC?
The BoE has announced that the base rate is increased to 1%, which is a 13-year high. Several other rates that affect individuals are pegged to the base rate – including HMRC’s penalty interest rate that applies to tax paid late. The late payment tax rate is set at the BoE base rate plus 2.5%. Unfortunately, this interest applies to all late payments, even where a time to pay arrangement has been agreed. Anyone on such a plan may wish to accelerate payments, as the instalments will be more expensive once HMRC increases the rate to 3.5%. This is also unlikely to be the last rate hike, with the next review due on 16 June.
The rate of repayment interest, i.e. where HMRC owes the taxpayer money, remains at 0.5%. This is set at the base rate minus 1%, with a lower limit of 0.5%. This will not increase until the base rate increases above 1.5%.
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