The new tax year saw a change to the way interest on late paid taxes is calculated. What’s changed and what are the new charges?
Prior to 2025/26, interest was charged at the Bank of England base rate plus 2.5% on most underpaid taxes. In a push for unpaid tax bills to be settled, it was announced at the 2024 Autumn Budget that this would change to the base rate plus 4% from 6 April 2025. The government says the rate of late payment interest encourages prompt payment and ensures fairness for those who pay their tax on time.
From 6 April 2025 the following rates apply:
- Late corporation tax paid quarterly – 7%
- Late payment interest on other taxes – 8.5%
There is no corresponding change to the way repayment interest rates are calculated, i.e. the base rate minus 1%, with a lower limit of 0.5%.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.