HMRC's late payment penalty fees are being revised following the Bank of England's decision to increase interest rates.

The changes will come into effect on 27 June for quarterly instalment payments and 5 July for non-quarterly.

HMRC's repayment interest rate will remain at 0.5%. The repayment rate is set at the bank rate minus 1%, with a 0.5% lower limit.

Interest rates on penalty fees are set in legislation and linked to the Bank of England base rate.

The Bank of England's monetary policy committee voted for an increase in the base rate of interest from 1% to 1.25% on 16 June.

The late payment interest is set at a base rate plus 2.5%. The lower limit ensures taxpayers continued to receive 0.5% repayment interest even when the base rate fell to 0.1%.

Repayment interest will continue to be paid at 0.5% until the BoE raises the base rate above 1.5%, after which repayment interest will increase with the base rate.

The difference between late payment interest and repayment interest is in line with the policy of other tax authorities.

HMRC will be updating its information on interest rates for repayment soon.

Ask us about your tax liability.