Following the increase of the Bank of England's (BoE) base rate to 1.75%, HMRC will raise late payment interest on tax bills by 0.5%, coming into effect on 23 August 2022.

This means the late payment interest rate will be 4.25%, having already increased to 3.75% on 5 July. This rate is the highest since the height of the financial crisis in January 2009, when it was set at 4.5%.

The repayment interest rate has increased to 0.75% and will come into effect on 23 August, a jump of 0.25% since 5 July.

Late fees and interest are payable on late tax bills covering:

• income tax
• National Insurance
• capital gains tax
• stamp duty land tax
• stamp duty reserve tax.

There has also been an increase in the corporation tax pay and file rate, which is now 4.25%, up from 3.75%.

HMRC interest rates are set in legislation and are linked to the Bank's base rate. The late payment interest rate is set at the base rate plus 2.5%, and the repayment interest is set at the base rate minus 1%, with a lower limit of 0.5%.

Ask us about your tax bill.