HMRC is raising interest on tax debt following the Bank of England's (BoE) base rate increase on Thursday (2 February).

The new late payment and repayment interest rates will come into effect from 21 February. Taxes affected include income tax, National Insurance contributions (NICs), and capital gains tax.

HMRC will charge 6.5% interest on outstanding tax debt - an 0.5% increase and the highest rate since the beginning of the financial crisis in 2008.

Repayment interest rates will also rise from 2.5% to 3%, meaning HMRC will also pay a higher rate to customers who have overpaid their taxes or paid too early.

Meanwhile, corporation tax self-assessment interest rates relating to interest charged on underpaid quarterly installment payments will increase to 5%.

This announcement came only days after the self-assessment return deadline on 31 January, when around 300,000 individuals failed to pay their taxes in time.

HMRC is urging any customers without outstanding tax debt to submit their returns as soon as possible to avoid further penalties.

Myrtle Lloyd, HMRC's director general for customer services, said:

"Customers who have yet to file, and who are concerned that they will not be able to pay in full, may be able to spread the cost of what they owe with a payment plan."

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