HMRC bringing in new charges for millions of people starting from Monday

HMRC interest rates for late payments will be revised following the Bank of England interest rate cut to 4.75%. The Bank of England Monetary Policy Committee announced on 7 November 2024 to reduce the Bank of England base rate to 4.75% from 5.0%.

HMRC interest rates are linked to the Bank of England base rate. As a consequence of the change in the base rate, HMRC interest rates for late payment and repayment will reduce. These changes will come into effect on Monday 18 November 2024 for quarterly instalment payments.

The changes will then take place on 26 November 2024 for non-quarterly instalments payments. On its website, HMRC, which now operates under the Labour Party government, said: "HMRC interest rates are set in legislation and are linked to the Bank of England base rate.

READ MORE Majorca demands UK tourists 'adopt' two habits and issues holiday warning

"Late payment interest is currently set at base rate plus 2.5%. Repayment interest is set at base rate minus 1%, with a lower limit - or ‘minimum floor’ - of 0.5%. The differential between late payment interest and repayment interest is in line with the policy of other tax authorities worldwide and compares favourably with commercial practice for interest charged on loans or overdrafts and interest paid on deposits.

"The rate of late payment interest encourages prompt payment and ensures fairness for those who pay their tax on time, while the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay."

The Bank’s monetary policy committee (MPC) voted by a majority of eight to one to reduce rates for the second time this year to ease the pressure on households and businesses from high borrowing costs. The pound rose against the US dollar after the Bank’s decision to cut rates, while financial markets reacted by betting that Threadneedle Street would cut interest rates fewer times and at a slower pace over the coming year.