*Late and early repayment Interest rate alert*
Any self employed tax payers with outstanding tax bills should be aware of the changes in HMRC interest rates over the last six months.
HMRC interest rates are set in legislation and are linked to the Bank of England base rate. There are 2 rates:
• late payment interest, set at base rate plus 2.5%
• repayment interest, set at base rate minus 1%, with a lower limit of 0.5% (known as the ‘minimum floor’)
If you can pay all or part of your outstanding tax bills to HMRC then please pay them to avoid additional costs.
These are the latest late payment and repayment rates:-
| From | Late payment % | Repayment % |
| 23 August 2022 | 4.25 | .75 |
| 5 July 2022 | 3.75 | .50 |
| 24 My 2022 | 3.5 | .50 |
| 5 April 2022 | 3.25 | .50 |
| 21 February 2022 | 3.00 | .50 |
| 7 January 2022 | 2.75 | .50 |
As you can see from the table rates, they are increasing fast this year and will continue to go up.
It is anticipated with soaring inflation rates currently at over 10% and the continual rise in the short term to a upper estimate of between 13% -15% in early 2023 that interest rates will continue to rise.
The remaining three Bank of England meetings on the 15 September, 3 November and the 15 December 2022 should unfortunately see further interest rate increases. Experts warn that the expected rate rise in September 2022 is likely to be another 0.50% increase and that would take the late payment rate to 4.75%.
Please don’t compound any outstanding tax bills with increasing late payment amounts, if your struggling to pay then you must contact HMRC to agree how to repay your tax bill or see if you can arrange a time to pay payment plan.
Also please check your tax return to check on the deadline dates to pay tax bills including any payments on account to avoid late payment interest. If your unsure then your Accountant should be able to help you or email us at mcdowallaccountancy@windowslive.com.