Following the Bank of England’s announcement on 6 February 2025 to lower the base rate to 4.5%, HMRC will also adjust its interest rates accordingly. From 25 February 2025, late payment interest will decrease by 0.25% to 7.00%, while repayment interest will drop to 3.50%.
These rates apply to the primary taxes and duties managed by HMRC and are directly linked to the Bank of England base rate. The late payment interest rate is set at 2.5% above the base rate, while the repayment interest rate is calculated as the base rate minus 1%, with a minimum threshold of 0.5%.
- For companies paying Corporation Tax through quarterly instalments, the interest rate on underpaid instalments will decrease from 5.75% to 5.50%, and repayment interest will fall from 4.50% to 4.25%. These adjustments take effect from 17 February 2025.
- For all other payments, the new late payment interest rate of 7.00% and repayment interest rate of 3.50% will apply from 25 February 2025.
Additionally, the Official Rate of Interest, commonly associated with employment-related loans, has been set at 2.25% for the 2024-25 tax year.
As announced in the 2024 Autumn Budget, the late payment interest rate will increase by 1.5 percentage points from 6 April 2025.
