Changes to Late Payment Interest Rates
HMRC Announces Change to Late Payment Interest Rates
HMRC have updated its late payment fees for individuals who missed this year's self-assessment tax deadline. Effective from 25th February, the interest rate on overdue tax payments will drop from 7.25% to 7%, in line with the recent reduction in the Bank of England's base rate.
The decrease in interest rates is a positive development for taxpayers; however, experts contend that the gap between the interest levied on late payments and the interest offered on refunds is "profoundly unjust." At present, HMRC provides a mere 3.5% interest on tax refunds, determined by the base rate minus 1%. Taxpayers who fail to meet deadlines face initial fines of £100 for returns that are up to three months overdue, with potential additional penalties reaching as high as £900. After six months, further fines based on the outstanding tax amount will be imposed.
Who Will Be Affected?
Around 1.1 million taxpayers who failed to meet the self-assessment deadline will be impacted.
It is still recommended that those with unpaid tax obligations address them quickly to prevent further penalties and increased scrutiny.
If you have an HMRC online account, you can visit their website https://www.gov.uk/log-in-register-hmrc-online-services to check for any outstanding tax. Alternatively, please feel free to reach out to us https://astonshaw.co.uk/contact/ by phone or email and we will gladly assist in checking this for you if we have access to your HMRC account.
How to prevent late payment interest?
Planning ahead is essential, so we suggest preparing your tax returns well in advance. By taking care of everything early for the year ending 5th April 2025, you can enjoy a stress-free conclusion to the year. Additionally, we recommend keeping funds in a savings account to ensure you can pay your taxes on time.