Following the Bank of England base rate increasing to 1.75%, HMRC has confirmed that it will raise its interest rates on late tax bills to 4.25% on 23rd August – a level not seen since January 2009.
Tax and advisory firm Blick Rothenberg warns the move will hit taxpayers who are not up-to-date, and their bills could grow very quickly.
Nimes Shah CEO at the firm said: “Since the start of 2022, the HMRC’s interest rate has increased by 1.5% - that’s the equivalent of an extra £225 per annum on a £15,000 tax liability. On the same £15,000 tax liability, you would suffer almost £650 of interest per annum.
“With continuing rising costs rising across the board, HMRC have hiked up interest on late tax payments at the latest opportunity. It sets a worrying trend for some taxpayers who are struggling to pay their outstanding taxes, against the backdrop of other rising costs.”
Nimesh believes the worst could be yet to come, with some economists projecting the Bank of England could decide to increase the base rate to 2.5% by the end of 2022. He adds: "This could see HMRC increasing their interest rate on late paid tax to 5% by the end of the year. Taxpayers who have outstanding tax liabilities should be mindful to settle as much as they can afford before there are further rate rises.”
HMRC has also announced it will increase the repayment supplement rate by 0.25% to 0.75% - the first increase in this rate in over a decade.