Penalty interest rate increases for third time this year
HMRC’s late payment interest rate will rise following another increase in the Bank of England’s base rate. When does this take effect and do taxpayers need to take action?
In line with the increase in the Bank of England base rate, late tax payments will be subject to interest at a rate of 3.25% (currently 3%) per annum from 5 April 2022 (or from 28 March for payments that are made in quarterly instalments). Late payment interest accrues even where a time to pay arrangement has been set up.
This is the third time HMRC has increased late payment interest this year, because the rate is set at 2.5% above base rate. Unfortunately, the repayment interest rate remains 0.5%, being the minimum rate that can be applied. HMRC’s Official Rate of Interest, which is used to calculate the income tax charge on the employee benefit of interest free loans, will also remain unchanged at 2% for the 2022/23 tax year.
Unfortunately, the only way to avoid the increased rate is to ensure all outstanding amounts are paid before 5 April. Where an individual can't do this, try to pay as much as possible to minimise the tax debt liable to the increased rate. In our opinion, the interest rate is likely to rise several times this year, so this makes good sense in any case.
Related Topics
-
Uber loses VAT margin scheme appeal
The Court of Appeal has ruled that Uber cannot use the Tour Operators Margin Scheme (TOMS) when accounting for VAT on its ride-hailing services. The decision could have significant implications for businesses that act as intermediaries when supplying services to consumers. What was the dispute about?
-
Timetable for agent multi-factor authentication rollout published
HMRC has published further details of its plans to introduce multi-factor authentication (MFA) for tax agents. The rollout is intended to strengthen security across HMRC's online services and will be introduced in stages over the coming months. What do you need to know?
-
HMRC clarifies treatment of averaging relief under MTD IT
HMRC has updated its guidance to explain how averaging relief claims will operate under Making Tax Digital for Income Tax (MTD IT). The clarification addresses concerns about how farmers and creators will claim relief once quarterly reporting becomes mandatory. What has changed?
This website uses both its own and third-party cookies to analyze our services and navigation on our website in order to improve its contents (analytical purposes: measure visits and sources of web traffic). The legal basis is the consent of the user, except in the case of basic cookies, which are essential to navigate this website.