HMRC to lower interest rates on late payments

How is HMRC interest calculated? 

Since 6th April 2025, the calculations of late payment and repayment interest have been: 

• Late payment interest: the Bank of England base rate plus 4% 
• Repayment interest: the Bank of England base rate minus 1% 

HMRC says that the difference between the two rates is “in line with the policy of other tax authorities worldwide”. 

Why has HMRC dropped the interest rates? 

The Bank of England base rate recently dropped to 4%, and this drop prompted the announcement of the reduction to HMRC’s interest rates. The Bank of England has been set a target of reducing inflation to 2% from its current level of 3.6% and reducing interest rates aims to help them reach this target 

What does this mean for me? 

If you are late paying any tax liability to HMRC you will pay less interest on the tax due (alongside any potential penalty). However, if HMRC owes you money by way of a tax refund you will also get less interest from them.  

First published 15 Aug 2025

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Helen Wood, CA

Helen is a qualified chartered accountant (CA) and joined TaxAssist in 2025 following three years as a freelance content writer for clients in the tax and accounting publishing sector. Prior to this, She spent 17 years at Big Four and Top 10 accountancy firms. Helen writes clear and helpful articles on tax and accounting for businesses and individuals.

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