HMRC has updated the late payment interest rates following a further increase in the Bank of England base rate in August 2023. Discover how this will affect your business.
Amid the ongoing challenge of mounting inflation in the UK, The Bank of England Monetary Policy Committee (MPC) announced an increase to the Bank of England base rate from 5.00% to 5.25% earlier this month – the 14th consecutive increase and the highest base rate for 15 years.
Charges for late payment interest are directly linked to the Bank of England’s base interest rate. As a result, this decision by the Bank of England MPC has prompted HMRC to adjust its late payment and repayment interest rates.
What are the new late payment and repayment interest rates?
The newly revised late payment and repayment interest rates apply to the primary taxes and duties that HMRC charges, including VAT. The updated rates are as follows:
- Late Payment Interest Rate: 7.75%
- Repayment Interest Rate: 4.25%
These revisions are set to become effective on the following dates:
- 14th August 2023 for quarterly instalment payments
- 22nd August 2023 for non-quarterly instalment payments
Interest charging on late VAT payments
From January 2023, HMRC implemented a new penalty system for late submissions and delayed VAT payments. Late payment interest is now applied from the day a VAT payment becomes overdue until the payment has been made in full. You can find a comprehensive summary of HMRC’s new VAT penalty regime and interest charging in our previous VAT insight.
In light of the changes to late payment and repayment interest rates, it is crucial to prioritise timely payments and avoid errors to mitigate the potential consequences of these revised rates.
Protect your business against costly penalties with expert VAT advice
As the revised interest rates increase late payment charges, making sure your business maintains timely VAT payments is paramount.
If you are struggling to manage your payments, our team of VAT and indirect tax accountants are here to offer financial guidance tailored to your business needs.
For more information on how we can help you stay VAT compliant, contact us today.
