Following the rise of the Bank of England’s base rate to 5%, the late payment interest rate and the repayment interest rate will both be seeing a new rate. Starting from the 11th of July, the late payment interest rate will increase to 7.5% while the repayment interest rate will increase to 4%.
The rates have both been increased by 0.5%, just a month after its last increment which was made on the 31st of May. Such rates were last witnessed in May of 2001, more than two decades ago.
What Are The Interest Rates Payable On?
For the late payment interest rate, it is payable on late tax bills that cover income tax, Capitals Gains tax, national insurance contributions, corporation tax pay and file, stamp duty and stamp duty reserve tax. Along with the late payment rates, the corporation tax pay and file rate has also increased to 7.5%.
In relation to the interest charged on the underpaid quarterly instalment payments, the corporation tax self-assessment interest rate was also raised from 5% to 5.25% on the 22nd of May.
Why Are The Interest Rates Increasing?
The increase in the interest rates is both in relation to the recent raise in the base rate by the Bank of England to 5%. This was done to bring down the inflation rate from the current amount, which is just under 9%, all the way down to 2%.
At the moment, it is expected by economists that by the end of 2023, the Bank rates may even rise to 6.25%, and in the case of this happening, HMRC is most likely to also make changes in their interest rates.
The issue of high inflation can be seen all over the world and UK is using its own approach to combat this. While it may be difficult to adjust right now, if the target of 2% inflation is achieved, it might bring huge reliefs to citizens.
For more information on how these changes might affect you, don’t hesitate to get in touch with us.
