Permanent increase to penalty interest rates
The new tax year saw a change to the way interest on late paid taxes is calculated. What’s changed and what are the new charges?
Prior to 2025/26, interest was charged at the Bank of England base rate plus 2.5% on most underpaid taxes. In a push for unpaid tax bills to be settled, it was announced at the 2024 Autumn Budget that this would change to the base rate plus 4% from 6 April 2025. The government says the rate of late payment interest encourages prompt payment and ensures fairness for those who pay their tax on time.
From 6 April 2025 the following rates apply:
- Late corporation tax paid quarterly - 7%
- Late payment interest on other taxes - 8.5%
There is no corresponding change to the way repayment interest rates are calculated, i.e. the base rate minus 1%, with a lower limit of 0.5%.
Related Topics
-
Should you use simplified expenses?
The flat rate expense you can claim for business journeys if you’re self-employed has increased to 55p per mile. Can you use simplified expenses for motoring costs and is it more tax efficient to do so?
-
Topping up your spouse’s pension
Company pension contributions are highly tax efficient. As you’ve maxed out your contributions you want to begin adding to your spouse’s pension pot. Can your company make the contributions or do you need to pay out of your own pocket?
-
Electronic VAT return and payment due