HMRC is reducing the interest rate on late tax payments to 7.25% starting November 18th, 2024, after a cut in the Bank of England’s base rate.
- This change highlights a significant disparity, as HMRC offers only 3.75% interest on tax refunds.
- The revised rates apply to new tax debts and quarterly instalment taxpayers from November 18th, and from November 26th for those on non-quarterly plans.
- Qdos tax insurance specialist emphasizes the importance of meeting the January 31st self-assessment deadline to avoid penalties.
- The self-employed are particularly affected by the disparity, raising fairness concerns.
The HMRC has announced a reduction in the interest rate it charges on late tax payments to 7.25%, effective from November 18th, 2024. This move is in response to the recent cut in the Bank of England’s base rate and aims to provide some relief to taxpayers with outstanding debts.
However, this adjustment brings to light a notable disparity in the interest treatment between late payments and refunds. While taxpayers benefit from a reduction in charges on overdue payments to 7.25%, the interest on refunds remains significantly lower at 3.75%. This creates a gap that favors HMRC, sparking debate on its fairness.
The new rates will impact taxpayers with new tax debts and those who pay through quarterly instalments starting from November 18th. For taxpayers on non-quarterly payment plans, the effective date will be November 26th. As the January 31st self-assessment deadline approaches, taxpayers are encouraged to comply in a timely manner to avoid the 7.25% interest and any subsequent penalties.
Seb Maley, CEO of Qdos, expressed concerns over this discrepancy, stating that the focus should remain on meeting tax obligations by the deadline to prevent additional costs. He highlighted, “The real talking point here – the elephant in the room – is the difference between the interest rate HMRC charges on late payments and the rate it offers on refunds.” Maley pointed out that while such practices might align with other tax authorities, they remain particularly burdensome for the self-employed, who feel the impact more severely.
With the self-assessment deadline looming, taxpayers are reminded of the importance of vigilance in tax compliance. Ensuring timely payments can help avoid the high costs associated with late payments. Maley further commented, “More than ever, self-employed individuals need to be vigilant about tax compliance, as late payments can come at a high cost.” The difference in interest rates between payments and refunds continues to be a contentious issue, meriting further examination.
The interest rate disparity between late payments and tax refunds by HMRC raises ongoing questions about system fairness.
