HMRC’s decision to reduce interest on late tax payments has garnered attention for its implications.
- Interest on late payments will drop to 7.25% starting 18th November as the Bank of England lowers its base rate.
- Refunds, however, will see a significantly lower interest rate of 3.75%, highlighting a notable disparity.
- Qdos tax specialist, Seb Maley, raises concerns about fairness, especially impacting the self-employed.
- Taxpayers are urged to meet the self-assessment deadline to avoid penalties and higher interest charges.
HMRC has announced a reduction in the interest it charges on late tax payments, lowering the rate to 7.25% from 18th November. This follows the Bank of England’s recent cut in its base rate, and applies to new tax debts and to quarterly instalment taxpayers. For non-quarterly taxpayers, this new rate will be effective from 26th November.
The disparity between the interest rates for late payments and tax refunds has become a focal point of concern. Tax refunds will attract an interest rate of just 3.75%, creating a significant gap. Seb Maley, CEO of Qdos, has highlighted this issue as “the elephant in the room,” pointing out that the approach, while consistent with practices of many tax authorities, is particularly challenging for the self-employed. These individuals often bear a disproportionate impact due to such financial policies.
As the 31st January self-assessment deadline approaches, taxpayers are reminded of the importance of adhering to this timeline to evade the 7.25% late payment interest rate as well as additional financial penalties. Maley emphasised the critical nature of tax compliance, noting, “More than ever, self-employed individuals need to be vigilant about tax compliance, as late payments can come at a high cost.”
This interest rate disparity between HMRC charges for late payments versus refunds remains a contentious issue warranting further examination. In an environment where even a single percentage point difference can have substantial economic consequences, the fairness of HMRC’s policy is being questioned.
The ongoing debate over HMRC’s interest rate policies underscores the complex challenges faced by taxpayers, particularly the self-employed.
