HMRC has announced an increase in its late tax payment rate, although it has not increased the corresponding interest rate for repayments to taxpayers who have overpaid their tax.
The decision to increase the late payment rate follows the Bank of England’s recent decision to increase UK interest rates to 0.75%.
HMRC has increased the late tax payment rate from 3% to 3.25%, while the repayment rate remains static at 0.5%.
An HMRC spokesperson stated that the different rates ‘provide fairness to taxpayers who pay on time’, with those who do not pay on time facing a ‘higher rate of interest on the unpaid tax that would otherwise have gone to our schools, hospitals and other vital public services’.
The Revenue also argued that setting a higher repayment rate could lead to deliberate overpayments of tax, and emphasised that the repayment rate never falls below 0.5%.
However, some experts warned that the disparity in interest rates is compounded by the amount of time it takes to make repayments to taxpayers.