Changes to HMRC Interest Rates from April 2025: What You Need to Know

HMRC has announced changes to how it calculates the interest rates on tax that is paid late, that will take effect from 6 April 2025.

These changes could impact businesses and individuals who may owe tax, making it crucial to stay informed and plan accordingly.

Currently, HMRC's late payment interest rate for most taxes, including income tax, national insurance, corporation tax (excluding quarterly payments) and VAT, is set at 2.5% above the Bank of England base rate. However, from 6 April 2025, this will increase to 4% above the base rate. This means that anyone who misses a tax payment could face significantly higher interest charges on overdue amounts.

The repayment interest rate—applied when HMRC owes taxpayers money—remains unchanged at base rate minus 1%, with a minimum rate of 0.5%.

If you think you might struggle to pay your tax bill on time, including personal tax payments on account, it is essential to consider the financial impact of these increased interest rates. In some cases, alternative borrowing options may be more cost-effective than incurring HMRC’s late payment interest.

For companies making quarterly payments, the late payment interest rate is currently 1% above base rate, and again this is increasing, so with effect from April 2025 the rate will be 2.5% above base rate.

The Official Rate of Interest (ORI) is used for tax calculations on certain employment benefits, such as company loans and employer-provided accommodation. Currently, the ORI for 2024/25 is set at 2.25%.

Historically, this rate has been fixed for an entire tax year. However, from 6 April 2025, the ORI will be reviewed quarterly, meaning that potential changes could take place on 6th April, 6th July, 6th October or 6th January.

While it is unclear whether the ORI will increase under this new system, the move to quarterly reviews introduces a level of uncertainty and additional administrative burdenfor businesses managing employee benefits. Employers and employees should be prepared for possible mid-year adjustments to their tax calculations.

With these changes on the horizon, it’s more important than ever to stay on top of tax deadlines and assess how interest rate shifts may affect your financial planning. If you’re concerned about making payments on time, speak to your accountant or financial adviser to explore the best options for your circumstances.

For more information or to discuss how these changes could impact you, feel free to contact our team at Forrester Boyd.

All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.