Changing late payment interest rates on unpaid tax liabilities
Published 26 March 2025
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This publication is available at https://www.gov.uk/government/publications/changing-the-late-payment-interest-rate-for-unpaid-tax/changing-late-payment-interest-rates-on-unpaid-tax-liabilities
Who is likely to be affected
Taxpayers who do not pay their tax at the required time will incur higher interest charges.
General description of the measure
The government will increase the rates charged by HMRC on unpaid tax liabilities by 1.5 percentage points (ppts) from 6 April 2025.
Policy objective
Increasing late payment interest encourages taxpayers to pay on time, helps raise vital revenue for public services, and ensures fairness for those who pay on time.
This forms part of a wider package of measures to close the gap between tax owed and tax paid.
Background to the measure
The government announced at Autumn Budget 2024 that the late payment interest rate would increase by 1.5 ppts.
Interest is charged on:
- late paid tax at Bank of England rate (BR) + 2.5 ppts, increasing to BR + 4 ppts
- late paid Quarterly Instalments of Corporation Tax at BR + 1 ppt, increasing to BR + 2.5 ppts
- late paid Customs Duty at BR + 2 ppts, increasing to BR + 3.5 ppts
HMRC keeps its interest rates under review and following this increase the late payment interest rates remain low compared to commercial borrowing.
This rate increase is an essential part of a package of measures to drive down the debt balance.
Detailed proposal
Operative date
This change will apply from 6 April 2025 to any outstanding and future amounts from that date.
Current law and proposed revisions
Late payment interest rates for different taxes are set out in the instruments below:
| Legislation | Current law | Proposed revisions |
|---|---|---|
| The Taxes (Interest Rate) Regulations 1989 (SI 1989/1297) | Regulation 3, 3AA, 3AC, 3A. 3ZA, 3ZB, 3ZC, 4 Regulation 3ZA Quarterly instalment payments of Corporation tax |
Bank of England rate + 4% Bank of England rate + 2.5% |
| The Air Passenger Duty and Other Indirect Taxes (Interest Rate) Regulations 1998 (SI 1998/451) | Regulation 4 | Bank of England rate + 4% |
| The Taxes and Duties, etc (Interest Rate) Regulations 2011 (SI2011/2446) | Regulation 3 (for the purposes of section 101 of the Finance Act 2009) | Bank of England rate + 4% per annum |
| The Customs (Import Duty) (EU Exit) Regulations 2018 (SI 2018/1248) | Regulation 45 | Bank of England rate + 3.5% per annum |
Summary of impacts
Exchequer impact (£ million)
| 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 |
|---|---|---|---|---|---|
| +50 | +255 | +260 | +215 | +215 | +215 |
These figures are set out at Table 5.1 of Autumn Budget 24 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2024.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure will have no impact on those who pay their liabilities on time, only those who fail to pay their liabilities by the required date will pay additional interest. Existing guidance on the GOV.UK website will be updated to reflect the changes in the late payment interest rates.
Equalities impacts
It is not anticipated that there will be impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
This measure will have no impact on compliant businesses and civil society organisations however those who fail to pay their liabilities by the required date will pay additional interest.
Operational impact (£ million) (HMRC or other)
There are no operational and delivery impacts as the measure looks to increase existing interest rates which are currently in operation.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored and assessed alongside other measures in the government’s package for closing the tax gap.
Further advice
If you have any questions about this change, please contact Ben Reed on telephone: 03000 547236 or email: benjamin.reed@hmrc.gov.uk.