The Monetary Policy Committee decided last month to increase the Bank of England (BoE) base rate to 4.25% from 4% and HMRC has followed with an announcement to increase the interest charged on late payment and repayment.
When will this happen?
As HMRC interest rates are linked to the BoE base rate, these changes will come into effect on:
- 3 April 2023 for quarterly instalment payments
- 13 April 2023 for non-quarterly instalment payments
Further guidance and information on rates can be found here.
The impact to UK businesses
The increase in interest rates on late payments means that individuals and businesses that fail to pay their taxes on time will face higher costs. This may incentivise more timely payment of taxes, as the cost of delaying payment becomes greater.
- Greater financial strain on businesses
For businesses that are already struggling financially, the increase in interest rates on late payments may exacerbate their financial difficulties. Higher interest costs could make it more difficult for these businesses to manage their cash flow and meet their financial obligations.
- Increased revenue for HMRC
The increase in interest rates on late payments and repayments is likely to result in increased revenue for HMRC. This revenue could be used to fund public services and infrastructure projects.
- Improved taxpayer compliance
The increase in interest rates on late payments could also improve taxpayer compliance. Individuals and businesses may be more motivated to pay their taxes on time to avoid the increased costs associated with late payment.
If you are concerned about the increasing interest rate and impact on your business, our team can help. Call us today.