HMRC interest rates fall, following base rate cut

On 7 August 2025, The Bank of England reduced its base rate from 4.25% to 4.00%, this will mean HMRC interest rates which are directly linked to the base rate have also decreased.

Interest rates to apply

HMRC set the interest rate for the late payment of most taxes including, Income Tax, Capital Gains Tax, VAT and Corporation Tax at 4.0% above the base rate. This will mean that from 27 August 2025, the late payment interest percentage fell from 8.25% to 8.00%.

The interest rate for the repayment of these taxes is most of the time based on 1.00% less than the base rate. From 27 August 2025 onwards the interest repayable on these taxes decreased from 3.25% to 3.00%.

Corporation tax due in quarterly instalments

If a company is required to pay its tax bill in quarterly instalments different rates of interest apply on late payments of tax and repayments of tax due.

From 18 August 2025, the interest rate applied on underpaid taxes in this area decreased from 6.75% to 6.50%. In addition, the interest rate applied to the repayment of these taxes decreased from 4.00% to 3.75% from the same date.

If you have any further questions regarding this article, please contact Joe Wilson on 023 8046 1237 or email Joe Wilson.