HM Revenue and Customs will charge 8 per cent interest on late tax payments after the Bank of England raised its base rate to 4 per cent, the tax authority has confirmed.

HMRC announced the change on 6 November, a day after the Bank's Monetary Policy Committee voted 8-1 to lift the base rate from 3.75 per cent to 4 per cent, the first increase since August 2023. HMRC interest rates are set in law and linked directly to the Bank rate, so they move automatically when the Bank acts.

Late payment interest is set at the base rate plus four percentage points, which takes it from 7.75 per cent to 8 per cent. Repayment interest, paid to taxpayers who have overpaid, is set at the base rate minus one percentage point, rising from 2.75 per cent to 3 per cent.

Two dates for the new rates

The higher rates do not start on the same day for everyone. They take effect on 16 November 2026 for quarterly instalment payments, which typically affect larger companies, and on 24 November 2026 for non-quarterly instalment payments, covering Self Assessment, VAT, PAYE, Capital Gains Tax and Stamp Duty Land Tax.

HMRC says the late payment rate encourages prompt payment and keeps things fair for people who pay on time, while the repayment rate compensates taxpayers for the loss of use of their money when they overpay.

The rise will add to the cost of paying tax late at a time when the Bank has also warned that further rate rises are possible if the war in Iran continues and energy prices stay high. Taxpayers with Self Assessment bills due on 31 January 2027 will face the 8 per cent rate on any amount paid late.