Late payment interest to be cut

Published: 12th August 2025

Interest rates were cut from 4.25% to 4% on 6 August. HMRC penalty interest rates are set at the Bank of England base rate plus 4%, and as such a corresponding change to penalty interest will soon take effect.

From 18 August the interest rate on late corporation tax paid quarterly will be reduced from 6.75% to 6.5%. Whereas late payment interest on other taxes will go from 8.25% to 8% from 27 August.

The rate of repayment interest, which is a tax-free payment made on overpaid tax, will also be reduced from 3.25% to 3% from 27 August.