Interest rates rise: Look out for late payment interest rates

The Bank of England raised interest rates by a quarter of a percentage point on Thursday 5 May, taking its base interest rate up to one per cent.

That is the highest interest rates have been since 2009 and was the Bank’s fourth rise in a row.

It comes as the Bank of England hopes to slow the rate at which prices are increasing by increasing the cost of borrowing to encourage people to spend less and save more.

How will the rise affect me?

The rise will leave many homeowners struggling to meet their monthly mortgage repayments, meaning it is a worrying time for many people.

The rise will also affect the amount of interest charged on things such as bank loans and credit cards, which will hit businesses and individuals alike.

It will also have an impact on any late payment of taxes to HMRC.

Because of the interest rate rise, HMRC’s late payment interest rates have also been revised following the Bank of England’s move.

HMRC interest rates are linked to the Bank of England base rate. As a result, HMRC interest rates for late payments will increase.

When do these changes come into effect?

• 16 May 2022 for quarterly instalment payments
• 24 May 2022 for non-quarterly instalments payments

Late payment interest will be at the base rate, plus 2.5 per cent.

HMRC says that the late payment interest rate encourages “prompt payment” and creates “fairness for those who pay their tax on time.”

According to HMRC, more detailed information on the interest rates for payments will be published shortly online.

Meanwhile, the increase in the late payment interest rate serves as another reminder of the importance of submitting tax returns and payments to HMRC on time.

For advice on tax services and related matters, contact us.