HMRC interest on late and early payments
Checked 17 July 2026 · How we check our figures
What it is
HMRC charges interest on tax paid late and pays interest on tax overpaid, and both rates are formulas in legislation tied to the Bank of England base rate: late payment at base plus 4 percentage points since 6 April 2025, repayment at base minus 1 with a floor of 0.5 (gov.uk, HMRC interest rates, checked 2026-07-17). Taxpayers meet it as interest on a late tax bill, a line that appears without a decision being taken. What the statements do not spell out is the character of the charge: interest is not a penalty, it compensates for time, runs daily from the due date and does not wait for blame; the excuse doors of the penalty world are a different building.
Reading the notice
The interest line on a statement carries its own arithmetic: the tax's due date starts the clock, the payment date stops it, and the rate between the two moves whenever the Bank of England moves (gov.uk, HMRC interest rates, checked 2026-07-17).
Two rates, one gap: the late payment formula sits 5 points above the repayment formula, floor aside, so the same pound costs far more to owe than it earns to be owed; the current figures are dated in the calculator at /fines/hmrc-interest.
A date boundary runs through older debts: days up to 5 April 2025 accrue at the old base plus 2.5, days from 6 April 2025 at base plus 4, so one bill can carry two formulas (gov.uk, HMRC interest rates, checked 2026-07-17).
The decision in front of you
Pay the tax and the interest stops that day: the charge is days times rate, so the only lever on it is the calendar, and part payments shrink the base the interest runs on.
Set up a Time to Pay arrangement and the penalties can stop accruing while interest continues to run on the outstanding balance: the arrangement manages the debt, it does not switch off the clock (gov.uk).
Dispute the tax itself and the interest follows the outcome: a reduced bill recalculates the interest on the reduced figure, while an unchanged bill leaves the full run in place; the interest line is arithmetic on the tax line, not a separate battle to win.
Do nothing and the meter simply runs: interest keeps accruing daily, penalties stack beside it on their own ladders, and the two together are the real cost of waiting; the penalty ladders live with their own calculators.
What happens next
Overpayments earn the mirror rate: repayment interest compensates for HMRC holding your money, at base minus 1 with the 0.5 floor, which stayed at 0.5 through the near-zero base years by design (gov.uk, HMRC interest rates, checked 2026-07-17).
Large companies inside the quarterly instalment regime run on their own, lower in-year rate, shown in the gov.uk tables and the calculator.
Every base rate decision feeds through to both formulas shortly afterwards; the calculator at /fines/hmrc-interest carries the dated figures.
The numbers
Late payment interest: Bank of England base rate plus 4 percentage points, from 6 April 2025; before that, base plus 2.5 (gov.uk, HMRC interest rates, checked 2026-07-17).
Repayment interest: base rate minus 1 percentage point, floor 0.5 (gov.uk, HMRC interest rates, checked 2026-07-17).
The rates in force today: see the calculator at /fines/hmrc-interest, figures dated there.
The deadlines
Interest runs from the tax's own due date to the day the payment arrives; each tax carries its own due dates, 31 January for Self Assessment being the familiar example (gov.uk).
The formula boundary is 6 April 2025: days before and after it price differently on the same debt (gov.uk, HMRC interest rates, checked 2026-07-17).
Repayment interest needs no claim of its own: it arrives with the refund, and its floor held it at 0.5 through the years the base rate sat below 1.5 (gov.uk, checked 2026-07-17).
What people get wrong
Treating the interest line like a penalty and hunting for a reasonable excuse route: the excuse arguments belong to the penalty regimes, while interest is time-priced arithmetic that runs regardless of the reason for delay.
Budgeting the repayment side at the borrowing side's rate: the two formulas sit 5 points apart by design, floor aside, and an expected refund earns far less than a debt costs (gov.uk).
Reading a Time to Pay arrangement as stopping the meter: it stops enforcement and penalty accrual, not the daily interest on what remains outstanding (gov.uk).
Authority
ss. 101 to 103 Finance Act 2009 and regulations made under them; gov.uk, HMRC interest rates for late and early payments