In light of the Monetary Policy Committee's recent decision to raise the Bank of England base rate to 5.25%, HMRC has declared an uptick in their own interest rates applied to both late tax payments and the interest rate on tax repayments ...
I am beginning to wonder how these regular HMRC interest rate hikes are going to affect small businesses!
Link with the Bank of England Base Rate: The interest rates set by HMRC are directly tied to the Bank of England base rate. The recent surge from 5% to 5.25% on 3rd of August has set off another round of rate adjustments for both late tax payments and tax repayments.
Corporation Tax Liabilities: The interest rate on unpaid instalments of corporation tax is determined as the base rate plus one. This means the rate will climb to 6.25% starting from 14th of August 2023.
Late Payment of Other Taxes: The interest rate for other late tax payments is the base rate plus 2.5. As a result, this rate will jump to 7.75% from 22nd of August 2023.
Overpayment of Tax: The interest rate that HMRC pays on tax overpayments is the base rate minus one. This rate will see an increase to 4.25% on 22nd of August 2023.
I am beginning to wonder how these regular HMRC interest rate hikes are going to affect small businesses, especially those with significant tax liabilities and also, what are the broader economic implications going to be?
Given the trend, can we expect further rate hikes in the near future, and how should you, as a business owner, prepare for them?
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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