HMRC raises late payment interest to 8% after Bank of England rate rise

HM Revenue and Customs (HMRC), the UK tax authority, has updated the interest it charges on unpaid tax and pays on overpaid tax. The trigger was the Bank of England: on 5 November 2026 its Monetary Policy Committee raised the base rate from 3.75% to 4.00%. HMRC ties both its late payment interest and its repayment interest to that base rate.

What is changing and from when?

Late payment interest, charged when you pay tax after the deadline, rises from 7.75% to 8.00% a year. Repayment interest, which HMRC pays when you have overpaid, rises from 2.75% to 3.00% a year. The new rates do not start on the same day: 16 November 2026 for quarterly instalment payments made by large companies, and 24 November 2026 for all other taxes, including Self Assessment income tax.

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How is late payment interest worked out?

HMRC late payment interest is always the Bank of England base rate plus 4 percentage points. That margin has applied since 6 April 2025 (it was plus 2.5 points before then). So a base rate of 4.00% produces exactly 8.00%. Interest runs daily from the day after the due date until the day the tax actually reaches HMRC.

How much does HMRC pay on overpayments?

If you have overpaid, HMRC refunds you with repayment interest, set at the base rate minus 1 percentage point, with a minimum floor of 0.5%. At a 4.00% base rate that gives 3.00%. The gap between 8.00% on debts and 3.00% on refunds shows that paying the government late costs far more than letting it hold your money.

Who does it affect and what should you do?

The rise affects anyone who pays UK tax late: Self Assessment taxpayers, business owners and employers on PAYE. The next big deadline is the 2025/26 Self Assessment income tax bill, due by 31 January 2027. The closer a debt sits to that date, the more interest builds up at the new 8.00% rate. If you cannot pay in full, you can set up a Time to Pay instalment plan on gov.uk; it does not remove interest but helps you avoid further late payment penalties.

Always check the current figures on HMRC's official page on gov.uk, where the exact rates and their start dates are published.