From 6 April 2025, the government will increase the interest charged on late tax payments by 1.5 percentage points.
This change, first announced in Autumn Budget 2024, is part of a broader effort to reduce the UK’s tax gap – the difference between tax owed and tax paid.
The increase will apply to both outstanding and future tax liabilities from that date and affects individuals and businesses who do not settle their liabilities on time. HMRC’s late payment interest rate is tied to the Bank of England base rate, and the changes will see rates rise as follows:
- General late payment interest: from base rate + 2.5% to base rate + 4%
- Quarterly instalments of Corporation Tax: from base rate + 1% to base rate + 2.5%
- Late Customs Duty: from base rate + 2% to base rate + 3.5%
The government expects the revised approach to generate an additional £255 million in revenue in the 2025/26 tax year. The aim is to encourage timely payment and ensure fairness for those who do pay on time.
What does this mean for businesses and individuals?
For those who pay their taxes on time, nothing will change. But for anyone with overdue liabilities, the cost of non-compliance will increase noticeably. Businesses operating on tight margins or dealing with payment delays should take particular care to stay up to date with their payment schedules.
If you’d like to discuss how this change might affect you or your business, our tax team would be happy to help. Please get in touch with your usual UNW contact or reach out directly to any of our Tax partners.
