UK Introduces Updated Interest Rates for Late and Early Tax Payments

The Bank of England Monetary Policy Committee announced on December 18, 2025 to reduce the Bank of England base rate to 3.75% from 4.00%. HMRC interest rates are linked to the Bank of England base rate, so HMRC interest rates for late payment and repayment of taxes were reduced accordingly.

As explained by HRMC guidances, the late payment interest rate encourages avoidance of delays in paying, while the repayment interest rate compensates taxpayers, who sometimes overpay when they pay ahead of deadline. In this way, the overall fairness of the tax system is ensured. Current repayment interest in case of early payments is set at base rate minus 1%, with a lower limit of 0.5%.

Changes came into effect on:

• December 29, 2025 ‒ for quarterly instalment payments,

• January 9, 2026 ‒ for non-quarterly instalment payments.

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