A further increase on interest paid to HM Revenue & Customs (โHMRCโ) for late payment of taxes will hit taxpayers who are not up-to-date, and their bills could grow very quickly, say leading tax and advisory firm Blick Rothenberg.
Nimes Shah CEO at the firm said: โFollowing another Bank of England base rate to 1.75%, HMRC has confirmed that it will raise its interest rates on late tax bills to 4.25% on 23 August โ a level not seen since January 2009.โ
He added: โSince the start of 2022, the HMRCโs interest rate has increased by 1.5% – thatโs the equivalent of an extra ยฃ225 per annum on a ยฃ15,000 tax liability.ย On the same ยฃ15,000 tax liability, you would suffer almost ยฃ650 of interest per annum.โ
โWith continuing rising costs rising across the board, HMRC have hiked up interest on late tax payments at the latest opportunity.ย It sets a worrying trend for some taxpayers who are struggling to pay their outstanding taxes, against the backdrop of other rising costs.โ
Nimesh said: โThe worst is yet to come on this front, with some economists projecting the Bank of England could decide to increase the base rate to 2.5% by the end of 2022 โ this could see HMRC increasing their interest rate on late paid tax to 5% by the end of the year.ย Taxpayers who have outstanding tax liabilities should be mindful to settle as much as they can afford before there are further rate rises.โ
He added: โHMRC have also finally increased the repayment supplement rate by 0.25% to 0.75% – the first increase in this rate in over a decade.ย Itโs quite shocking that HMRC have quickly increased the rate on late paid tax by six times the amount the equivalent repayment interest rate has gone up by this year.
HMRCโs meagre 0.75% repayment supplement rate means there is not any great incentive for HMRC to release repayments. There continues to be one rule for money owed to HMRC and another for taxpayers who are due a refund. Many taxpayers have seen significant delays to repayments over the last 12 months, but HMRC can continue to drag their heels with little cost to the Treasury.โ
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