From 6 April 2025, HMRC implemented a significant change that will affect taxpayers across the UK, including many businesses and property owners. As part of a broader shift announced in the 2024 Autumn Budget, the interest charged on late tax payments will increase significantly, rising by 1.5%.

This means that the new late payment interest rate will now be calculated as the Bank of England base rate plus 4.00%, up from the previous rate of base rate plus 2.5%. For those managing tight cash flows or dealing with variable rental income, this notable jump should not be ignored.

According to HMRC, the change is designed to encourage prompt payment and ensure fairness for those who settle their tax liabilities on time. The updated rate reflects not only the economic environment, where base rates have increased, but also a policy shift towards a more stringent stance on tax compliance.

What's staying the same?

While the penalty for paying late is increasing, the interest paid by HMRC on overpayments remains unchanged. Repayment interest continues to be calculated at the base rate minus 1%, with a minimum floor of 0.5%.

Who will this impact most?

This change will be most keenly felt by:

• Businesses with fluctuating cash positions who might delay VAT, PAYE or corporation tax payments.
• Landlords and property investors with variable income, especially those with unexpected void periods or maintenance costs.
• Individuals in self-assessment, including company directors, consultants and those with untaxed income.

This rate increase serves as a timely reminder of the importance of proactive financial planning. Whether you run a growing business or manage a property portfolio, staying ahead of your tax obligations can save you significant costs and stress. If you would like to review your situation or implement a more effective system for handling tax payments, we are here to help.

If you are a business, landlord or property investor and you would like some support with submitting your tax on time or forecasting, then contact us by calling 01623 490 120 or emailing This email address is being protected from spambots. You need JavaScript enabled to view it.