Bank of England Raises Base Rate
On 5 November 2026, the Monetary Policy Committee of the Bank of England declared an increase in the base interest rate from 3.75% to 4.00%. This decision reflects ongoing economic assessments and aims to maintain financial stability.
Impact on HMRC Interest Rates
As a direct outcome of the base rate adjustment, the interest rates applied by HM Revenue and Customs (HMRC) for late payments and repayments will also rise.
These revised interest rates will take effect on the following dates:
- 16 November 2026 for quarterly instalment payments
- 24 November 2026 for payments not made on a quarterly basis
Further updates regarding the specific interest rates applicable to these payments will be provided soon.
Framework for Setting HMRC Interest Rates
The interest rates set by HMRC are governed by legislation and are directly linked to the Bank of England’s base rate. Currently, late payment interest is calculated at the base rate plus an additional 4%, while the repayment interest stands at the base rate minus 1%. Notably, there is a minimum threshold, or ‘floor’, for repayment interest, which is established at 0.5%.
This structure, which differentiates between late payment and repayment interest, aligns with the practices of tax authorities worldwide and provides a competitive comparison to commercial interest rates on loans, overdrafts, and deposits.
Rationale Behind the Interest Rate Structure
The rate imposed on late payments serves to encourage timely tax payments, thus promoting fairness among taxpayers who adhere to their obligations. In contrast, the repayment interest rate is designed to adequately compensate individuals for the temporary loss of access to their funds when overpayments occur. This dual approach ensures that the interests of both the tax authority and taxpayers are balanced effectively.