HMRC's announcement that, effective from 21st August this year, the rate of interest charged on late tax payments has been increased from 3.00% to 3.25% was the second increase to late payment interest in two years.
The interest rate will not rise for those due refunds on overpayments, however, and for this reason the Association of Chartered Certified Accountants (ACCA) claims the increase is unfair and has asked HMRC to think again to ensure that a similar increase is introduced for the interest received on repayments of tax. The interest on these payments has not increased from 0.5% since 2009.
HMRC responded to say that the repayment interest rate has been frozen since 2009 as it would be unfair for taxpayers to obtain a better rate of interest on a tax refund than they would receive from a bank account. HMRC does not want taxpayers to use the tax repayments system to secure a better rate, hence the freeze. It is unlikely any change will be made to the repayment interest rate as a result.
It best to ensure you are paying the correct amount of tax in order to avoid paying interest, so please make sure you are aware of your tax payment responsibilities, and know the amount of tax that you are due to pay, the date that it is due, and the payment options open to you.
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