HMRC increase interest rates on late Corporation Tax payments from April 2025
HMRC charges interest on late payments of corporation tax based on a set % above the BoE base rate. On 6 April 2025, HMRC increased the differential rates, which could significantly impact companies that miss their payment deadlines.
What’s changing?
Two categories of payments are affected:
- “Standard” Corporation Tax payments – Corporation Tax liabilities that have not been paid by nine months and one day after the end of the accounting period. Such late payments will be subject to an annual interest rate of BoE base rate + 4% (up from + 2.5%).
- Quarterly Instalment Payments (QIPs) – underpayments of Corporation Tax which are due by “large” and “very large” companies in instalments (during or straddling the end of the accounting period). Such late payments will be subject to an annual interest rate of BoE base rate + 2.5% (up from + 1%). Liabilities that remain unpaid by nine months and one day after the end of the accounting period will then attract the interest rate noted above.
Based on the current BoE base rate of 4.5%, the revised interest rates from 6 April 2025 are:
| Interest type | Pre-6 April 2025 | From 6 April 2025 |
|---|---|---|
| "Standard" payments | 7.00% | 8.50% |
| Underpaid QIPs | 5.50% | 7.00% |
It is crucial to make payments of Corporation Tax in good time, in order to avoid unnecessary interest charges and stay compliant.
While interest rates on late payment of tax have increased, the rate of interest paid by HMRC to taxpayers on overpaid Corporation Tax remains unchanged. For QIPs overpaid up to nine months and one day after the end of the accounting period the rate is BoE – 0.25%, currently being 4.25%. For all other overpayments of Corporation Tax the rate is BoE – 1%, currently being 3.5%.
Our earlier article provides a useful summary of the quarterly instalment regime, the impact of associated companies on the timing of Corporation Tax payments, and a reminder that HMRC have the power to levy penalties on the late payment of tax.
If you’re unsure whether or how you may be impacted by these changes, please don’t hesitate to get in touch with your usual Johnston Carmichael contact, a member of our Corporate Tax team or fill in the short form below.
