Oh boy, the taxman isn't playing around! If someone owed £10,000 in tax, they'd now be charged £600 in interest - that's a not so insignificant £325 more than they would have been charged a year ago!
The interest rate the Taxman charges on unpaid taxes has skyrocketed to a 14-year high of 6%. Unfortunately, that's not the same rate of return you can expect if you're owed money. HMRC upped the rate on unpaid income tax and national insurance as well as other taxes like capital gains tax, stamp duty, corporation tax and inheritance tax by 0.5%. This is following the Bank of England's base rate rise last month. This is their highest rate since November 2008 when they charged 6.5%. Looks like they're really making sure they get paid up!
Over the course of the last 13 months there has seen a huge jump in the BOE base rate. It's now 3.5%, up from a mere 0.1% in December 2021. So the HMRC rate is now 6%... that's more than double from January when it was 2.75%!.
Those owed money by HMRC will get not be getting the same kind of interest payments unfortunately. The rate for positive balances with HMRC has only risen by two percent since last January, meaning there's a 3.5 percent difference to negative balances. This is all thanks to a law from 2011 that ensures HMRC charges 2.5 percent more than the base rate. The same law states they can pay only one percentage point less than the base rate with minimum interest rate of 0.5 percent.
So beware! If you miss the January 31 deadline to file your self-assessment return and pay any tax due, you'll be in for a fine - but that's not all! On top of the fine, you'll have to pay interest too. Ouch! HMRC reported this week that 5.7 million people still need to file their returns, so don't forget to do yours - or you'll be forking out a £100 fine and interest charges! Argh!
If you're having trouble paying your bill on time, it's worth agreeing a payment plan with HMRC before any penalty charges kick in. That way, as long as you stick to the agreed instalments, no penalty will be charged - though interest will still be applied.
HMRC says they want to treat all taxpayers fairly and this includes not paying out more interest than possible from high street banks and building societies.