Taxman hikes interest for unpaid tax but has frozen the rate on money it owes to overpayers for more than a decade
- Taxman upping its late payment charge from 2.75% to 3% from Monday
- Yet the rate it pays on repayments will stay at 0.5% — as it has since 2009
HMRC is hiking interest charges on unpaid tax while leaving the rate paid on money it owes frozen for more than a decade.
The Bank of England this month raised the base rate from 0.25 per cent to 0.5 per cent and the taxman will now increase its late payment charge from 2.75 per cent to 3 per cent from Monday.
Yet the rate it pays on repayments will stay at 0.5 per cent — as it has since 2009.
HMRC will increase its late payment charge from 2.75% to 3% from Monday. Yet the rate it pays on repayments will stay at 0.5% as it has since 2009
HMRC says it cannot pay a higher interest rate on money it owes because that could lead to taxpayers deliberately overpaying to receive a better rate than is available on the savings market.
The charges are levied on late payments of income tax, National Insurance contributions, capital gains tax and stamp duty.
The highest interest rate charged on tax debt was 8.5 per cent in 2007. In 2009 HMRC paid nothing on repayments, yet in February 2000 it paid 4 per cent on money owed to taxpayers.
An HMRC spokesman says: ‘The interest we charge and pay delivers fairness for all.
‘It ensures we do not encourage people to overpay their tax to secure a higher interest rate than available commercially, and that those paying their tax late do not get an unfair financial advantage over those paying on time.
‘Most other comparable tax authorities take the same approach and our consultations on this found that most agreed or accepted there should be an interest differential.’