HMRC: New Interest Rates for Late, Early Payments Announced

• HMRC has announced multiple updates to its interest rates for both late and early tax payments across all regimes, extending into November 2026.
• New duties, including Vaping Product Duty (from October 2026) and Alcohol Duty (from September 2025), are now subject to these specific HMRC interest rates.
• The repayment interest rate is currently 2.75% (effective from January 9, 2026) and is linked to the Bank of England's base rate, which is 4.00% as of November 5, 2026.
• Corporation Tax instalment interest rates and interest on overpaid quarterly payments have also been updated, effective December 29, 2025.
• Accurate application of these frequently changing HMRC interest rates is critical for legal and compliance professionals to avoid incorrect tax advice or compliance breaches.

Lawyers and compliance officers must regularly consult these updated HMRC interest rates to precisely calculate tax liabilities for their clients, assess potential penalties for late payments, and determine the correct interest on overpayments across various tax regimes.

Her Majesty's Revenue and Customs (HMRC) regularly adjusts its interest rates for both late and early payments across all tax regimes, with several significant updates recently announced and scheduled for the coming years. These changes are crucial for understanding tax liabilities and potential refunds. Notably, the framework for HMRC interest rates has been expanded to include new duties, reflecting evolving tax policy.

A key development involves the introduction of the Vaping Product Duty, which will be subject to HMRC interest rates for late and early payments starting from October 1, 2026. Similarly, Alcohol Duty, effective from September 1, 2025, will also have its outstanding amounts subject to specific late payment and repayment interest rates from that date. These additions underscore the broad application of HMRC's interest rate policies.

Further adjustments to the general HMRC interest rates for late and early payments are slated for November 2026, alongside updates for late payments in August, May, and April 2025. February 2025 will also see an update to both late and early payment rates. Additionally, the interest rate applicable to overpaid quarterly instalment payments and early payments of Corporation Tax not due by instalments was updated, effective December 29, 2025. These frequent revisions necessitate continuous monitoring by taxpayers and their advisors.

The comprehensive system of HMRC interest rates applies uniformly across all tax categories, covering both instances where payments are made after their due date and situations where payments are made in advance or overpaid. This ensures a consistent approach to financial adjustments related to tax obligations. The methodology for setting these rates has also been clarified, with new details provided on how both repayment interest and late payment interest rates are determined.

Specifically, the repayment interest rate, which is linked to the Bank of England's base rate, is currently 2.75% (effective from January 9, 2026), with the Bank of England's base rate at 4.00% as of November 5, 2026. This mechanism provides a clear guideline for calculating interest on overpayments. Furthermore, information concerning Value Added Tax (VAT) for periods commencing on or after January 1, 2023, has been integrated, along with departmental interest rates relevant to VAT periods starting on or before December 31, 2022.

Historical adjustments also include a correction to the effective date of the 2.75% interest rate in January 2022, which was amended from January 4, 2022, to January 7, 2022. Changes have also been made to the classification of certain duties; Customs Duty and Excise Duty Drawback were removed from the list of default and statutory interest within the departmental interest rates section, while Excise Duty Drawback was subsequently added to the broader departmental interest rates section. These detailed modifications highlight the dynamic nature of HMRC's interest rate guidance.

The ongoing and prospective changes to HMRC interest rates for late and early payments carry significant implications for individuals, businesses, and particularly for legal and compliance professionals. The frequent updates, sometimes occurring multiple times within a single year—such as in August, July, June, April, and February of 2023, and similarly in November, October, August, and May of 2022—demand diligent attention to ensure accurate financial planning and compliance.

Lawyers and compliance officers must regularly consult these updated HMRC interest rates to precisely calculate tax liabilities for their clients, assess potential penalties for late payments, and determine the correct interest on overpayments across various tax regimes. This includes newly introduced duties like the Vaping Product Duty interest and Alcohol Duty interest rates, which add new layers of complexity to tax calculations. The accuracy of Corporation Tax instalment interest and HMRC repayment interest rates is equally vital for corporate clients.

Failure to apply the correct rates could lead to substantial discrepancies, resulting in incorrect tax advice, financial penalties for clients, or compliance breaches. Therefore, maintaining up-to-date knowledge of these specific HMRC interest rates is not merely good practice but a critical requirement for effective and responsible tax advisory services.

Lawyers and compliance officers must regularly check these updated HMRC interest rates to accurately calculate tax liabilities, potential penalties for late payments, and interest on overpayments for clients across various tax regimes, including newly introduced duties like Vaping Product Duty and Alcohol Duty. Failure to apply the correct rates could lead to incorrect tax advice or compliance breaches.

Source: Original reporting via GOV.UK guidance on HMRC interest rates.