The Bank of England reduced its base rate from 4.25% to 4.00% on 7 August 2025. Because HM Revenue and Customs (HMRC) interest rates are directly linked to the base rate, the interest charged on late tax payments and the interest paid on repayments will also fall.
When the changes take effect
- 18 August 2025 for quarterly instalment payments.
- 27 August 2025 for non-quarterly instalment payments.
How the rates are set
Late payment interest is set at the Bank of England base rate + 4.0%. So, this will decrease to 8.0%.
Repayment interest is based on the Bank of England base rate - 1.0%, with a minimum floor of 0.5% So, the interest payable on tax repayments will reduce to 3.0%.
See: https://www.gov.uk/government/news/hmrc-interest-rates-update
With the festive season underway and household budgets feeling the pressure, it may be useful to know that if you are worried about paying your tax bill in one lump sum, you may be able to spread the cost.
If your business is based in England and Wales, you can now view the future rateable value of your property.
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