{"id":104385,"date":"2025-02-18T11:30:00","date_gmt":"2025-02-18T11:30:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=104385"},"modified":"2025-02-18T10:32:03","modified_gmt":"2025-02-18T10:32:03","slug":"hmrc-changes-late-payment-rules","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/hmrc-changes-late-payment-rules\/","title":{"rendered":"HMRC Changes Late Payment Rules \u2013 How 1.1 Million Brits Will Be Affected"},"content":{"rendered":"\n<p>The <strong>HM Revenue and Customs (HMRC)<\/strong> has announced a reduction in the <strong>late payment interest rate<\/strong> from <strong>7.25% to 7%<\/strong>, offering a slight reprieve for the <strong>1.1 million Britons<\/strong> who missed the <strong>31 January<\/strong> deadline for filing their <strong>Self Assessment Tax Return<\/strong>.&nbsp;<\/p>\n\n\n\n<p>This adjustment follows the <strong><a href=\"https:\/\/www.bankofengland.co.uk\/\" target=\"_blank\" rel=\"noopener\">Bank of England<\/a>\u2019s<\/strong> decision to lower its <strong>base rate<\/strong> from <strong>4.75% to 4.5%<\/strong>, directly impacting HMRC\u2019s interest calculations.<\/p>\n\n\n\n<p>While the rate cut provides some financial relief, critics argue that the system remains <strong>disproportionate<\/strong>. Taxpayers who owe HMRC are charged significantly higher interest than those entitled to refunds, raising concerns about fairness in the tax system.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>A small reprieve but significant penalties remain<\/strong><\/h2>\n\n\n\n<p>The reduction in the late payment <a href=\"https:\/\/en.econostrum.info\/uk\/bank-of-england-interest-rate-strategy\/\" data-type=\"post\" data-id=\"102048\">interest rate<\/a> aligns with <strong>HMRC\u2019s policy<\/strong>, which sets its rate at <strong>2.5 percentage points above the Bank of England\u2019s base rate<\/strong>.\u00a0<\/p>\n\n\n\n<p>This means that from <strong>17 February<\/strong>, taxpayers with outstanding bills will see a slight reduction in the cost of their debt. However, the penalty system for late filing remains in place, and charges can escalate rapidly.<\/p>\n\n\n\n<p>According to <strong>HMRC<\/strong>, the penalty structure is designed to encourage timely compliance. <strong>Taxpayers who miss the deadline face an immediate \u00a3100 fine, regardless of whether they owe tax or not.<\/strong> Additional charges include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>\u00a310 per day<\/strong> after three months (up to \u00a3900)<\/li>\n\n\n\n<li><strong>5% of the tax owed or \u00a3300<\/strong> (whichever is greater) after six months<\/li>\n\n\n\n<li><strong>An additional 5% or \u00a3300<\/strong> after 12 months<\/li>\n<\/ul>\n\n\n\n<p>Beyond these penalties, <strong>the 7% late payment interest rate<\/strong> continues to apply, accumulating daily on unpaid amounts. This can result in significant financial strain for those struggling to settle their tax liabilities.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Disparity in interest rates raises fairness concerns<\/strong><\/h2>\n\n\n\n<p>Despite the recent reduction, critics argue that <strong>HMRC\u2019s interest policy remains unbalanced<\/strong>. While taxpayers are charged <strong>7% on overdue payments<\/strong>, HMRC only pays <strong>3.5% interest on refunds<\/strong>, meaning taxpayers receive <strong>half the rate<\/strong> in return if HMRC owes them money.<\/p>\n\n\n\n<p>This discrepancy has drawn criticism from tax professionals. <strong>According to the Chartered Institute of Taxation<\/strong>, the difference between the two rates creates an unfair system where taxpayers are penalised more harshly than HMRC itself.<\/p>\n\n\n\n<p>HMRC, however, defends its approach, stating that its rates are in line with other tax authorities and are <strong>consistent with standard financial practices<\/strong>, given that similar rates are applied by banks for <a href=\"https:\/\/en.econostrum.info\/uk\/low-interest-loans-electric-vehicle\/\" data-type=\"post\" data-id=\"103144\">loans <\/a>and deposits. The department maintains that the system is designed to encourage timely payment rather than act as a punitive measure.<\/p>\n\n\n\n<p>For taxpayers who missed the deadline, <strong>paying outstanding amounts as soon as possible remains the best course of action<\/strong> to avoid further penalties and interest charges. Seeking professional financial advice can also help navigate the complexities of the UK\u2019s tax system and mitigate unnecessary costs.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Britons who missed the Self Assessment deadline will see a slight drop in late payment interest, but penalties remain steep. While HMRC reduces charges for overdue taxes, it still pays out half the rate on refunds. Critics argue the system unfairly favours the tax office, leaving taxpayers at a disadvantage. <\/p>\n","protected":false},"author":10,"featured_media":104386,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[46],"tags":[],"class_list":["post-104385","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-social-welfare","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/104385","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/comments?post=104385"}],"version-history":[{"count":1,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/104385\/revisions"}],"predecessor-version":[{"id":104387,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/104385\/revisions\/104387"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media\/104386"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media?parent=104385"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/categories?post=104385"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/tags?post=104385"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}