HMRC Interest Rate Increase
HMRC has confirmed changes to its interest rates following the Bank of England’s decision on 5 November 2026 to raise the base rate from 3.75% to 4.00%. These adjustments affect late payments, repayments, and related tax regimes. Separately, the official rate of interest used for beneficial loans remains at 3.75%.
These rates apply across major taxes and duties, including Income Tax, National Insurance contributions, Capital Gains Tax, Stamp Duty Land Tax, VAT (for periods starting on or after 1 January 2023), Alcohol Duty (from 1 September 2025), Vaping Product Duty (from 1 October 2026), Corporation Tax (from the normal due date), and others.
Late Payment and Repayment Interest Rates
HMRC’s late payment and repayment interest rates are set in legislation and are directly linked to the Bank of England base rate.
- Late payment interest is charged at base rate + 4% (this margin has applied since 6 April 2025; previously it was +2.5%).
- Repayment interest is paid at base rate – 1%, subject to a minimum floor of 0.5%.
Current rates (as of mid-November 2026):
- Existing late payment interest: 7.75% (until 23 November 2026)
- Existing repayment interest: 2.75% (until 23 November 2026)
New rates taking effect:
- From 24 November 2026 (non-quarterly instalment payments): late payment interest rises to 8.00%; repayment interest rises to 3.00%.
Interest payable is calculated as: amount outstanding × rate ÷ 365 × number of days late.
HMRC does not charge interest on interest. The higher late payment rate is designed to encourage prompt payment and maintain fairness for those who pay on time. The lower repayment rate compensates taxpayers for the temporary loss of use of their money when they overpay.
Official Rate of Interest (Beneficial Loans)
This is a separate rate used mainly to calculate the taxable benefit on employment-related loans (cheap or interest-free loans from an employer to an employee or director) and certain other benefits, such as some living accommodation. In summary:
- The official rate has stood at 3.75% since 6 April 2025 and continues at this level from 6 April 2026.
- Since April 2025 the rate has been reviewed quarterly and can change during the tax year (potential change dates: 6 July, 6 October, and 6 January). Any change is published by HMRC.
- For loans outstanding throughout the tax year, an average official rate is used under the normal averaging method.
If an employer charges interest below the official rate (or none), the difference can create a taxable benefit-in-kind for the employee (subject to the £10,000 de minimis exemption in many cases).
Taxpayers due a repayment from HMRC on or after 24 November 2026 will receive a slightly higher rate of interest (3.00%). Although this is well below the 8.00% charged by HMRC on late payments, it is nonetheless an increase.
One point to highlight, the rate rise for Corporation Tax quarterly instalment payers take effect earlier, from 16 November 2026 so finance teams should watch out for this.
| Rate Type | Current (to 23 Nov) | From 24 Nov 2026 | Notes |
| Late payment (main taxes) | 7.75% | 8.00% | Base + 4% |
| Repayment (main taxes) | 2.75% | 3.00% | Base – 1% (min 0.5%) |
| Official rate (beneficial loans) | 3.75% | 3.75% | Subject to quarterly review |
Always refer to the official GOV.UK tables for the precise rates applicable to your tax or duty, as some older regimes or specific duties have historical variations.