HMRC late payment interest now 7.75% — what it costs you

 

HMRC's late payment interest rate is now 7.75% a year, in force from 9 January 2026. It's set at the Bank of England base rate plus 4 percentage points — the jump from base plus 2.5% came in on 6 April 2025, so late payers have been paying a steeper rate for a while.

 

How it works: the rate applies to the main taxes and duties, so overdue Self Assessment, PAYE, VAT and Corporation Tax balances all accrue interest from the day the payment is overdue until it's paid in full. HMRC's stated aim is to encourage prompt payment and keep things fair for those who pay on time. (Interest HMRC pays you on overpayments is far lower — base rate minus 1%, currently 2.75%.)

 

What it costs in practice: at 7.75%, a £10,000 overdue bill costs roughly £2.12 a day in interest — and that's before any late payment penalties, which are separate.

 

The takeaway: paying promptly genuinely matters. If cash flow means you can't pay on time, speak to HMRC about a Time to Pay arrangement rather than letting the interest stack up — an agreed plan is always cheaper than 7.75% plus penalties.