HMRC Interest Rates to Fall Following Base Rate Cut

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