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Interest Rate rise impacts HMRC late payment charges

The Bank of England raised interest rate to its highest level since March 2009

The Bank of England has raised the interest rate from 0.5% to 0.75% last week. The quarter of a percentage point rise sets the rate at its highest level since March 2009.

The rise in the interest rate will no doubt increase the interest costs of residential mortgages that have variable or tracker rates. It will be interesting to see if the rise in the rate is passed on to savers.

Not only that, but HMRC have now announced that the interest rate they apply to late payments of tax liabilities will increase by the same amount from 3% to 3.25%. This is also the highest level the rate has been since March 2009, but thankfully nowhere near the 8.5% it was back in February 2000.

The only exception to this increase is quarterly instalment payments of corporation tax, for which the rate increased already on 13th August 2018, from 1.50% to 1.75%.

Sadly the early repayment interest rate which HMRC pays this of us kind enough to pay our taxes in advance of the deadline remains unchanged since November 2009 at 0.5%

You can find a link to all HMRC interest rates, and the history of those charges on the HMRC website.

In response to the Bank of England increase in the rate Alpesh Paleja, CBI Principal Economist, said:

‘This decision was in line with our expectations. The case for another rate rise has been building, with inflationary pressures being stoked by a tight labour market and many indicators now suggesting that weak activity in the first quarter of 2018 was a blip.’

‘The Monetary Policy Committee has signalled further rate rises over the next few years, if the economy evolves as they expect. These are likely to be very slow and limited, particularly over the next year as uncertainty around Brexit takes its toll on business investment.’

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