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UK, IoM Hike Interest On Late Tax Payments


Following the recent increase in the Bank of England interest rate to 5.25 percent, both the United Kingdom and the Isle of Man have made adjustments to their late payment interest rates.

The Bank of England's Monetary Policy Committee, in a decision made on August 3, 2023, voted to raise the Bank of England base rate from its previous level of five percent. This shift directly impacts the interest rates set by Her Majesty's Revenue and Customs (HMRC), as these rates are closely linked to the Bank of England's base rate. Additionally, due to an existing agreement between the Isle of Man Government and the United Kingdom, the administration and management of value-added tax (VAT) and other indirect taxes in the Isle of Man align with the practices of the United Kingdom.

As a consequence of this change in the base rate, there will be corresponding increases in the rates applied for both late payment and repayment cases by both HMRC and the Isle of Man.

Effective from August 14, 2023, the interest rate on late payments will experience an elevation to 7.5 percent for quarterly instalment payments. For non-quarterly payments, this rate change will take effect from August 22, 2023.


The calculation for late payment interest involves adding 2.5 percent to the base rate. Conversely, repayment interest will be calculated by subtracting one percent from the base rate. Furthermore, there is a stipulated lower limit, often referred to as the 'minimum floor,' which is set at 0.5 percent. Taking these factors into consideration, the repayment interest rate has been established at 4.25 percent


Contacts

If you require assistance in relation to the above and/or would like to discuss anything further, please do not hesitate to contact info@act.london or your usual A.C.T. contact.

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