HMRC Late Payment Interest v Late Tax Refund Interest
Published / Last Updated on 09/04/2025
HMRC suggests:
“The late payment interest rate encourages prompt payment. It ensures fairness for those who pay their tax on time.
The repayment interest rate compensates taxpayers fairly, when they overpay, for loss of use of their money.”
Current late payment and repayment interest rates
The current late payment and repayment interest rates applied to the main taxes and duties that HMRC currently charges and pays interest on are:
- Late payment interest rate - 8.50% from 6 April 2025 – this increased by 1% to further encourage prompt payment.
- Repayment interest rate - 3.50% from 25 February 2025.
HMRC automatically issues late payment of tax notices and constantly adds penalties without being prompted.
See: HMRC Tax Refunds and New Late Tax Penalties
Yet, HMRC issue tax refunds with no interest automatically added.
In a recent case, it has taken HMRC 9 months to issue a tax refund and guess what? No interest added.
You must make a claim for interest to get it – how unfair and underhand is that?
