HMRC Interest Rates Cut Following Bank of England Decision
Late payment and repayment interest rates are changing after the Bank of England cut its base rate to 3.75%. New rates apply from late December 2025.
HMRC has announced changes to interest rates following the Bank of England's decision to cut its base rate from 4.00% to 3.75% on 18 December 2025.
New Interest Rates
HMRC interest rates are linked to the Bank of England base rate:
| Type | Formula | New Rate |
|---|---|---|
| Late payment interest | Base rate + 4% | 7.75% |
| Repayment interest | Base rate − 1% (min 0.5%) | 2.75% |
When Changes Apply
| Payment Type | Effective Date |
|---|---|
| Quarterly instalment payments | 29 December 2025 |
| All other payments | 9 January 2026 |
What This Means for You
If you owe tax: Late payment interest will be slightly lower, but 7.75% is still significant. Paying on time remains the best approach.
If HMRC owes you: Repayment interest on overpayments will be calculated at 2.75%.
Key Reminder
The Self Assessment deadline is 31 January 2026. If you can't pay in full, consider setting up a Time to Pay arrangement rather than accruing interest on late payments.
Information accurate as of 21 December 2025. Verify current details on GOV.UK.