It comes after the Bank of England dropped its base interest rate to 4.25% earlier this month
HMRC has cut the late payment interest rate from 8.5% to 8.25% from this week. It comes after the Bank of England dropped its base interest rate to 4.25% earlier this month.
It means if you’ve missed a payment on your tax bill, you’ll now be charged slightly less in interest. HMRC said: “The late payment interest rate encourages prompt payment. It ensures fairness for those who pay their tax on time.”
This could affect you if you have yet to file or settle your latest self-assessment tax bill. An estimated 1.1m self-assessment taxpayers missed the recent January 31 tax deadline.
Meanwhile, the repayment interest – which is paid to you when HMRC owes you money, for example, if you overpaid tax – is also being reduced to 3.25%.
You may need to submit a self-assessment if you’re self-employed, if you earned extra income outside of your main employment, if you earn income from renting out a property, or if you’re a high earner and you claim Child Benefit.
If you missed the January 31 deadline to file your tax return, you would have been slapped with a £100 fine. This increases to fines of £10 a day, up to a maximum of £900.
If you still haven’t filed after three months – then after six months, you’re charged 5% of tax owed or £300, whichever is greater. This is then repeated again after 12 months.
You must also pay any tax due or you’ll be charged interest on late payments. After 30 days you’ll then also be fined an extra 5% of the unpaid tax, with this being repeated at six months and 12 months.
If you’re struggling to pay your tax bill and you owe less than £30,000, you may be able to set up a payment plan with HMRC, known as Time to Pay.
Do I need to fill in a self-assessment tax return?
MoneyHelper has explained that you may need to fill in a self-assessment if one of the following applies to you:
- Your self-employment income was more than £1,000 (before taking off anything you can claim tax relief on)
- Your income from renting out property was more than £2,500 (you’ll need to contact HMRC if it was between £1,000 and £2,500)
- You earned more than £2,500 in untaxed income, for example from tips or commission
- Your income from savings or investments was £10,000 or more before tax
- You need to pay Capital Gains Tax on profits from selling things like shares or a second home
- You’re a director of a company (unless it was a non-profit organisation, such as a charity)
- You, or your partner’s, income was over £60,000 and you’re claiming Child Benefit
- You have income from abroad that you need to pay tax on, or you live abroad but have an income in the UK
- Your total taxable income was over £150,000
- You’re a trustee of a trust or registered pension scheme
- Your State Pension was your only source of income and was more than your personal allowance
- You received a P800 from HMRC saying you didn’t pay enough tax last year
