HMRC Late Payment Interest 2026: What You'll Owe If You Miss the Deadline

The current HMRC interest rate: 6.75% in 2026

HMRC's late payment interest rate is not fixed — it tracks the Bank of England base rate with a fixed uplift of 2.5 percentage points:

HMRC late payment rate = BoE base rate + 2.5%

With the Bank of England base rate at 4.25% in May 2026, the current rate is:

4.25% + 2.5% = 6.75% per annum

This rate updates within 13 working days of any change to the base rate. If the Bank of England cuts to 4.0% at its next meeting, the HMRC rate would drop to 6.5%. If it rises to 4.5%, HMRC's rate goes to 7.0%.

Historical context: At the post-pandemic rate peak (BoE base at 5.25% in August 2023), HMRC was charging 7.75% — the highest in 15 years. Rates have come down since, but 6.75% is still higher than most savings accounts and equivalent to a mid-range personal loan.

Daily rate: how interest accumulates

Interest is calculated on a daily basis — HMRC doesn't wait for months to add interest, it runs from the day after the deadline.

Daily rate at 6.75%: 6.75% ÷ 365 = 0.01849% per day

Example: You owe £8,500 in self-assessment tax. You miss the 31 January 2026 deadline and pay on 30 April — exactly 88 days late.

Interest = £8,500 × 6.75% ÷ 365 × 88 = £138.08

That's on top of any late payment penalty (see below). A few hundred pounds may seem manageable — but the penalty structure that runs alongside it is considerably more punishing.

Self Assessment deadlines: when interest starts

Missing a deadline by even one day triggers interest. Here are the key Self Assessment dates for 2025/26:

Payments on account (POA): If you had a tax bill over £1,000 in 2024/25 and less than 80% was collected via PAYE, you must make advance payments towards 2025/26 — half by 31 January 2026 and half by 31 July 2026. These also attract interest if paid late.

Penalties: separate from, and on top of, interest

It is vital to understand that penalties and interest are completely separate. Missing a deadline triggers both.

Late filing penalties

Late payment penalties

Combined impact — worked example:

Sarah has a self-assessment bill of £6,000 for 2024/25. She doesn't file or pay until 1 August 2026 (7 months after the 31 January deadline).

Late filing penalties:

• £100 (day 1)
• £10/day × 90 days (day 91 to day 180) = £900
• 5% surcharge at 6 months: £6,000 × 5% = £300
• Total filing penalties: £1,300

Late payment penalties:

• 30 days late: £6,000 × 5% = £300
• 6 months late: £6,000 × 5% = £300
• Total payment penalties: £600

Interest (6.75% on £6,000 for 182 days): £6,000 × 6.75% ÷ 365 × 182 = £201.86

Total additional cost: £1,300 + £600 + £201.86 = £2,101.86 on a £6,000 bill.

This shows why late payment interest — while real — is often the smallest part of the problem. The penalty structure is the larger concern.

The repayment interest rate: HMRC's asymmetry

When HMRC owes you money — a refund, an overpayment, an amended return — they pay interest too. But the rate is:

HMRC repayment interest = BoE base rate - 1.0% = 3.25% (May 2026)

The gap:

• HMRC charges you: 6.75%
• HMRC pays you: 3.25%
• Difference: 3.5 percentage points

This asymmetry is deliberate and long-standing. If you've overpaid tax and are waiting for a refund, the interest you receive rarely compensates for inflation or the opportunity cost of the money. Always chase refunds promptly — file your return early and contact HMRC if your refund is delayed.

For 2026/27, the repayment rate on the different tax types is the same 3.25% — whether it's income tax, capital gains tax, or corporation tax repayments.

Time to Pay (TTP) arrangements

If you genuinely cannot pay your tax bill, HMRC offers Time to Pay — a structured payment plan agreed over the phone (0300 200 3835 for self-assessment). Plans typically spread payments over 3–12 months, though longer arrangements are possible for larger debts.

Key points about TTP:

• Interest continues to accrue during the TTP period — it does not stop
• HMRC may agree to suspend or reduce penalties if you engage proactively
• You must contact HMRC before the 30-day mark to avoid the 5% late payment penalty where possible
• TTP is not guaranteed — HMRC will ask about your financial position (income, assets, expenses)
• Breaking a TTP agreement can trigger the full penalty regime

Best strategy: If you can't pay in full, pay as much as you can on the deadline date and arrange TTP for the remainder. This minimises interest (running on a smaller balance) and demonstrates good faith to HMRC.

Corporation Tax: the same rules apply

For incorporated businesses (limited companies), Corporation Tax late payment interest follows identical rules:

• Rate: BoE base rate + 2.5% = 6.75%
• Accrues from the due date (typically 9 months and 1 day after the accounting period end for standard companies)
• Large companies (taxable profits over £1.5m) must make quarterly instalment payments — different due dates apply, and interest rates for late instalment payments are different (lower rate: 1.5% over base)

Special rates for tax avoidance and disputed assessments

Taxpayers involved in tax avoidance scheme investigations face different rules. Under follower notices and accelerated payment notices, HMRC can demand payment of disputed tax upfront while the litigation continues. Interest still accrues on any amounts outstanding.

If you're disputing an HMRC assessment, the strategic question is often: should I pay first and fight later? If you win the dispute, HMRC pays back with repayment interest (3.25%). If you don't pay and lose, you owe the original tax plus 6.75% interest throughout. The maths usually favours paying first — and several tax tribunal judgments have endorsed this approach.

How to stop interest accruing: the practical checklist

1. File your Self Assessment on time (31 January online). This avoids filing penalties entirely — even if you can't pay yet.
2. Pay any amount you can on the deadline date. Interest accrues on the unpaid balance — reducing that balance reduces the daily interest.
3. Set up a budget payment plan with HMRC in advance if you know a large bill is coming (available for income tax and Class 2/4 NI).
4. Reduce your payments on account if your 2025/26 income will be lower than 2024/25 — file a claim to reduce (via your online SA account). Avoids late payment interest on POAs that turn out to be overstated.
5. Check your tax code if employed — many self-assessment taxpayers could have their SA tax collected through PAYE adjustments (if the bill is under £3,000), avoiding the January shock.

When HMRC gets it wrong

If HMRC issues an incorrect assessment and you are charged interest as a result:

• Challenge the assessment via formal appeal within 30 days
• If successful, HMRC reverses interest from the date of the incorrect assessment
• If the delay was caused by HMRC error, you may be entitled to statutory interest plus a potential complaint to the Adjudicator's Office
• Keep all correspondence and document when you first raised the dispute

HMRC has a formal complaints process and an independent Adjudicator's Office for cases where HMRC has handled things poorly. This can result in interest being waived and sometimes additional compensation being paid.

Sources

• HMRC: Interest on late payments of tax
• HMRC: Self Assessment deadlines
• HMRC: Time to Pay arrangements
• Bank of England: Monetary Policy decisions
• gov.uk: Appeal a tax decision