Seb Maley of Qdos says HMRC could investigate those who are late payers
HMRC has decided to be a little bit nicer and cut the interest rate they charge on late tax payments. This comes after the Bank of England snipped the base rate down a tad, from 4.75% to 4.5%.
From the 17th of February, if you’re late paying your taxes, you’ll be charged 7% interest instead of 7.25%. Now, it doesn’t sound like much, but for the roughly 1.1 million of us who missed the January 31st self-assessment deadline, every little helps.
For example, say you owe £5,000. The old rate would have meant £362.50 in interest over a year. The new rate? £350. So, you’d save £12.50. Enough for a decent fish and chips.
However, here’s the sting in the tail. While they’re charging us 7% on what we owe them, they’re only giving us 3.5% on any overpayments they have to refund us (that’s the base rate of 4.5% minus 1%).
Example: If HMRC owes you £5,000, you’ll only get £175 in interest.
Basically, HMRC is charging us nearly double the interest they pay us back. They claim it’s standard practice and in line with other tax authorities and, well, banks. But that doesn’t make it any less annoying.
Seb Maley, who runs tax insurance firm Qdos, reckons the interest rate dip is a tiny crumb of comfort.
“It’s a small reprieve, in reality,” he says. “The real story is that HMRC still charges double the interest than it pays on money owed to taxpayers in the form of refunds and rebates. It’s a huge mismatch and one that taxpayers are bearing the brunt of.”
He also warns that if you leave your tax bill unpaid for too long, HMRC might start poking around and investigating.
“Along with being hit by interest rates as high as 7% on outstanding tax bills, the longer a tax bill remains unpaid, the higher the chances are that HMRC will take a closer look and potentially investigate,” says Maley.
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