Minimum interest rate for tax overpayments
HM Revenue and Customs (HMRC) has announced that people who overpay their taxes will be guaranteed a minimum of 0.5 per cent interest on the money.
This will be the case even if the official base rate falls below 1.5 per cent, HMRC said.
The move is part of plans by the government to simplify the way that HMRC sets interest rates on both late payments and overpayments of tax.
HMRC said that the new system for calculating the interest that is both charged and paid will be more transparent and will introduce greater elements of certainty.
The first of the new rates will be worked out in September following that month’s meeting of the Bank of England’s Monetary Policy Committee.
Some adjustment to the current rates will still be necessary, HMRC said, were the base rate to remain on hold.
The simplified rates will be linked to the Bank of England base rate and will change in response to any changes announced by the Monetary Policy Committee 13 working days later.
Interest charged on late payments of tax will be the Bank of England base rate plus 2.5 and for interest paid on overpayments, the rate will be the Bank of England base rate minus 1.
Criticism was levelled at HMRC earlier in the year when the interest rate on overpaid tax dropped to zero.