HMRC interest rates for late payments will increase again this month to their highest level since 2001.

Late payment interest is payable on tax bills covering income tax, National Insurance contributions, capital gains tax, corporation tax pay and file, stamp duty land tax, stamp duty and stamp duty reserve tax.

The latest rise was triggered by the increase in the Bank of England base rate to 5.25 per cent and set in legislation.

What are the increases?

The interest rates will increase as follows:

• The rate of interest for the overdue payment of tax bills is calculated as base rate plus 2.5, so will increase to 7.75 per cent.
• The rate of interest on unpaid instalments of corporation tax liabilities is calculated as base rate plus one. It will increase to 6.25 per cent.
• The rate of interest paid by HMRC on the overpayment of tax is calculated as base rate minus one. It will increase to 4.25 per cent.

What does the Government say about late payment and repayment interest?

The Government said the rate of late payment interest “encourages prompt payment” and ensures fairness for those who pay their tax on time.

Meanwhile, the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay. It also said the differential between overdue payment interest and repayment interest is “in line” with the policy of other tax authorities worldwide. And it compares “favourably” with commercial practice for interest charged on loans or overdrafts and interest paid on deposits,

The Bank of England Monetary Policy Committee announced an increase to the Bank of England base rate from 5.00 per cent to 5.25 per cent on August 3.

The UK’s central bank continues to respond to persistent high inflation, bringing interest rates to their highest level since prior to the 2008 financial crisis.

Taxpayers can find more detailed information on the current interest rates for payments on the official Government website.

Need support or advice with tax repayments? We can help.

The UK’s financial watchdog has warned it will crack down on lenders that fail to justify low savings rates.

The Financial Conduct Authority (FCA) said providers who fail to show how their rates represent fair value to customers could face “robust action by the end of 2023”. This could include fines.

It is part of a 14-point plan by the FCA following a month-long review into the savings market. It found many banks are not passing on interest rate rises to savers.

Smaller firms offering higher rates

The UK’s largest financial establishments, including Lloyds, NatWest, HSBC, Santander UK and Nationwide Building Society, had passed on just over a quarter of rising interest rates to the most popular easy access accounts. As for fixed savings accounts, banks passed on about 51 per cent of rate increases.

There has also been significant variance between firms, with smaller firms offering higher interest rates on average than their larger competitors.

Given soaring interest rates on mortgages, credit cards and loans, low savings rates are seen by many as unfair, given booming bank profits. The regulator has said it will “conduct further analysis” into how cash savings are contributing to these profits.

Named and shamed

The FCA has already met with some of the country’s biggest lenders telling them to speed up. The regulator expects lenders to pass benefits to savers within “weeks” of a central bank interest rate rise.

Its 14-point plan will monitor how quickly banks pass on savings rates to customers and name and shame those which fail.

‘Better deals for savers’

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said: “We want a competitive cash savings market that delivers better deals for savers, where interest rates are reviewed quickly following base rate changes and firms prompt savers to switch to accounts paying higher rates.

“We welcome the progress that has been made so far but this needs to speed up. We will be using the Consumer Duty to ensure this is the case – with firms required to prove to us that they are offering their customers fair value.

“We continue to urge savers to shop around to take advantage of the increasing number of better saving deals available.”

The pandemic triggered a seismic shift in working practices with remote and hybrid working become the norm at many UK businesses.

Even when a return to the traditional workplace became possible, it was evident many workers preferred a more flexible arrangement. Well-reported difficulties in recruitment and talent acquisition led many employers to accept flexible working requests.

It also became more commonplace for employers to allow workers to live and work overseas.

Whether these arrangements are temporary or long term, there are tax and legal implications for the employer and the employee working away from HQ.

The rules are extensive and it would be wise to seek advice before making the move.

Income tax

As well as paying UK tax, earnings can also be subject to income tax in the country where the employee physically works. Employers may therefore have obligations to report and collect tax for the overseas country.

Typically speaking:

• If the employee works for six months or less, income duties may not be taxable overseas. However, the employer may have reporting obligations in the country overseas
• Medium-term working abroad would see the income taxed in the UK – usually with a foreign tax credit – as well as being taxed by the overseas country
• In the case of long-term working overseas – usually at least one UK tax year – the income would only be taxable in the overseas country

In some countries, a double taxation treaty exists that can override the local rules.

Social security

Social security contributions may also have local reporting requirements with employee and employer required to pay rates that can be much higher than in the UK.

There are some reciprocal social security agreements in place so advice should be taken to prevent issues in this area.

Corporation tax

Employers will also have to be wary of whether having an employee working abroad will create a “permanent establishment” in that country.

This would make a taxable presence that could render the employer subject to corporation tax in that country.

However, if the work location is not a fixed place of business, working from a home for example, and the overseas working arrangement is temporary, the risk of creating a “permanent establishment” would be low.

Need support or advice on this issue? We can help.

Voluntary and community organisations will benefit from a £5.5m pot awarded by HM Revenue and Customs (HMRC) to support customers who may need extra help with their tax affairs.

HMRC is inviting eligible organisations to bid for the funding, worth £1.8 million a year from 2024 until 2027, through HMRC’s Voluntary and Community Sector Grant Funding programme. Bids can be submitted until 21 August 2023 with successful organisations being announced in October ready for the new funding to start from 1 April 2024.

This is the 12th round of funding HMRC is awarding as part of its commitment to help everyone get their tax right. The programme builds on more than a decade of partnership funding, worth in excess of £20 million.

HMRC’s commitment

Angela MacDonald, HMRC’s Deputy Chief Executive and Second Permanent Secretary, said: “We know that customers really value the trusted tax advice they receive from our voluntary and community sector partners. The funding programme is an important part in our commitment to support our hardest to reach customers and builds on the current support HMRC offers to those who may need extra help with their tax affairs.”

David Newbold, director of Sight Loss Advice Service, from RNIB, one of 12 organisations previously awarded under the grant programme said: “RNIB is extremely grateful to HMRC for its generous support, ensuring blind and partially sighted people can access the advice, information and practical help they need to deal with their tax affairs and HMRC.

“We’re proud to have HMRC as a partner, its contribution is vital to continue our important work in supporting vulnerable individuals.”

39,000 customers helped

In the past year alone, funded organisations have supported 39,000 customers over the phone, with face-to-face meetings and via email.

Successful organisations will receive funding to provide free advice and support to customers who:

• may face barriers in understanding their tax obligations and claiming their entitlements.
• are digitally excluded from accessing HMRC services.
• have any other difficulty in interacting directly with HMRC.

As well as providing support to customers who may need extra help, organisations will provide valuable insight to improve HMRC’s understanding of customers in vulnerable circumstances. This will allow HMRC to reduce barriers and improve the customer experience when dealing with the department.

HMRC’s Voluntary and Community Sector Grant Funding programme complements the work of HMRC’s Extra Support Team, who are on hand to help customers whose health conditions or personal circumstances make contacting HMRC difficult.

More information on eligibility and how to apply can be found online at GOV.UK.

1 August 2023 – Due date for corporation tax due for the year ended 31 October 2022.

19 August 2023 – PAYE and NIC deductions due for month ended 5 August 2023. (If you pay your tax electronically the due date is 22 August 2023)

19 August 2023 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2023.

19 August 2023 – CIS tax deducted for the month ended 5 August 2023 is payable by today.

1 September 2023 – Due date for corporation tax due for the year ended 30 November 2022.

19 September 2023 – PAYE and NIC deductions due for month ended 5 September 2023. (If you pay your tax electronically the due date is 22 September 2023)

19 September 2023 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2023.

19 September 2023 – CIS tax deducted for the month ended 5 September 2023 is payable by today.