HMRC revises late payment interest rates after Bank of England rate hike | Personal finance | Finance

These new rates will affect those who make late payments on national insurance, income tax, capital gains tax, inheritance tax and stamp duty. The Bank of England has hiked the base rate as the UK faces its highest inflation rate in four decades.

On May 5, the Bank of England’s Monetary Policy Committee voted to raise the base rate from 0.75% to 1%.

For many households, it had seen anxiety set in as debt piled up as the cost of living crisis bit into paychecks.

Due to the rise, HMRC interest rates for late payments will also rise in May as the two are directly linked.

Late payment interest is fixed at the base rate plus 2.5%.

READ MORE: Over-60s risk missing out on free prescriptions for YEARS amid state pension changes

The interest rate for quarterly payments will be applied on May 16 and May 24 for non-quarterly payments.

This means that from the end of May all late payments will be charged with 3.50% interest.

3.50% interest is a level not seen for HMRC late payments since January 2009, during the financial crisis.

The redemption interest rate will not be affected, remaining at 0.5%.

DO NOT MISS :

The interest rates on late payments are intended to encourage Britons to quickly pay the money they owe to HMRC.

It all adds up to a pile of mounting financial worries for Britons, as the base rate is now at its highest level in 13 years to cope with the equally astonishingly high rate of inflation.

This is the fourth consecutive base rate hike since late 2021, when the base rate was at a historic low of 0.1% due to the pandemic.

However, inflation is not expected to slow down anytime soon, leading some experts to believe that another base rate hike may be looming in the future in an effort to keep inflation under control.

An increase in the base rate essentially means that the public will see their cost of borrowing increase for loans, mortgages and credit cards.

Experts noted that the one percent hike will match borrowing costs in the current economy with levels seen in early 2009, following the financial crisis.

Britons already have lower levels of disposable income now than during this financial crisis, as energy bills soar beyond some people’s capacity.

These high energy prices are mainly due to the pressures exerted on the industry by the pandemic and aggravated by the crisis in Ukraine.

Britons are really starting to feel the financial brunt of the current economic situation, as April saw the appearance of new national insurance rates, the rise in the energy price cap and the start of the new fiscal year .

Alastair Douglas, CEO of Totally Money, warned the hikes could see 8.9 million people struggling to make their repayments.

He said: “For variable rate mortgage holders, repayments that were once affordable will quickly become unaffordable.

“Raising rates to one will see two million borrowers face average repayment hikes of over £1,000 a year and could leave some first-time defaulters.”


Source link

Elaine R. Knight