UK Reduces Late Payment and Repayment Interest Rates

The UK HMRC has updated its guidance on interest rates for late and early tax payments following the Bank of England’s reduction of the base rate from 4.00% to 3.75% on December 18, 2025, resulting in new late payment and repayment interest rates effective from January 9, 2026.
As a result of the base rate cut, the late payment interest rate will decrease to 7.75% (down from 8.00%), while the repayment interest rate will be set at 2.75% (down from 3.00%), applicable to various tax payments such as Corporation Tax, Income Tax, National Insurance contributions, and Capital Gains Tax.
For Corporation Tax quarterly installment payments, the late payment interest rate will be 6.25% starting December 29, 2025 (down from 6.50%), and the repayment interest rate for overpaid quarterly installments and early payments will be 3.50% (down from 3.75%).