HMRC increases interest rate for late tax payments

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The penalties for late tax payment for self-employed individuals are set to increase. HMRC is to increase the interest rate charged on overdue tax payments to 3.25% on August 21st.

The rise from the previous interest rate of 3% is due to the Bank of England’s recently announced base rate increase to 0.75%.

As a self-employed individual, whether you are a personal trainer or a professional dog walker, ensuring your taxes are in order is your responsibility. And the penalties that come as a result of non-compliance are just another reminder of such.

Tax-related penalties can be imposed by HMRC for a variety of reasons. These can include serious offences such as the intentional concealment of income, to other scenarios such as late tax returns or the delayed payment of tax and national insurance.

After the date of the interest rise, individuals who are late to pay their tax contributions face a hefty double-penalty.

As well as accruing interest on the tax owed at the new rate, there is a standard penalty amount added on to what you are deemed to owe HMRC. This figure is calculated as 5% of the tax is outstanding in the first instance.

Fail to pay within six months and another 5% of the outstanding balance is added on to the total. All the while the amount owed to HMRC is accruing interest at 3.25%.

For full information on the penalties that can be issued by HMRC, please visiting the Gov.UK website.