What is Late Payment Interest? UK Definition 2026/27
Quick Answer
Interest charged by HMRC on overdue tax payments at Bank of England rate plus 2.5%.
Definition of Late Payment Interest
HMRC charges interest on late tax payments at the Bank of England base rate plus 2.5%. As of 2026, this is typically around 7-8%. Interest runs from the payment due date until the date you pay. Its calculated daily and compounds. Unlike penalties, late payment interest cannot be appealed - its automatic.
Late Payment Interest — Key Facts for 2026/27
| Rate calculation | Base rate + 2.5% |
| Current rate | ~7.5% (varies) |
| Calculated | Daily, compounded |
| Appeal possible | No - automatic charge |
How Late Payment Interest Works — Example
- 1Tax due 31 January: £10,000
- 2Paid 31 May: 4 months late
- 3Interest rate: 7.5% per year
- 4Daily rate: 0.0205%
- 5Interest for 120 days: ~£250
How Late Payment Interest Affects Your Tax
Late payment interest adds significantly to tax bills if payment is delayed. At current rates, its expensive borrowing. Always pay on time or arrange a Time to Pay agreement with HMRC to discuss options.
Official HMRC Guidance on Late Payment Interest
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: Interest on late paymentsFrequently Asked Questions about Late Payment Interest
Related Tax Terms
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.