Welcome to our third newsletter for 2025 aiming to bring you the latest in financial news and updates. This month Porter Garland Chartered Accountants focus on the following topics.
First our lead story:
HMRC CUTS LATE PAYMENT INTEREST TO 7%: Following the Bank of England’s base rate cut to 4.5% on 6 February, HMRC will lower its late payment and repayment interest rates from 25 February.
The late payment interest rate will drop from 7.25% to 7.0%, while the repayment interest rate will decrease from 3.75% to 3.5%. These changes reflect HMRC’s standard approach, where late payment interest is set at the base rate plus 2.5%, and repayment interest is set at the base rate minus 1%, with a minimum floor of 0.5%.
For corporation tax, interest on underpaid quarterly instalments will fall to 5.5% from 5.75% on 17 February – one week earlier than the main rate change. Similarly, interest on overpaid quarterly instalments and early corporation tax payments will drop to 4.25%.
Looking ahead, from 6 April 2025, HMRC will increase its premium on late payment interest, raising the surcharge from 2.5% to 4% over the base rate. Announced in last October’s Budget, this move will generate £255 million a year from 2025/26, targeting tax avoidance and late payments.
Despite these adjustments, HMRC continues to pay lower interest on overpayments than on late payments. It has defended this policy by citing international tax authority practices and comparing commercial loan and deposit rates.
And other stories:
CHANGES TO INHERITANCE TAX ON PENSIONS FROM 2027: From April 2027, unused pension pots and death benefits will be included in an individual’s estate for inheritance tax (IHT) purposes.
BANK OF ENGLAND CUTS INTEREST RATES TO 4.5%: The Bank of England (BoE) has cut the base rate by 0.25%, bringing it to its lowest since May 2023.
GOVERNMENT AI ROLLOUT REQUIRES BETTER COLLABORATION: The Government’s use of artificial intelligence (AI) is expanding, but departments must work together to manage risks effectively.
WANT TO TALK TO AN EXPERT? Call one of the team at Porter Garland Chartered Accountants for advice on any of your financial matters – accounting, taxation and bookkeeping services. Or to keep reading, click this link: news_roundup_march25