The situation was exacerbated by HMRC’s decision to hike the late payment interest rate to 4% above the Bank of England base rate from 6 April 2025, meaning rates were as high as 8.25% for many months.

In total, HMRC charged 1.3 million taxpayers late payment interest in 2023-24 raising £137m in a single tax year, revealed a freedom of information request by AJ Bell. The average interest payment was just over £100. 

Late payment interest was hiked from 6 April 2025 to base rate plus 4%, when it had previously been base rate plus 2.5%, and interest accrues daily on the original amount owed, meaning the total quickly escalates.