HMRC hauls in record £409m in late payment interest

The amount of late payment interest paid by taxpayers has trebled since the start of the pandemic as frozen thresholds drag more into tax net

A freedom of information request by RSM has found the amount of money paid out in late payment interest to HMRC hit £409.4m in 2024, more than tripling in just three years.

In 2021 £131.9m was paid in late interest by taxpayers who failed to pay their tax bill on time. In 2024 this has now exploded to £409.5m due to the HMRC interest rate increasing to a peak of 7.75% in August 2024.

HMRC’s interest rate was 2.6% in 2021, however the Bank of England base rate was at a historic low of 0.1% as a result of covid lockdowns.

HMRC’s average interest rate in 2023 was 7.08%, increasing to 7.63% on average through 2024.

RSM partner Chris Etherington said the reason for the increase can ‘simply be explained by this increase in the average rate applied’.