You’ve heard of the “awful April” bill rises – and the taxman has joined in as well. 

HMRC has hiked its late payment interest fees to 8.5%, meaning the gap between what it charges taxpayers in late payment interest and the rate it offers on overpaid tax is now wider than ever, according to an FOI by investment platform AJ Bell.

Late payment interest on income tax has surged in recent years, with £150m paid so far for the 2022/23 tax year. The average payment is up 14% on 2021/22 to £103.33, according to HMRC.

Charlene Young, senior pensions and savings expert at AJ Bell, said: “Buried in the publications following the chancellor’s spring statement last week was confirmation of the hike in late payment interest rates that will apply from 6 April this year.

“In her October budget, the chancellor gave the green light for HMRC to up the interest penalty that can be charged from the Bank of England’s base rate plus 2.5% to the base rate plus 4%, meaning it will stand at 8.5% from 6 April 2025.

“In contrast, HMRC will continue to only pay base rate minus 1% on repayments owed to taxpayers, equivalent to 3.5%.

“HMRC can still also give themselves more time to pay compared to taxpayers. That’s because late interest is chargeable immediately, yet the repayment supplement only kicks in if HMRC are a year late.”

How late fees work

You’ll face a penalty if you need to send a tax return, and if you miss the deadline for submitting it or paying your bill.

There’s a late penalty fine of £100 if a tax return is up to three months late and you’ll have to pay extra fees if it’s later or if your tax bill is late.

For unpaid tax, a 5% fine applies after 30 days.

Then, after six and twelve months, an extra 5% is applied.

You’ll also be charged interest on late payments at a base rate plus 4%.

In all, this means the interest charge will be 8.5% from now on.