01 August 2024
It has been announced by the Bank of England that the base rate has been reduced to 5% from 5.25%. This is the first drop in interest rates since March 2020.
The Bank of England uses interest rates to impact the levels of inflation, with a target of 2% year-on-year inflation. The current levels of inflation are roughly 2%, leading to speculation over the last few months of when the Bank of England will react and start to reduce interest rates. The Monetary Policy Committee votes five to four in favour of reducing interest rates, with the minority instead wishing to maintain the previous rate.
For payroll professionals, it is good to be aware of the impact this announcement has on HM Revenue and Customs’ (HMRC’s) late payment interest charges. This page will be updated with the latest rates when HMRC updates them to reflect the new base rate.
HMRC interest rates are set in legislation and are linked to the Bank of England base rate, these rates are:
- late payment interest – set at base rate plus 2.5%
- repayment interest – set at base rate minus 1%, with a lower limit of 0.5%.
The next Bank of England announcement is set for 19 September 2024.
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