Understanding Changes to Tax Interest Rates

Recent changes to tax interest rates have come into effect following the Bank of England’s decision to increase the base rate. Understanding these updates is important to avoid surprises when dealing with tax payments or repayments.

Key Changes to Interest Rates

Earlier this month, the Bank of England raised the base rate from 0.25% to 0.5%. This change has resulted in an increase in the interest charged on the late payment of taxes. Effective from 21 November 2017, the rate increased from 2.75% to 3%.

However, there is an exception for corporation tax paid through quarterly instalments. For these payments, the interest rate rose earlier, from 1.25% to 1.5%, effective from 13 November 2017.

Repayment Supplement Rate

While the interest charged on late payments has increased, the repayment supplement remains unchanged. It continues to be paid at a rate of 0.5%, offering consistency for taxpayers expecting repayments.

Implications of the Changes

These changes to tax interest rates highlight the importance of staying informed about updates that may impact your tax obligations. Late payments now incur higher costs, making timely payments even more crucial.

For businesses paying corporation tax in quarterly instalments, it’s essential to factor in the increased rate when managing cash flow. Staying on top of these changes can help minimise unnecessary expenses.

Stay Informed About Tax Updates

Keeping up with changes to tax interest rates ensures you’re prepared for any financial adjustments. Whether you’re an individual taxpayer or a business managing corporate taxes, understanding these changes can help you plan more effectively.

If you need guidance or have concerns about these updates, get in touch with our team for expert advice. We are always happy to see how we can help. Plus, we offer a free introductory meeting so that you can find out what we do and how we do it. So, do call us today and let’s see how we can partner in your success!

An article in The Times has stated that almost £1.5bn UK tax relief was claimed on individuals’ charity gifts last year. Around 50% of the donations declared were made by individuals with incomes over £250,000, raising the question of whether tax relief on charitable donations disproportionately benefits the rich. Another fact noted was that a significant proportion of the gifts were made by individuals over 65.

The question is then whether tax relief on charitable donations is costing too much? It’s possible that Gift Aid and the lower inheritance tax rate of 36% (which applies where at least 10% of the net estate is left to charity) may come under scrutiny.

A recent case which was heard at tribunal looked at the question of whether a company director is required to file a self assessment tax return, in relation to an appeal against a late filing penalty.

The conclusions were that although HMRC want company directors to file returns, nothing in the legislation states that directors have to file a return, if there is no charge to tax. However, the law does require an individual to file a return if a notice to file has been issued. The case I refer to above was won by the taxpayer because HMRC were unable to prove they had sent the notice to file to the correct address; he still ended up filing a tax return.

If you are a company director and you receive a notice to file a return then it probably is as well that you do not ignore the notice to file as late filing penalties can amount to £1,600, if a return has not been filed 12 months after the filing deadline.

HMRC’s latest drive against tax evasion has placed the onus on tax professionals to write to clients, forwarding a copy of a letter from HMRC. As we were threatened with a £3,000 fine if we failed to comply with the requirement, we felt duty bound to reluctantly send the message to all clients who we provide personal advice to.

HMRC’s motives are to make people aware that the CRS will provide them with access to new information about income and assets owned by UK resident individuals in various other countries. HMRC will use this information to check offshore income has been correctly declared and any UK tax owed, assessed and paid.

Anyone who has been disclosing details of all their income clearly has nothing to worry about. At the risk of pointing out the obvious, investments held in the Channel Islands and the Isle of Man are considered to be held overseas.

It would also be advisable to ensure income derived from Euro or Dollar accounts is reported on tax returns, even if only very modest amounts are received. This is because if HMRC receive notification that a person has an offshore account but is not disclosing overseas income, then HMRC may consider that an investigation could be cost effective – so ensure you do not provide HMRC with a reason to initiate an invasive investigation!

 If you have any questions on this subject then you can get in touch with your usual contact in the office or you can use the website contact form!