UK BUSINESS NEWS • HMRC UPDATE
HMRC late-payment interest rises to 8%
From 24 November 2026. What company directors need to know about the higher charges on VAT, PAYE and Corporation Tax arrears — and the options if their business is struggling.
What has HMRC announced?
On 6 November 2026, HM Revenue & Customs announced an increase in interest rates following the Bank of England’s decision on 5 November to raise Bank Rate from 3.75% to 4.00%.
The standard HMRC late-payment interest rate will rise from 7.75% to 8.00% on 24 November 2026. The interest rate HMRC pays on qualifying tax repayments will also rise from 2.75% to 3.00% on that date.
Separate rates apply to certain Corporation Tax quarterly instalment payments, with changes taking effect earlier, on 16 November 2026.
Important: These rates have been announced but are not yet in force as at 7 November 2026. They apply from the dates shown below; they do not retrospectively replace the rates for earlier periods.
The numbers at a glance
HMRC interest rates: what is changing?
| Interest category | Old rate | New rate | From |
|---|---|---|---|
| Standard late-payment interest | 7.75% | 8.00% | 24 November 2026 |
| Standard repayment interest | 2.75% | 3.00% | 24 November 2026 |
| Underpaid Corporation Tax quarterly instalments | 6.25% | 6.50% | 16 November 2026 |
| Interest paid on overpaid quarterly instalments / qualifying early Corporation Tax payments | 3.50% | 3.75% | 16 November 2026 |
The standard rate generally covers relevant overdue VAT, PAYE/National Insurance and Corporation Tax from its normal due date. Specific tax regimes and accounting periods can have different rules. Figures sourced from HMRC’s official interest-rate tables, updated 6 November 2026.
How much more could overdue tax cost?
Although the increase is only 0.25 percentage points, interest adds to the pressure on companies already struggling to meet tax bills, wages and ordinary running costs.
Illustrative overdue tax debt
£50,000
Assuming the balance remains unchanged for a full year.
Illustrative annual interest at 8%
£4,000
Equivalent to around £333 per month, before any separate penalties.
At 7.75%, the same illustrative annual interest would be £3,875. The increase is therefore £125 over a full year on an unchanged £50,000 balance. Actual HMRC interest is calculated by reference to the applicable dates, balance and tax rules; this is a simple comparison, not a personalised calculation.
Why does this matter to company directors?
Where the company is viable
Make sure repayment is realistic
A business with sustainable cash flow may be able to discuss a Time to Pay arrangement with HMRC. The plan must allow for ongoing taxes, normal trading expenses and interest on unpaid balances.
Where the company is struggling
Do not let arrears keep increasing
If VAT or PAYE is repeatedly being used to fund day-to-day trading, the company may face a wider financial problem. Directors should assess the position promptly rather than relying on another short-term delay.
An interest-rate rise does not introduce a new insolvency law or make liquidation automatic. However, unpaid HMRC liabilities can still lead to collection and enforcement action, including a winding-up petition in appropriate cases.
Practical next steps
Three things to do if your company owes HMRC
Step 01
Know the full figure
List overdue VAT, PAYE, National Insurance, Corporation Tax, interest and penalties. Check the figures against HMRC records.
Step 02
Test your cash flow
Allow for rent, wages, suppliers and future tax bills as well as any proposed instalments towards existing arrears.
Step 03
Choose the right route
Consider early engagement with HMRC and obtain independent advice where the company cannot realistically repay its debts.
Remember: A Time to Pay arrangement does not necessarily stop interest accruing. For VAT arrears, HMRC states that interest continues on the outstanding balance until it is paid in full.
What if the company cannot afford to pay HMRC?
HMRC does not have to accept a payment plan. The key issue is whether the company can meet its ongoing commitments and deal with the debt within a realistic period.
Depending on the circumstances, the options may include a revised repayment proposal, additional funding, restructuring or, where the company is insolvent and there is no viable route forward, a Creditors’ Voluntary Liquidation (CVL).
At DCA Business Recovery, we will explain the available options in plain English and tell you if we believe liquidation is not necessary. There is no hard sell.
Frequently asked questions
When does HMRC late-payment interest increase to 8%?
The standard late-payment rate increases from 7.75% to 8.00% on 24 November 2026. The change was confirmed by HMRC on 6 November.
Does the increase affect VAT and PAYE arrears?
Yes, the standard rate applies to relevant overdue VAT and PAYE/National Insurance debts. The rate that applies to any particular liability depends on the tax and period involved.
Why is the Corporation Tax quarterly instalment rate 6.5% rather than 8%?
Underpaid Corporation Tax quarterly instalments have a separate rate. That rate rises to 6.50% on 16 November 2026. Ordinary late-paid Corporation Tax from its normal due date is generally subject to the standard rate.
Does interest still apply if HMRC agrees a payment plan?
Yes. A Time to Pay arrangement can help spread repayments, but HMRC generally continues to charge applicable late-payment interest on the outstanding balance. Some penalties may be reduced or avoided depending on the circumstances.
Does owing HMRC money mean my company must be liquidated?
No. Unpaid tax alone does not mean liquidation is inevitable. The right option depends on the company’s financial position, future viability and its ability to pay creditors.
Free & confidential initial advice
Worried about your company’s HMRC arrears?
DCA Business Recovery is a family-run insolvency practice providing clear, practical advice to directors. We will help you understand the position, assess the options and decide what to do next — without pressure.
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