Bank Rate Rises – you pay more, HMRC doesn’t…

First published on 30 March 2022 by Alastair
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At the end of February, my colleague Ashley Marshall wrote a blog on the unfair way HMRC charges those who have made an error that results in unpaid tax a far higher rate of interest on the outstanding amount than they themselves pay out when they make an error.

Now, to add insult to injury, HMRC has increased the interest rate that applies to late taxes.  In April 2020 this was 2.6% but from April 5th this year it will rise to 3.25%. This is due to the increase in official interest rates by the Bank of England After months of arguing that we would only see a transitory phase of higher inflation which would then fall away towards the end of this year, the Bank has belated realised that inflation is rising pretty rapidly and not showing any signs of stopping soon.

The higher rates will around 1.3 million people, mainly freelancers, landlords and other workers, who have not yet filed their tax return for the year. In addition, a further 850,000 struggling taxpayers on HMRC repayment plans, known as “Time to Pay” will also be affected.

All this at a time when the cost-of-living is ramping up considerably and is expected to continue to do so for a long time, with energy prices going through the roof in April and expected to do so again in October. While it must be noted that the government does not have a bottomless pit of money to throw at every problem, if there is one thing that infuriates the average voter it’s being treated unfairly.  But, as Ashley noted in her blog, that’s exactly what HMRC does, by keeping the rate it pays in interest on its errors to 0.5% - a figure that has not risen for more than 10 years.

Now you might think that with the rise in the Bank Rate, the taxman (i.e. the government) might relent and realise that if ever there was a time to give a bit then it’s now.  At present and even more so in the future, HMRC is making more money from those who struggle to pay their bills than it did previously, while simultaneously saving on the money it pays out for its own mistakes.  It does seem as if there is one rule for them and another for us…

If you are concerned about paying your tax, please do get in touch. We are Fife’s leading tax specialist and have the experience and expertise to help with any aspect of your tax affairs.

Vivian Linstrom, M&S Accountancy and Taxation

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