Interest Rates on the Rise – What You Need to Know for 2025
There are big changes coming to HMRC interest rates from April 2025, with an increase in late payment interest and a new approach to the Official Rate of Interest (ORI). If you have outstanding tax bills or offer benefits to employees, these changes could cost you more—or make tax calculations more complex.
Late Payment Interest – Increasing from April 2025
Currently, HMRC interest rates are linked to the Bank of England base rate. There are two key rates:
- Late payment interest = Base rate + 2.5% (Encourages prompt tax payments)
- Repayment interest = Base rate – 1% (with a floor of 0.5%) (What HMRC pays you on tax refunds)
Current HMRC Interest Rates (2024):
- Late payment interest: 7.25% p.a. (Base rate of 4.75% + 2.5%)
- Repayment interest: 3.75% p.a. (Base rate of 4.75% – 1%)
What’s changing in April 2025?
Late payment interest will increase by 1.5 percentage points to Base rate + 4%.
Repayment interest remains unchanged—meaning HMRC will continue paying you less interest than it charges you.
Impact of the change:
- If you owe tax, it will cost you more in interest from April 2025.
- The gap between what HMRC charges and what it pays out grows to 5%—costing taxpayers more.
- Action required: If you have outstanding tax debts, pay them as soon as possible to avoid higher charges next year.
Need help managing a tax bill? We can assist with tax planning and HMRC Time to Pay arrangements.
Changes to the Official Rate of Interest (ORI) – New Quarterly Reviews
The Official Rate of Interest (ORI) is used to calculate:
Accommodation benefit (applies to company-provided housing).
Loan benefit (applies to employee loans from employers).
Current ORI (2024): 2.25% p.a.
- The ORI has always been fixed for a full tax year—until now.
What’s changing in April 2025?
From April 2025, the ORI will be reviewed and adjusted quarterly rather than remaining fixed for the year.
This makes loan benefit calculations more complex—as different ORI rates may apply within the same tax year.
Employers and employees with company loans should be prepared for fluctuating benefit-in-kind (BIK) charges.
What should you do?
Review any employer-provided loans to see how the changes could impact benefit-in-kind charges.
Speak to us if you need help calculating taxable benefits for employees.
How Merranti Accounting Can Help
If you have outstanding tax bills – We can help you pay off tax early or set up an HMRC Time to Pay arrangement to avoid excessive interest.
If your business provides employee benefits – We can review how ORI changes will impact tax charges on loans and accommodation.
>If you need tax advice – Our expert team is here to help you stay ahead of these changes and avoid unnecessary costs.
Contact us today to plan ahead and avoid being caught out by rising interest charges in 2025!
