HMRC Late Payment Interest Calculator, 2026/27

How this is calculated

HMRC charges interest on most taxes paid after the due date, calculated daily from the day after the payment was due until the day it is actually paid. The current late payment rate is 7.8% per year, set at a margin above the Bank of England base rate and reviewed whenever the base rate changes.

The calculator converts the annual rate to a daily rate by dividing by 365, then multiplies the amount owed by the daily rate and the number of days late to give the interest charge, which is how HMRC's own systems calculate it for most taxes including income tax, corporation tax and VAT.

Because the rate is linked to the base rate, this cost can move up or down over the year, and it is separate from and in addition to any late payment penalty that may also apply.

Why the rate is set where it is

HMRC's late payment interest rate is deliberately set above the rate it pays on money it owes taxpayers (the repayment rate), which is designed to discourage taxpayers from treating HMRC as a cheap source of borrowing by simply not paying on time.

Because the rate compounds daily and applies from the very next day after the deadline, even a short delay on a large tax bill can add up meaningfully, particularly for VAT or corporation tax payments involving larger sums.

What to do if payment will be late

Interest cannot generally be avoided once a payment is late, but agreeing a Time to Pay arrangement with HMRC before the deadline, or as soon as possible after it, can prevent additional penalties from being charged even though interest will still accrue on the outstanding balance.

Paying as much as possible by the due date, even if not the full amount, reduces the balance interest is calculated on and therefore the total cost, so a partial payment is always worth making rather than waiting until the full amount is available.

What is HMRC's current late payment interest rate?

HMRC currently charges 7.8% per year on most late paid taxes, a rate that is linked to the Bank of England base rate and can change during the year if the base rate moves.

Does interest apply to all taxes?

Yes, late payment interest applies to income tax, corporation tax, VAT and most other taxes administered by HMRC, calculated daily from the day after the due date until the tax is paid in full.

Is interest the same as a penalty?

No, interest simply compensates HMRC for late payment and is not a punishment; penalties are a separate, additional charge for paying late, calculated under a different set of rules and often based on how many days or months the payment is overdue.

Can I avoid interest by agreeing a payment plan?

No, interest continues to accrue on any outstanding balance even under an agreed Time to Pay arrangement, but agreeing the arrangement can help you avoid additional late payment penalties on top of the interest.