TAX

 

VAT (Value Added Tax), PAYE (Pay As You Earn), NI (National Insurance), and Corporation Tax are some of the taxes that businesses collect on behalf of HMRC. It is essential that these taxes are paid in a timely manner to be compliant with UK tax laws. 

If you are struggling to pay your creditors, either due to a temporary cash flow issue or as part of a longer-term financial problem, then you may think delaying a payment to HMRC is the best option. However, HMRC have great enforcement powers and will take action to recover any debts, therefore you need act quickly and be proactive in dealing with any arrears. 

 

HMRC impose a daily interest rate on all overdue payments, which applies from the date the payment was due until it is paid in full. The official interest rate is derived from HMRC’s fixed rate plus the Bank of England (BoE) base rate. 

As of April 2025, HMRC’s fixed interest rate was 4% and as of 19th June 2025 the BoE base rate was 4.25%. (Please note the interest rate will change, therefore you must check HMRC’s website for the latest information). This can be calculated as follows: 

Interest owed = Amount owed X Interest Rate ÷ 365 X Days Late 

 

Example Calculation: You owe = £10, 000 VAT 

Interest rate (4% + 4.25%) = 8.25% ÷ 365 = 0.00022% Days late = 30 

So, £10,000 x 0.00022 x 15 = £67.80 

After 30 days you would owe an additional £67.80 in interest 

 

If you are unable to pay the debt in full, then HMRC may be able to offer payment options. A Time to Pay (TTP) arrangement is a payment plan designed to suit both parties and should be arranged directly through HMRC, or an Insolvency Practitioner can act on your behalf. 

 

If you need advice or would like to discuss your options, then please get in touch for a no obligation chat.