Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the potential impact of the difference between the interest rates charged by HMRC on late tax payments and the interest rates paid by HMRC on tax refunds owed on taxpayers.

HMRC treats interest in line with other tax authorities and financial institutions by having a differential between the interest it pays, and the interest charged. This differential is currently 5ppt, with both Repayment Interest and Late Repayment Interest linked to the Bank of England base rate that reflects wider economic conditions and gives transparency for those tracking its rates.

In setting rates, HMRC weighs up various factors to provide transparency and ensure fairness for those who do pay on time, the cost to the public purse of delayed payment, and increasing the tax debt.

The differential between late payment and repayment rates supports appropriate compliance incentives within the tax system. This makes sure that HMRC does not become the lender of first preference to some customers, impairing its ability to efficiently collect taxes and fund public services.

This also ensures taxpayers do not benefit from delaying payment by effectively borrowing from HMRC at lower rates than are available through commercial short‑term lending. It also avoids creating incentives to overstate tax to secure a financial return compared with commercial savings rates.