HMRC is raising interest rates on tax debt from 22 November following the recent 0.75% increase in the Bank of England (BoE) base rate.

Interest will rise to 5.5%, in line with the base rate hike. The last time the rate changed was 11 October, when it went up by 0.5% to 4.75%.

In January, the interest rate was just 2.75%, but has since increased seven times throughout the year. This latest rate is the highest since the height of the financial crisis in 2009.

Affected taxes include corporation tax, income tax, National Insurance contributions (NICs) and inheritance tax.

The repayment interest rate on these taxes is also rising from 1.25% to 2.0%, meaning that HMRC will also pay a higher rate to customers who have overpaid or paid too early.

Speaking on the how interest rates are set, HMRC said:

"The late payment interest rate encourages prompt payment. It ensures fairness for those who pay their tax on time.

"The repayment interest rate compensates taxpayers fairly, when they overpay or pay early, for loss of use of their money."

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