HMRC has confirmed the interest rate on late tax bills will increase by 0.25%, following the Bank of England's (BoE) increase of interest to 1%.

The increase in interest means late payment rates will increase to 3.5% as of 24 May. This will be the second increase in two months after it was raised to 3.25% on 5 April, and will be the highest rate since the financial crisis in January 2009.

The late payment interest rate is applied and payable on income tax, National Insurance contributions, capital gains tax, and stamp duty land tax. The corporation tax pay and file rate will also increase to 3.5%.

Corporation tax self-assessment interest rates, if underpaid on quarterly instalments, will rise to 0.75% from 16 May, increasing by 0.25%.

The repayment interest rate will stay the same at 0.5%, the figure it has been since 29 September 2009.

On 5 May, it was announced the monetary policy committee (MPC) had voted 6-3 to increase the bank rate by 0.25%, bringing the interest rate to 1%. The decision was made as a move against surging inflation and marked the fourth consecutive increase.

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