CT600 Interest Charges: What HMRC Charges for Late Payment
If you pay corporation tax late, HMRC charges interest from the due date. This guide explains how interest is calculated and how to minimise charges.
Current Interest Rates
HMRC interest rates change with Bank of England base rate:
| Type | Current Rate |
|---|---|
| Late payment interest | Base rate + 2.5% |
| Repayment interest | Base rate - 1% (minimum 0.5%) |
Historical Context
| Period | Late Payment Rate |
|---|---|
| 2023-24 | 7.75% |
| 2022-23 | 6.5% (rising) |
| 2021-22 | 2.75% |
| 2020-21 | 2.75% |
When Interest Starts
Standard Rule
Interest starts from the payment deadline, not filing deadline:
| Period Length | Payment Due |
|---|---|
| 12 months or less | 9 months + 1 day after period end |
| Over 12 months | Different dates for each CT600 |
Example Timeline
Year-end: 31 March 2024 Payment deadline: 1 January 2025 Tax due: £10,000
| If Paid | Days Late | Interest |
|---|---|---|
| 1 January | 0 | £0 |
| 1 February | 31 | ~£66 |
| 1 April | 90 | ~£192 |
| 1 July | 181 | ~£386 |
Interest vs Penalties
Interest and penalties are separate charges:
| Charge | What It Is | When Applied |
|---|---|---|
| Interest | Compensation for late payment | From payment deadline |
| Penalties | Punishment for non-compliance | After filing deadlines |
Key Difference
- Interest: Always charged on late payment, regardless of reason
- Penalties: May be appealed if reasonable excuse exists
How Interest Is Calculated
Simple Interest Method
HMRC uses simple interest (not compound):
``` Interest = Tax × Rate × (Days late ÷ 365) ```
Example Calculation
Tax owed: £25,000 Days late: 60 Rate: 7.75%
``` Interest = £25,000 × 0.0775 × (60 ÷ 365) Interest = £25,000 × 0.0775 × 0.1644 Interest = £318.42 ```
Multi-Rate Periods
If rates change while payment is outstanding:
- Interest calculated separately for each rate period
- Totals added together
Minimising Interest Charges
Strategy 1: Pay on Time
Set a reminder:
- Payment due: 9 months + 1 day after period end
- Set calendar reminder 2 weeks before
- Allow time for bank transfer to clear
Strategy 2: Pay Estimated Amount
If accounts aren't finalised:
- Calculate estimated tax
- Pay estimate by deadline
- Adjust when final figures known
- Interest only on underpayment
Strategy 3: Time of Payment
Payment clears when:
- Online banking: Same or next working day
- Direct Debit: Budget Payment Plan only
- CHAPS: Same day
- Cheque: Days to clear (avoid)
Strategy 4: Check Calculations
Before paying:
- Verify tax calculation is correct
- Review allowable deductions
- Check for available reliefs
- Correct errors = lower tax = lower interest
Interest on Overpayments
HMRC also pays interest on overpayments—but at a lower rate.
Repayment Interest
| Situation | Interest Rate |
|---|---|
| Late payment (you owe) | Base rate + 2.5% |
| Overpayment (they owe) | Base rate - 1% |
When HMRC Pays Interest
- Repayment interest starts from payment deadline
- Only on amounts genuinely overpaid
- Not on payments on account returned
Special Situations
Quarterly Instalment Payments
Large companies (£1.5m+ profits) pay in instalments:
| Instalment | Due Date |
|---|---|
| 1st | 6 months + 13 days into period |
| 2nd | 9 months + 13 days into period |
| 3rd | 14 days after period end |
| 4th | 3 months + 14 days after period end |
Extended Accounting Periods
15-month period example:
Two CT600 returns with different deadlines:
- First 12 months: Own payment deadline
- Remaining 3 months: Own payment deadline
Amended Returns
If you amend your CT600 and tax increases:
- Interest charged from original payment deadline
- Even though amendment filed later
- Additional tax was always "owed"
Frequently Asked Questions
Can I claim interest paid as a business expense?
No. HMRC interest charges are not tax-deductible expenses.
What if HMRC made an error?
If HMRC's mistake caused your late payment:
- Interest may be waived
- You need to prove HMRC error
- Contact HMRC with evidence
Is there a minimum interest charge?
HMRC doesn't charge interest below £5. Small amounts may be waived.
Does interest apply to penalties too?
Penalties themselves don't attract interest. But if penalties increase the amount you owe and you don't pay promptly, the penalty amount becomes part of the debt.
Can I pay in instalments?
Contact HMRC about a Time to Pay arrangement:
- Spread payments over months
- Interest still applies
- But avoids escalation
Summary
| Aspect | Details |
|---|---|
| Current rate | Base rate + 2.5% (check GOV.UK) |
| Starts from | Payment deadline (not filing deadline) |
| Calculation | Simple interest, daily |
| Avoidance | Pay on time, even estimated amounts |
| Repayment rate | Base rate - 1% (you get less) |
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