The Bank of England raised the base rate from 0.5% to 0.75% last week and this change will impact over one million self-assessment customers who have yet to file their 2020/21 tax return.

This is because HMRC interest rates are linked to the Bank of England base rate.

For non-quarterly instalment payments – such as the outstanding balance on late tax returns – the interest rate will rise to 3.25% from 5 April 2022.

It comes after the rate was previously increased from 2.75% to 3% from 21 February 2022.

More than two million people missed the 31 January deadline to file their 2020/21 self-assessment tax return and latest statistics from HMRC revealed 1.3 million missed the 28 February deadline.

While HMRC waived the late filing penalty for anyone submitting their return by 28 February, and has given customers until 1 April to pay tax or to set up payments to avoid a late payment penalty, the interest on outstanding balances has applied since 1 February 2022.

A 5% late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, by midnight on 1 April 2022.

Further, for those who miss the second deadline, as well as interest, the usual daily penalties will apply.

There are also additional penalties at six months late – August 2022 (5% of the tax you owe or £300, whichever is greater) and 12 months late – February 2023 (5% of the tax you owe or £300, whichever is greater, though in some cases you may have to pay up to 100% of the tax owed).

HMRC confirms repayment interest rates remain unchanged (0.5% from September 2009).

Help to pay your tax

The HMRC Time to Pay service allows people or businesses to spread their tax payments over time. Self-assessment taxpayers with up to £30,000 of tax debt can do this online once they have filed their return.

If taxpayers owe more than £30,000, or need longer to pay, they can call the Self-assessment Payment Helpline on 0300 200 3822.

Self-assessment payments can be made through the HMRC app by connecting to their bank or by Direct Debit, personal debit card or corporate/commercial credit/debit card.