HMRC have announced the latest interest rates charged on late payments of tax. The main rate of interest on unpaid tax falls to 2.5% from 24 March while interest on overpaid tax remains nil.

The reduced rates covering quarterly instalment payments and early payments of corporation tax not due by instalments take effect from 16 March 2009.

The reduced rates covering all other direct and indirect taxes and National Insurance contributions paid late and overpaid take effect from 24 March 2009.

Income Tax, National Insurance contributions, Capital Gains Tax, Stamp Duty, Stamp Duty Land Tax and Stamp Duty Reserve Tax

Late payments, tax credits on overpayments in cases of fraud, neglect and on penalties charged, and tax charged by an assessment for the purpose of making a loss of tax wholly or partly attributable to failure or error by the taxpayer will be subject to interest of 2.5% instead of 3.5 per cent from 24 March.

Overpaid Income Tax, National Insurance contributions, Capital Gains Tax, Stamp Duty, Stamp Duty Land Tax and Stamp Duty Reserve Tax (repayment supplement) remains at 0 per cent interest.

Petroleum Revenue Tax, Advance Corporation Tax

The rate of interest for Development Land Tax, Petroleum Revenue Tax (including Supplementary Petroleum Duty and Advance Petroleum Revenue Tax), and on advance Corporation Tax and Income Tax on company payments which became due on or before 13 October 1999 paid late or overpaid changes from 2.75 per cent to 2 per cent.

Income Tax on Company Payments Due on or after 14 October 1999

The rate of interest on late payment of Income Tax on company payments which became due on or after 14 October 1999 changes from 3.5 per cent to 2.5 per cent.

Inheritance Tax

The rate of interest for late payments or repayments of Inheritance Tax, Capital Transfer Tax and Estate Duty changes from 1 per cent to 0 per cent.

Customs Duty, Environmental Levies and Tax, Excise Duties, Insurance Premium Tax and VAT

The rate of default interest charged on underdeclared VAT, Air Passenger Duty, Insurance Premium Tax, Landfill Tax, Climate Change Levy, Aggregates Levy, excessive repayments of VAT, Insurance Premium Tax, Landfill Tax, Climate Change Levy, Aggregates Levy and Customs Duties recovered by assessment and late payment of Customs Duty changes from 3.5 per cent to 2.5 per cent.

The rate of statutory interest paid where an official error has caused an overpayment, a failure to claim credit, or a delay in certain repayments of VAT, Insurance Premium Tax, Landfill Tax, Climate Change Levy, Aggregates Levy, Excise Duties and where there has been undue delay in processing a claim for repayment of Excise Duty and Customs Duty remains at 0 per cent.

Full details of these changes are available at http://www.hmrc.gov.uk/news/interest-rates1103.htm