The Taxes and Duties, etc (Interest Rate) (Amendment) Regulations 2025
- Department: HM Treasury
- Made under: Finance Act 1989, Finance Act 1996, Finance Act 2009, Taxation (Cross-border Trade) Act 2018
The 2025 regulations amended multiple existing tax regulations, increasing the interest rate payable to HMRC on outstanding tax liabilities.
The Taxes and Duties, etc (Interest Rate) (Amendment) Regulations 2025 amend several existing regulations to increase the interest rate on unpaid taxes owed to HMRC. The changes affect various tax areas, including income tax, air passenger duty, and customs duties, raising the interest rate by 1.5% in each affected area.
The regulations came into force on April 6, 2025, and are supported by prior legislation.
Arguments For
Increased Revenue for the Government: Higher interest rates on unpaid taxes will generate more revenue for the government, potentially improving public finances and reducing the national debt.
Deterrent to Tax Evasion: Increased penalties encourage timely tax payments, discouraging tax evasion and ensuring a fairer system.
Alignment with Inflation: Raising interest rates can help align penalties with current inflation rates, making penalties more effective.
Legal Precedent: The amendments are made under existing legal powers in various Finance Acts, providing a solid legal basis for the changes.
Arguments Against
Burden on Taxpayers: Higher interest rates increase the financial burden on taxpayers who are already struggling, potentially leading to hardship for individuals and businesses.
Administrative Costs: Implementing and enforcing changes could strain the resources of HMRC leading to potential increased administrative expenditure in the process.
Impact on Businesses: Increases in interest payments could negatively impact liquidity for small businesses, potentially harming economic activity.
Potential for unintended consequences: The elevated interest rate could lead to unforeseen consequences in the business and wider economy and may encourage actions to mitigate the effects of higher taxes.
The Treasury make these Regulations in exercise of the powers conferred by section 178(1) to (3) of the Finance Act 19891, section 197(1) to (3) of the Finance Act 19962, section 103(1) and (3) of the Finance Act 20093 and section 32(13) of, and paragraph 5(1), (2)(d) and (3) of Schedule 6 to, the Taxation (Cross-border Trade) Act 20184.
The Treasury created these regulations using existing powers found in the Finance Act 1989, Finance Act 1996, Finance Act 2009, and the Taxation (Cross-border Trade) Act 2018.
These acts grant the authority to adjust interest rates applicable to tax payments.
- Citation and commencement These Regulations may be cited as the Taxes and Duties, etc (Interest Rate) (Amendment) Regulations 2025 and come into force on 6th April 2025.
These regulations are officially titled the 'Taxes and Duties, etc (Interest Rate) (Amendment) Regulations 2025' and became effective on April 6, 2025.
- Amendment of the Taxes (Interest Rate) Regulations 1989 (1) The Taxes (Interest Rate) Regulations 19895 are amended as follows. (2) In regulations 3(3), 3A(3), 3AA(3), 3AC(3), 3ZB(3), 3ZC(3) and 4(3), in the formula, for “2.5” substitute “4”. (3) In regulation 3ZA(4), in the formula, for “1” substitute “2.5”. (4) In regulation 5A— (a) at the end of paragraph (a), omit “and”; (b) in paragraph (b), for “thereafter.” substitute “for the period beginning with 6 April 2017 and ending with 5 April 2025, and”; (c) after paragraph (b), insert— “4% per annum thereafter.”
This section amends the 1989 Taxes (Interest Rate) Regulations.
Specific regulations (3(3), 3A(3), 3AA(3), 3AC(3), 3ZB(3), 3ZC(3), and 4(3)) are changed replacing "2.5" with "4" in their formulas.
Additionally, Regulation 3ZA(4) changes "1" to "2.5" in its formula, and Regulation 5A is modified by removing "and" from paragraph (a), altering paragraph (b), and adding a new paragraph (c) setting the rate at 4% per annum.
- Amendment of the Air Passenger Duty and Other Indirect Taxes (Interest Rate) Regulations 1998 (1) The Air Passenger Duty and Other Indirect Taxes (Interest Rate) Regulations 19986 are amended as follows. (2) In regulation 4(3), in the formula, for “2.5” substitute “4”.
This section modifies the 1998 Air Passenger Duty and Other Indirect Taxes (Interest Rate) Regulations.
Specifically, it changes the numeric value in regulation 4(3), replacing "2.5" with "4" within the formula.
- Amendment of the Taxes and Duties, etc (Interest Rate) Regulations 2011 (1) The Taxes and Duties, etc (Interest Rate) Regulations 20117 are amended as follows. (2) In regulation 3(1), in the formula, for “2.5” substitute “4”.
This section amends the 2011 Taxes and Duties, etc (Interest Rate) Regulations.
It modifies regulation 3(1) by changing the formula, replacing "2.5" with "4".
- Amendment of the Customs (Import Duty) (EU Exit) Regulations 2018 (1) The Customs (Import Duty) (EU Exit) Regulations 20188 are amended as follows. (2) In regulation 45(4), in the formula, for “2” substitute “3.5”.
Section 5 amends the 2018 Customs (Import Duty) (EU Exit) Regulations.
In regulation 45(4), the number "2" in the formula is replaced with "3.5".
Jeff Smith Vicky Foxcroft Two of the Lords Commissioners of His Majesty's Treasury 25th March 2025
This section shows the signatures of Jeff Smith and Vicky Foxcroft, two Lords Commissioners of His Majesty's Treasury, and the date of signing, March 25th, 2025.
Explanatory Note (This note is not part of the Regulations) These Regulations make provision concerning the rate of interest applying to certain amounts payable to the Commissioners for His Majesty’s Revenue and Customs (“HMRC”). Regulation 2 amends various provisions of the Taxes (Interest Rate) Regulations 1989 (S.I. 1989/1297). Regulation 3 amends regulation 4(3) of the Air Passenger Duty and Other Indirect Taxes (Interest Rate) Regulations 1998 (S.I. 1998/1461). Regulation 4 amends regulation 3(1) of the Taxes and Duties, etc (Interest Rate) Regulations 2011 (S.I. 2011/2446). Regulation 5 amends regulation 45(4) of the Customs (Import Duty) (EU Exit) Regulations 2018 (S.I. 2018/1248). Each of these amendments increases the interest payable to HMRC on unpaid tax liabilities by 1.5%. A Tax Information and Impact Note covering this instrument will be published on the government website at http://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins.
The explanatory note summarizes the regulations' effect.
It clarifies that these regulations adjust interest rates for various taxes.
It details which specific regulations are being changed and the consistent 1.5% increase to the interest on unpaid taxes.
A link is provided to access further tax information and impact notes.
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