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Avoid Interest Rate Increases on Late Self-assessment Payments

Published: 16 December 2024

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Halfway through December and with Christmas fast approaching, you could say the festive spirit is well and truly upon us now! And while there’s plenty to look forward to – family time, festive feasts, New Year’s Eve celebrations – the winter season also brings with it the ever-looming self-assessment deadline.  

Granted, self-assessment tax returns don’t exactly scream festive cheer, but they are certainly important and not to be ignored. In fact, getting ahead and filing early could be the best way to go to enjoy a stress-free Christmas period with loved ones. What’s more, the recently announced increased interest rates on late payments means you’re facing even larger penalties than before for late filing. Sorting your tax return early will not only save you from unwanted fines, you’ll also be doing yourself a massive favour and starting 2025 on a high note. 

Read this blog for an overview of how interest rate increases will impact self-assessments. 

Late payment interest increase    

Labour delivered their first budget on October 30th this year and with it brought several changes that will be implemented from April 2025. Hidden amongst the changes was the introduction of a 1.5% increase in interest rates charged on late tax payments, which many taxpayers may not have been made aware of. 

As of April 6th 2025, the interest rate on late payments will rise to the base rate plus 4%. It comes as part of the government’s initiative to encourage people to pay their taxes on time, specifically targetting the group of taxpayers who have filed their self-assessment paperwork, but whose tax bill remains outstanding. 

What does this mean for self-assessment filing? 

It’s always been important to submit your self-assessment on time to avoid penalties. The current base rate, set by the Bank of England, is 4.75% meaning that if this remains the same until April, people paying late could face penalties of 8.75%. Filing self-assessments late was never the ideal situation, however, with these increased interest rates, it really is in your best interest to be vigilant of deadlines and start the process earlier rather than later and to submit your payment on time.  

As a small business owner, you’ll understand just how necessary it is to keep finances running smoothly for the benefit of your cash flow. The last thing you need is to be hit with HMRC penalties that grow in value each day the longer you leave your unpaid taxes outstanding. Forking out for fines, especially with these increased interest fees, could make a real dent in your hard-earned profit.  

Here’s a reminder of the all-important deadlines to make a note of: 

  • October 5th: deadline to register to file 
  • October 31st: deadline to submit paper returns 
  • January 31st: deadline to submit online returns and tax payment 

Remember, everyone who is classed as self-employed and receives income not taxed at source must complete and submit a tax return. If you want a recap of all things self-assessment, you might find it useful to check out our FAQs guide for first-time filers

What does this mean for me? 

Though interest rates on late payments are set to increase, there’s no real reason why this should affect your day to day as long as you take the necessary steps to file on time. We advise you to be mindful of: 

Organisation

Keep your filing paperwork and relevant financial documents organised and labelled throughout the year. When it comes to filing season, you know exactly where everything is and can hit the ground running without delays. 

If you’re looking for a solid way to keep on top of all your tasks throughout the year, our bookkeeping service might just be the answer to your problems. From payment processing and daily banking to recording financial transactions and maintaining ledgers, using bookkeeping software really can make all the difference when it comes to day-to-day management of your books. The best part? Your documents will be organised and ready to go come filing season! 

Timekeeping

Start the filing process earlier rather than later. Why not rid yourself of stress by getting it out the way before Christmas? That gives you plenty of time to spot mistakes and triple-check your submission ahead of time.  

There’s no such thing as ‘too late’ with us; we can get your tax returns filed within 48 hours of receiving your information.  

Professional Guidance

Get a tax expert on board who can ease the burden of filing and advise you along the way. 

How can Baa help? 

Baa are specialists when it comes to all things tax, and self-assessments are no exception. Tax returns are part of our core services, meaning we’re well-versed in all the intricacies of filing dos and don’ts. Our accountants will guide you through the filing process, go through your records and financial documents to ensure all is correct for HMRC’s standards, and help you optimise your taxes through deductions and allowances. Most importantly, we’re here to make sure you never miss a deadline and have to pay a penalty. 

So, why not treat yourself? It is Christmas after all! File your self-assessment with us now and you can enjoy the festive season without any stress knowing we’ve taken care of your submission compliantly and expertly. Roll on 2025…without any penalties! 

Get in touch with our team today or browse this self-assessment page for more info.  

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