If certain taxpayers underpay tax, Inland Revenue will charge them interest whereas certain taxpayers who overpay tax will receive interest. The interest rate set by Inland Revenue is reviewed regularly to ensure they are in line with market interest rates.
The rate for underpaid tax will increase from 8.22% to 8.35%, while the rate for overpayments of tax will decrease from 1.02% to 0.81%. These rates will apply from 29 August 2019.
In an economic climate of falling interest rates it does appear strange why Inland Revenue’s interest rates have increased! According to Inland Revenue the new rates are consistent with the floating first mortgage new customer housing rate and the 90-day bank bill rate.