Check the rate before you treat 8% as your tax bill

The Bank of England’s Monetary Policy Committee raised Bank Rate from 3.75% to 4% on 5 November 2026. HMRC announced that late-payment and repayment interest will rise as a result, from 16 November 2026 for quarterly instalment payments and from 24 November 2026 for non-quarterly payments, and that its rate tables would be updated shortly.

For a director sitting with an unpaid corporation tax, VAT or PAYE bill, the number that matters is the rate that applies to that tax, not the headline in a press note. HMRC’s own statement of the formula is late-payment interest at base rate plus 4%, and repayment interest at base rate minus 1%, with a floor of 0.5%. On that formula the standard late-payment rate moves from 7.75% to 8%, and the standard repayment rate from 2.75% to 3%. The five-point gap does not change. HMRC has not published the updated tables yet, and it says different dates apply to quarterly instalments. Do not paste 8% into a spreadsheet until you have checked the tax and the start date.

HMRC says the gap is in line with other tax authorities and compares favourably with commercial practice, and that late-payment interest encourages prompt payment while repayment interest fairly compensates overpayers. It gives no comparison figures, no count of how many taxpayers are affected, and no estimate of extra interest the Exchequer will collect. The extra cost on a simple calculation is modest on paper and painful in a business that is already short of cash. At a constant 8% simple annual rate, £10,000 left outstanding for a full year accrues about £800, roughly £25 more than at 7.75%. Real charges depend on the tax, the dates and the rules that apply to that debt. Interest is not a fine you can argue down later. It keeps running while the debt sits there.

That is the point the insolvency sales call will not lead with. A practitioner who is paid from a formal procedure has a reason to talk about creditors’ voluntary liquidation (CVL) or a company voluntary arrangement (CVA) before you have asked HMRC what a time to pay would cost. Formal insolvency is sometimes the right choice. It is not the first calculation.

What you need this week is three numbers, not a pitch. What can the company pay now, from cash it actually has. What would a time to pay cost in interest if HMRC agrees one. And what sits on you personally if the company cannot pay: a personal guarantee, an overdrawn director’s loan account, or conduct that could later be called wrongful trading or lead to disqualification.

HMRC’s guidance on time to pay is clear on the interest point. If it agrees an arrangement, you are normally expected to pay what you owe as soon as you can, and HMRC charges interest on tax paid late even where a time to pay is in place. The arrangement stops enforcement for as long as you keep to it. It does not freeze the interest clock. Missing a payment can end the arrangement, and HMRC can then move to enforcement, including, for some debts, a winding-up petition. Scotland and Northern Ireland have different court routes for winding up; the interest rules and the time-to-pay principle are the ones to check against HMRC’s own pages, not against a call-centre script.

Who gets paid if this goes formal is a different order from who is calling you now. In a liquidation, the costs of the procedure are paid first, then secured and preferential creditors. HMRC is a secondary preferential creditor for certain taxes, including VAT and PAYE deductions, ahead of ordinary unsecured trade creditors. A bounce back loan sits in that unsecured pile unless a guarantee or other security changes the position, and many bounce back loans were not personally guaranteed. A personal guarantee given to a bank, a landlord or a supplier is a separate claim against you. It is not wiped because the company enters a CVL. An overdrawn director’s loan account is an asset of the company. A liquidator will ask you to repay it. Wrongful trading and disqualification are about what you did once you knew, or ought to have known, that there was no reasonable prospect of avoiding insolvent liquidation, and about your conduct as a director. They are not automatic because a tax bill exists. They become harder to answer if you have ignored the debt, taken drawings the company could not afford, or let a practitioner choose the procedure before you have the figures.

HMRC is a creditor with a timetable, not an enemy and not a friend. Its late-payment rate is set in legislation and moves with Bank Rate. The Bank’s decision on 5 November explains the 0.25-point rise. It does not explain the five-point gap, which is the margin written into the rules. You do not need to win that argument to deal with this week’s bill. You need the correct rate for your tax, a written proposal you can afford, and a clear view of what is company debt and what is already yours.