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Interest on underpaid corporation tax by companies is intended to encourage prompt payment. HMRC interest rates are set in legislation and are linked to the Bank of England base rate. Late payment interest is set at the base rate plus 2.5%.

A harmonised regime is in place in respect of interest for the late payment of all taxes, with the exception of corporation tax (see below). The regime applies a single rate of simple interest on late payments, rather than applying a different rate to different taxes. This guidance note focuses on interest payable by companies. For details of interest payable under self assessment for individuals, such as partners and sole traders, see the Interest and penalties on late paid tax under self assessment guidance note.