Late payment interest (UK tax)
Late payment interest is generally simple interest on the amount outstanding, using the applicable annual rate and the relevant number of days. For a constant amount and rate, calculate tax outstanding × annual rate × days ÷ 365. If the balance or rate changes, calculate each interval separately. Determine the relevant tax payment dates and use the rate and assumptions given in the question.
Worked example
Assume £10,000 tax remains unpaid for 73 days at a constant 8% annual rate. Interest is £10,000 × 8% × 73/365 = £160.
Common mistake
Compounding interest or applying one rate to the entire period when the rate or outstanding balance changes. Interest is distinct from a late-payment penalty.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Direct | June 2026–June 2027 |