Do I get interest if I pay my tax early?

Paying your taxes early can be a wise financial decision if the funds are available, as HMRC will pay you interest.

HMRC interest rates are set in legislation that links them to the Bank of England base rate. There are two rates:

The repayment interest, set at base rate minus 1%
Late payment interest, set at base rate plus 2.5%

Tax repayment interest in summary

The repayment interest rate compensates you fairly for the loss of the use of your money.
To prevent you from using HMRC as an interest-generating service, they only pay interest on early payments of tax, not on overpayments.
Interest received or paid on personal taxes isn’t taxable or tax-deductible, but it is on other taxes like Corporation Tax.
The interest paid or charged will be credited to your tax account and usually repaid to your bank account.
HMRC will not repay sums under £100 and will hold this as a credit towards your next tax payment.
The repayment interest rate can help you earn some additional income in the form of interest that you might not be getting on your bank accounts.

For example, paying Corporation Tax early

Darren is a savvy associate dentist and learns HMRC will pay interest if he pays his Corporation Tax early.

Darren has a surplus of cash funds, not earning any interest. He decided to take advantage of the HMRC repayment interest.

The Corporation Tax his company pays is typically £15,000 a tax year. He asked his accountant to provide him with the payment reference and paid HMRC £15,000 on 1st October 2022, 11 months before his upcoming Corporation Tax was due on 1st September 2023.

When his accountant filed his tax return for the accounting period 30 November 2022 with HMRC in March 2023, the Corporation Tax due was £10,000. HMRC repaid the £5,000 overpayment straight away. There is no interest paid on the overpayment.

On the due date of 1 September 2023, HMRC credited and repaid £248.70 in interest, calculated as follows.

Amount(s) paid before due date(s) (£)	From date	to	No. of days	Rate (%)	Credit interest (£)
10000	01/10/2022	10/10/2022	9	0.75	1.85
10000	11/10/2022	21/11/2022	41	1.25	14.04
10000	22/11/2022	05/01/2023	44	2.00	24.11
10000	06/01/2023	20/02/2023	45	2.50	30.82
10000	21/02/2023	12/04/2023	50	3.00	41.10
10000	13/04/2023	30/05/2023	47	3.25	41.85
10000	31/05/2023	10/07/2023	40	3.50	38.36
10000	11/07/2023	21/08/2023	41	4.00	44.93
10000	22/08/2023	01/09/2023	10	4.25	11.64
		Total	327		248.70