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ACCA Strategic Professional · Advanced Taxation (UK) · Tax administration and the UK tax system

Anita's tax for 2025/26 of £20,000 is paid 6 months late. Using the ATX-UK assumed rate of interest on underpaid tax, and calculating simple interest, what is the interest? (Assume exactly half a year.)

The assumed rate on underpaid tax is 8.50%. For £20,000 over six months, interest is £20,000 x 8.5% x 6/12, which equals £850. Using a full year, the official rate or the overpaid rate would give wrong figures.

  1. A£850Correct
  2. B£1,700
  3. C£375
  4. D£350

Explanation

The assumed rate on underpaid tax is 8.50%. Annual interest is £20,000 x 8.5% = £1,700, so six months is £850. £1,700 is the full-year error, £375 uses the official rate of 3.75% for half a year, and £350 uses the overpaid rate of 3.5% for half a year.

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