ACCA Strategic Professional · Advanced Taxation (UK) · Mitigation of tax by numerical analysis and reasoned argument
Dev pays £30,000 of income tax late and HMRC charges interest on the underpaid tax for exactly 6 months. Using the assumed rates in the official tax tables, what interest is due?
Interest on underpaid tax is charged at the assumed rate of 8.50%. For £30,000 over six months, the interest is £30,000 x 8.5% x 6/12, which equals £1,275.
- A£525
- B£1,125
- C£1,275Correct
- D£2,550
Explanation
Underpaid tax interest rate is 8.50%. £30,000 x 8.5% x 6/12 = £1,275. £1,125 uses the 3.75% official rate and £525 uses the 3.50% overpaid rate with a wrong base.
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