ACCA Strategic Professional · Advanced Taxation (UK) · Statutory obligations, time limits and the implications of non-compliance
Mariana, an individual, underpaid income tax of £6,000 for a previous year and settles it exactly 6 months after the due date. Using the assumed interest rates in the ATX-UK tables (Finance Act 2025), what interest is chargeable on the underpaid tax?
Interest is £255. The assumed rate on underpaid tax is 8.5%, so £6,000 × 8.5% × 6/12 gives £255. Using the official rate of 3.75% or the overpaid rate of 3.5% would be wrong, and £510 ignores that only six months have passed.
- A£255Correct
- B£112.50
- C£105
- D£510
Explanation
Interest on underpaid tax is 8.50%. £6,000 × 8.5% × 6/12 = £255. £112.50 wrongly uses the official rate of 3.75%. £105 uses the overpaid rate of 3.5%. £510 is a full year's interest.
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