The interest rate charged on late payments of VAT and other indirect taxes will increase from 1 May 2026.
The interest rate is calculated by applying the Bank of England base rate plus a ‘prescribed’ percentage defined in legislation. From 1 May 2026, the prescribed percentage for default and late payment interest will increase from 2.5% to 4%.
Interest accrues from the first day payment becomes overdue and continues until the outstanding balance is paid. If the payment is more than 15 days late, a late payment penalty may also be applied. The earlier the outstanding amount is paid, the lower the penalty will be.
For more information on late payment penalites can be found online.
This measure will have no impact on those taxpayers who make their tax payments on time.
The Isle of Man aligns its approach to penalties and interest with that of the United Kingdom. Under the Customs and Excise Agreement 1979, the Island is required to maintain consistency with UK legislation in the administration of VAT and other common duties.
Current default interest and late payment interest rates can be found on the Payments webpage.
Any taxpayer who is experiencing difficulties with meeting their VAT payment obligations should contact the Debt Management Unit on +44 1624 648160.
Please note:
- Default interest is charged on late payments relating to VAT periods starting on or before 31 December 2022
- Late payment interest is charged on late payments relating to VAT periods starting on or after 1 January 2023, and to Machine Games Duty, Soft Drinks Industry Levy and Plastic Packaging Tax
