Bank Rate rises to 4%: what it means for UK freelancers

Published 5 November 2026.

The Bank of England raised Bank Rate from 3.75% to 4% on 5 November 2026. The Monetary Policy Committee voted 8 to 1 for the rise, with the one dissenter wanting a bigger move to 4.25%. It is the first increase in more than three years, and the Bank expects inflation to reach about 5% by mid-2027.

Most coverage is about mortgages and savings. For a freelancer, three other numbers move with it, and they move on different dates.

1. HMRC's late payment interest goes to 8%

HMRC charges interest on late tax at Bank Rate plus 4%, and pays interest on overpaid tax at Bank Rate minus 1%. So once HMRC applies today's rise:

	Now	After HMRC updates
Late payment interest	7.75%	8%
Repayment interest	2.75%	3%

HMRC had not announced the start date when this was written. Its changes usually take effect a few weeks after a Bank of England decision: the December 2025 cut, for example, reached most taxpayers on 9 January 2026. Check HMRC's interest rates page on GOV.UK for the date.

Why it matters now: your next big payment is 31 January 2027, the balancing payment for 2025/26 plus the first payment on account for 2026/27. If any of that is paid late, interest runs at the higher rate. A missed payment on account still costs interest but no penalty, as explained in what happens if you miss a payment on account.

2. Late invoice interest goes to 12%, but not until 1 January

If a business client pays you late, you can claim statutory interest at 8% plus a reference rate. The reference rate is not whatever Bank Rate is on the day the invoice goes overdue. It is fixed twice a year:

• Bank Rate on 30 June sets the rate for invoices that go overdue from 1 July to 31 December.
• Bank Rate on 31 December sets it for invoices that go overdue from 1 January to 30 June.

Bank Rate was 3.75% on 30 June 2026, so an invoice that goes overdue before the end of December still carries 11.75%, rise or no rise. If Bank Rate is still 4% on 31 December, invoices that go overdue from 1 January 2027 carry 12%.

The fixed recovery fee does not change: £40, £70 or £100 depending on the size of the debt. Our guide to charging late payment interest on an invoice has worked examples and invoice wording.

3. Your tax pot can earn a bit more

If you set aside money for your January bill, which you should, a higher Bank Rate usually means easy-access savings rates edge up too. Banks do not have to pass the rise on, so check what your account actually pays rather than assuming it moved. Money held back for tax is the one pot most freelancers keep for months at a time, so a rate that tracks Bank Rate is worth having.

What to do this month

1. Put 31 January 2027 in your diary and make sure the money for it is set aside, since paying late now costs more.
2. Check your invoice terms. If they quote a late payment interest rate, make sure the wording still holds from January, or simply refer to statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998.
3. Look at your savings rate on the money you hold back for tax.

The next Bank of England decision is on 17 December 2026, so the 31 December reference rate could still change.

For the bigger picture on cash flow and setting money aside, see our guide to managing your freelance finances and taxes. If a client has stopped paying altogether, start with what to do when a client doesn't pay.

This is general information, not financial or tax advice. Figures are correct as at 5 November 2026. Check GOV.UK or the Bank of England for the latest rates.

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