Does HMRC pay interest on a late CIS refund?

Yes, but only from 31 January after the tax year ends. For 2025-26 CIS deductions, repayment interest runs from 31 January 2027. The rate has been 2.75% a year since 9 January 2026. It is tax-free.

That start date is the part most people miss. GOV.UK says repayment interest compensates you for the loss of use of your money, but for tax deducted at source, which is how HMRC treats CIS deductions, interest only starts on 31 January after the tax year. So a refund paid before that date earns nothing, however long it took, and one paid after it earns a small amount.

How the rate is set

GOV.UK says HMRC's repayment interest rate is the Bank of England base rate minus 1%, with a lower limit of 0.5%. It changes when the base rate changes. These are the most recent rates for Income Tax, as listed on GOV.UK on 16 October 2026.

Late payment interest is what HMRC charges when you pay tax late. It is set at base rate plus 4%, so the gap between the two rates is large.

When the clock starts for CIS deductions

HMRC's CIS manual says the deductions a contractor takes from a self-employed subcontractor are treated by law as Income Tax paid. HMRC's Compliance Handbook says that for income tax deducted, or treated as paid, on income for a tax year, repayment interest starts on 31 January following that year, under paragraph 6 of Schedule 54 to the Finance Act 2009. HMRC's Self Assessment manual applies the same date in practice: for deductions at source, such as PAYE tax and SC60 credits (an older form of CIS deduction certificate), the effective date of payment is 31 January following the end of the tax year.

31 January is also the online filing deadline for the same year. HMRC's manual counts days from the start date to the date of repayment, so a refund paid on 31 January itself earns none, and one paid on 1 February earns 1 day.

A worked example

A self-employed carpenter is owed £2,000 for 2025-26, all of it from CIS deductions. The figures below assume the rate stays at 2.75% and use simple daily interest, so HMRC's own figure may differ by a few pence.

At 2.75%, £2,000 earns about 15p a day. The interest is not a reason to file late, because the £2,000 itself arrives months later.

If part of the refund is money you paid yourself

Some subcontractors pay tax as well as having CIS taken off, for example payments on account. HMRC's manual says that for tax you paid directly, interest runs from the later of the date you paid it and the date it was due. In its worked example, an overpayment is allocated first to the balancing payment, then to the payments on account, and only then to tax deducted at source. So part of a refund can carry interest from an earlier date than 31 January.

What this means for you

A CIS refund paid before 31 January following the tax year earns no interest, and that is correct. If your refund was paid after 31 January following the tax year, interest should have been added, and it is tax-free under section 749 of the Income Tax (Trading and Other Income) Act 2005. The amount is usually small.

GOV.UK says Making Tax Digital for Income Tax (MTD) does not change the dates tax is due. Under MTD, though, a refund is not claimed in the tax return. HMRC adds your CIS deductions to your MTD tax return, and any refund is requested separately through HMRC online services, so ask for it as soon as the return is in.

Steps to check your interest

1. Find the tax year your refund relates to, and the date it was paid.
2. If it was paid after 31 January following that year, count the days from 31 January to the payment date.
3. Multiply the refund by the rate in force for those days and by the days, then divide by 365.
4. Compare that with the payment you received. If no interest seems to have been added, call the Self Assessment helpline on 0300 200 3310.
5. Next year, file as early as you can after 5 April. The free MTD check shows whether Making Tax Digital changes how you file from April 2027, and the trades section covers CIS through the year.