The Bank of England has raised its base rate from 3.75% to 4%

Last week, we looked at what the Autumn Budget meant for freelancers. This week, more financial news. The Bank of England has increased its base rate from 3.75% to 4%, the first increase in more than three years.

You might not pay much attention to news like this, but as a freelancer (and that also means business owner), it is worth keeping in mind for a few reasons.

1. Overdue invoices get more expensive

No-one likes an invoice paid late. If you are chasing clients and adding late fees, the interest you can charge is 8% plus the Bank of England base rate.

That rate does not change on the day of the announcement. It is fixed twice a year. The base rate on 30 June is used for invoices that become overdue between 1 July and 31 December, and the rate on 31 December is used from 1 January to 30 June. Once interest starts, that rate stays with the debt.

For the rest of 2026, statutory interest is still 11.75% (8% plus the 3.75% rate on 30 June). If the base rate is still 4% on 31 December, invoices that become overdue from January 2027 can be charged at 12%. If your contract already sets a different interest rate, that rate applies instead.

If you are not sure of your rights, what you are allowed to charge, how to chase a late invoice, or how to handle the emotional side of a very common problem, the late payments guide covers it.

The Small Business Commissioner has a calculator so you do not have to keep track of the rates yourself.

2. Late tax gets more expensive too

A higher base rate also means paying more if your tax is late. That can apply to Self Assessment and payment on account, and to VAT or PAYE.

Late payment interest is set at base rate plus 4%. With the base rate at 4%, that is 8%. HMRC's tables apply the new rate from 24 November 2026. Until then, late payment interest stays at 7.75%.

If you are struggling to pay HMRC, do not avoid it. Speak to them as quickly as you can. You may be able to arrange a payment plan, rather than letting more interest build up.

It works the other way too. Where you have overpaid, or paid early, HMRC pays you interest (or, more often, knocks it off the next bill), but at a lower rate. That is repayment interest, set at base rate minus 1%, so 3% from 24 November. Until then it stays at 2.75%.

3. Savings rates might increase

Banks can be slower to react, but a higher base rate can mean cash in your accounts earns a little more. That includes a personal savings account or a business account, and money you have put aside for the January tax bill.

It is worth shopping around. money.co.uk compares business savings accounts, and there is a short note on whether a business savings account is worth it.

4. Inflation is still making your day rate worth less

The Bank puts rates up to try to curb inflation. CPI inflation was 3.5% in September, and the Bank expects it to rise to around 5% by the middle of next year. If your day rate is not keeping pace, your income is lower in real terms.

Treat it as a prompt to look again at your pricing for 2027, and to redo your budget from what you have actually brought in this year, with room for higher costs. Contractor UK's inflation calculator shows what an older day rate is worth in more recent prices.

ps. None of this is legal or financial advice. It is one freelancer trying to make sense of the numbers. Always take advice from people who do this for a living.