Consider paying on account tax on 1 February 2025 at the latest

Companies could opt to make voluntary payments of on account tax for the income year 2024 on 20 March 2024 and 20 November 2024, but there is also an option to do so on 1 February 2025 and thus avoid the interest charge on underpaid tax.

With a payment on 20 March and 20 November 2024 the interest charge on underpaid tax was not published. It was not published until 10 December 2024, so if a voluntary payment of on account tax was made e.g. on 20 November 2024, then it was probably based on an expectation that the interest charge on underpaid tax roughly corresponded to what was applicable for 2023.

In February and in November 2024, we informed in general about the possibility of making voluntary payments of on account tax etc. which is why this information only concerns the possible payment of on account tax on 1 February 2025. As stated in the newsletter in November 2024, we expected then that the interest charges on underpaid tax for 2024 would be at the same level as for 2023, but another increase incurred.

The interest charge on underpaid tax for 2024

The interest charge on underpaid tax for the income year 2024 has increased. It is set at 8.3% against 7.7% in 2023.The 8.3% corresponds to approximately 10.6% pa before tax, as the interest charge on underpaid tax is non-deductible.

In the case of a voluntary payment on 1 February 2025, the payment is reduced with a proportional interest of 1.6%, corresponding to 70/360 days of the interest charge on underpaid tax of 8.3%.

If the company expects underpaid tax for 2024, it is still beneficial to make a payment of on account tax, even if the payment is reduced by 1.6%, as the interest charge on underpaid tax of 8.3% ceases to apply.

If, for example, DKK 100,000 is paid, only DKK 98,500 is credited as on account tax paid, but because of the interest charge on underpaid tax being not applicable, it effectively corresponds to an interest saving of 8.2% pa or approximately 10.5% pa before tax.

Even with the higher interest rate, an interest charge on underpaid tax of approximately 10.6% pa before tax is such a high surcharge that most companies with underpaid tax can advantageously make a voluntary payment of tax on account.

If the company is included in a joint taxation group, the tax is calculated on the basis of the joint taxation income.

Therefore, we recommend that you prepare an actual calculation of the expected tax for the income year 2024 before 1 February 2025, and if there is an additional underpaid tax, that you pay it on 1 February 2025 at the latest and thus avoid the high interest charge on underpaid tax.

We refer to our general briefing in both February and November 2024 on the considerations regarding the payment of additional on account tax. For the sake of order, we draw your attention to the fact that if you wish to make a voluntary payment, you must first report the amount of the voluntary payment at TastSelv Erhverv before making the actual payment. If the amount is not reported prior to making the payment, the voluntary payment will be refunded, and it will therefore not be set off against the final assessed corporation tax, and therefore interest will be charged on the underpaid income tax.

If you wish assistance from PwC, do not hesitate to contact us.

Overpaid tax

It is not only the interest charge on underpaid tax that has increased compared to 2023, but also the interest allowance on overpaid tax. The interest allowance has increased to 4.4% against 3.6% in 2023. The interest allowance is tax-exempt, so it corresponds to approximately 5.6% before tax.

Please note that there is no interest allowance on overpaid tax that has arisen as a result of a voluntary payment on 1 February 2025. On the other hand, the proportion of the voluntary payment that results in excess tax is not reduced by the 1.6% surcharge.

However, interest allowance is given for overpaid tax as a result of overpaid ordinary tax on account as well as any dividend tax paid and voluntary payment of on account tax on 20 March 2024 and 20 November 2024, adjusted for an allowance or a surcharge of 1.1%.

A voluntary on account tax payment on 20 March 2024 will be increased by 1.1% whereas a payment on 20 November 2024 will be reduced by 1.1% when tax paid for the income year 2024 is calculated on 20 November 2025 on the annual tax assessment.