Bank of England base rate: 3.75%, and what it does to business borrowing

Alex BeardsleyFounder & Director

|Updated September 2026

Bank Rate has sat at 3.75% since 18 December 2025, when the Monetary Policy Committee cut it from 4.00%. Five meetings in 2026 have left it alone. What has moved is the argument inside the room: in February four of the nine members wanted a cut, and by July three of them wanted a rise to 4%. The committee's own explanation for holding is the energy-price shock from the Middle East. In its July summary it said that “monetary policy cannot influence energy prices but is being set to ensure that the economic adjustment to them occurs in a way that achieves the 2% inflation target sustainably.”

For a business borrowing money, the rate itself matters less than the mechanism that carries it into your agreement. A fixed-rate loan does not care what the Bank does. A variable commercial mortgage cares on its next reset date. An HMRC late-payment bill cares within about three weeks. The sections below set out each of those links, with the lender wording they rest on.

Every 2026 decision so far

The direction of dissent is the story of the year. The July minority (Megan Greene, Catherine Mann and Huw Pill) voted for 4%. Inflation gives them their case: the Consumer Prices Index rose 2.9% in the twelve months to July 2026, up from 2.6% in June, and the Bank expects it to climb further as energy costs pass through. The August CPI figure lands on 16 September, the day before the next decision.

Bank Rate since December 2021

Fourteen consecutive rises took Bank Rate from 0.25% to 5.25% between December 2021 and August 2023. It stayed at 5.25% for a year, then came down in six steps of a quarter point to the current 3.75%. The effective dates below are the Bank's own.

How a Bank Rate move reaches a business loan

“Base rate plus margin” means the lender adds a fixed number of percentage points to Bank Rate. With Bank Rate at 3.75% and a margin of 3%, you pay 6.75%. When the Bank moves, your rate moves by the same amount on the lender's next reset date and the margin stays put. Some lenders put a floor under the base-rate part so the total can never fall below a certain level.

The wording differs by lender, and it is worth reading the actual clause rather than the marketing line. Four examples from the lenders' own documents:

• Allica Bank prices variable commercial mortgages as a “margin over Base Rate” and states the base-rate component is “subject to a minimum Base Rate of 1.5%”. Its fixed products revert to a margin over Bank Rate when the fixed period ends. The mechanism is current; the margins in its February 2025 product guide may not be.
• Barclays offers business loans above £25,001 on a fixed or variable basis, with the variable rate “tracking the Bank of England base rate”. It does not publish the margin, and its footnote says that if the tracked rate falls below zero it is treated as zero, so you never pay less than the facility margin.
• Funding Circle is the opposite case: “All our loans are fixed rate, so you'll know exactly how much you'll need to repay each month.” A Bank Rate change after you draw down changes nothing on a Funding Circle loan.
• Lombard offers hire purchase on “fixed and variable rate options” and says a variable rate “might go up or down, depending on factors including the Bank of England Base Rate”. No formula is published, so on a variable Lombard agreement you are trusting the reset letter.

Our reading of that list: fixed is for anyone who cannot absorb a rise, and variable is for anyone who expects cuts and can live with being wrong. In the property deals we arrange, the question that decides it is usually not the forecast but the reversion clause, because a five-year fix that reverts to a high margin has already told you what year six looks like.

Products that do not move with Bank Rate

A merchant cash advance carries one fixed fee agreed at the start and repaid as a share of card takings, so a Bank Rate change after signing does nothing to what you owe. The same is true of fixed-fee revenue-based finance and of any fixed-rate term loan for its fixed period. Where Bank Rate does reach these products is in the price of the next offer: lenders fund their books on facilities whose cost tracks market rates, and they reprice new deals over time. An agreement already running is untouched.

HMRC interest is Bank Rate plus four

Since 6 April 2025 HMRC has charged late payment interest at Bank Rate plus 4 percentage points, up from plus 2.5. At today's Bank Rate that is 7.75%, in force since 9 January 2026. Repayment interest, what HMRC pays you when it owes you, is Bank Rate minus 1 with a floor of 0.5%, so 2.75% now. HMRC updates both rates two to three weeks after a Bank Rate change. If you are weighing a Time to Pay arrangement against a VAT or tax loan, 7.75% is the number the loan has to beat, and it moves with the table above.

Dates to diarise

The Monetary Policy Committee announces on Thursdays at noon. The remaining 2026 dates are 17 September, 5 November and 17 December. For 2027 the Bank has published provisional dates of 4 February, 18 March, 29 April, 17 June, 29 July, 16 September, 4 November and 16 December. A note for anyone reading an older guide: the committee did not meet in May or August 2026, whatever some rate trackers say.

Frequently asked questions

Sources

1. Bank of England, Bank Rate (current rate)
2. Bank of England, Bank Rate history database
3. Bank of England, Monetary Policy Summary and minutes, February to July 2026
4. Bank of England, upcoming MPC dates
5. ONS, Consumer price inflation, UK: July 2026
6. HMRC, interest rates for late and early payments
7. Allica Bank, commercial mortgage rates and product guide
8. Barclays, Barclayloan for Business
9. Funding Circle, small business loans
10. Lombard, hire purchase

CapExpand Ltd (FRN 1060885) is an Appointed Representative of White Rose Finance Group Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 630772). We are a credit broker, not a lender. We do not provide financial advice.