Bank of England cuts interest rates
The vote to lower the interest rate to 5.0% was close, with five members voting in favour and four against.
In its first cut for four years, the Bank of England (BoE) has reduced interest rates by 0.25%. The BoE was under pressure to make this reduction as inflation had hit its 2% target for the past two months.
Economists had predicted no cut until the next meeting in September.
The Bank explained that cutting rates from 5.25%, which had been in place for over a year, was “appropriate to slightly reduce the degree of policy restrictiveness”. It added that “the impact of past external shocks has diminished, and there has been some progress in moderating inflation persistence risks”.
The Bank warned that despite a stronger-than-expected GDP, restrictive monetary policy continues to weigh on real economic activity, leading to a looser labour market and reducing inflationary pressures. While it did not indicate whether further cuts are forthcoming, the cooler inflation figures suggest it is likely.
The Bank expects the fall in headline inflation and normalisation in many inflation expectation indicators to continue to weaken pay and price-setting factors for businesses.
A 0.25% cut will not significantly impact mortgage holders or businesses with large loans but signals the Bank is moving in the right direction.
The Bank said:
“A margin of slack should emerge in the economy as GDP falls below potential and the labour market eases further.
“Domestic inflationary persistence is expected to fade away over the next few years, owing to the restrictive stance of monetary policy.”
CGT take falls by £2.5 billion
Only 369,000 taxpayers paid CGT in 2023, resulting in a £2.5bn drop in revenue to £14.4bn.
Only 369,000 taxpayers paid capital gains tax (CGT) in the last tax year, a decrease of 40,000 from the previous year. Despite the overall reduction, CGT from residential property sales rose to £1.6bn.
High-income individuals had a significant impact, with those earning £5 million or more contributing 41% of total CGT payments, despite representing just 1% of all CGT taxpayers. Furthermore, 44% of CGT was paid by people earning over £150,000.
London and the South East continued to dominate, providing 50% of the CGT payments, mirroring trends from previous years. The remaining regions in the UK had a more even distribution of CGT liability.
Age-wise, taxpayers aged 55 to 64 were the most significant contributors, generating £26.7bn in gains and paying £4.7bn in CGT. Notably, a thousand taxpayers aged 15 or younger collectively paid £5m in CGT.
While the total number of taxpayers and gains decreased, specific segments, such as high-income earners and certain age groups, contributed significantly to the CGT revenue.
HMRC cuts late payment interest rate
0.25% reduction for late and repayment interests. The Bank of England (BoE) cut the base rate to 5.0% on 1 August, the first reduction in over four years.
HMRC will lower late payment and repayment interest rates for the first time in a year. This change has prompted HMRC to adjust its rates, which are tied to the base rate. The changes will take effect on 20 August.
From 20 August, the late payment interest rate will decrease to 7.5% from 7.75%, where it has remained for the past 12 months. The repayment interest rate will drop to 4.0% from 4.25%.
Late payment interest is set at the base rate plus 2.5%, while repayment interest is set at the base rate minus 1%, with a lower limit of 0.5%.
Additionally, on 12 August, the corporation tax self-assessment interest rate for underpaid quarterly instalments will decrease to 6.0% from 6.25%.
As a result, HMRC will continue to pay lower interest on overpayments, with the rate decreasing to 4.75% from 5.0%. Similarly, the interest on overpaid quarterly instalments and early payments of corporation tax not due by instalments will also drop to 4.75% from 5.0%.
Businesses targeted for NMW compliance
Enforcement will focus on 11 specific regions: Belfast, Birmingham, Bradford, Cardiff, Cornwall, Cumbria, East Anglia, Glasgow, Liverpool, the North East, and Watford.
HMRC is cracking down on small and medium-sized businesses (SMEs) in 11 UK regions for potential non-compliance with the National Minimum Wage (NMW). Companies found guilty of underpaying will have to reimburse workers for NMW arrears, and face increased National Insurance Contributions (NICs).
Businesses that refuse HMRC’s initial offer of a health check meeting risk financial penalties of up to 200% and public naming and shaming.
Many SMEs might unintentionally breach regulations due to the complexity of NMW rules and common misunderstandings about calculating NMW beyond just an hourly rate.
HMRC has allocated over £27m to address NMW non-compliance, focusing on regional enforcement. Areas were chosen based on data indicating a higher number of workers potentially earning below the required NMW and intelligence from worker complaints.
Over 50% of SMEs in the targeted regions could be affected, facing significant administrative burdens, even if they are compliant. Many businesses have already received letters from HMRC as part of a three-stage process.
Targeted businesses will first receive a nudge letter listing common areas of NMW non-compliance. The next step is a letter offering a free HMRC health check. Ignoring this offer will result in HMRC opening a formal enquiry.
HMRC failing on responsiveness, says Charter report
HMRC is failing on the key metrics of responsiveness, ease and accuracy, according to the annual HMRC Charter report.
The report reviewed HMRC’s performance against its Charter from April 2023 to March 2024.
The survey received over 1,600 responses, with complaints about service levels a recurring theme.
- ‘Being responsive’ scored the lowest of the Charter standards, with an average score of just 2.4 out of 10.
- ‘Making things easy’ and ‘getting things right’ also scored poorly, at 2.8 and 3.5 respectively.
- The remaining standards – ‘being aware of your personal situation’, ‘treating you fairly’, “recognising that someone can represent you’, ‘mutual respect’ and ‘keeping your data secure’ – scored higher at 4.1, 5.0, 5.7, 5.6 and 6.8 respectively.
Richard Wild, the Chartered Institute of Taxation’s (CIOT) Head of Tax Technical, said:
‘Significant time is lost every day for members, their clients, and indeed HMRC themselves, due to delays and inefficiencies in dealing with HMRC.
‘The three standards on responsiveness, ease and accuracy were by far the lowest scoring, which is disappointing as between them they represent the health of the tax system.
‘Businesses are prevented from operating effectively due to the inability to obtain timely registrations or responses. Taxpayers’ legitimate refunds are withheld or delayed. Guidance and correspondence from HMRC is misleading or incorrect. All these things are inhibitors on growth and investment.’
Internet link: GOV.UK CIOT website
HMRC sends ‘nudge letters’ to crypto investors
HMRC has ‘sent nudge’ letters to crypto investors who it suspects have failed to pay the correct tax on their gains, according to the Chartered Institute of Taxation (CIOT).
Many crypto investors are unaware of their tax obligations due to uncertainty over tax rules and limited understanding of the nature of crypto assets.
A chargeable disposal occurs when individual:
- Sells crypto assets for fiat currency.
- Exchanges one crypto asset for another.
- Uses crypto assets to buy goods or services.
- Gives away crypto assets to someone other than spouse or civil partner (in this instance, the individual is deemed to receive the value of the asset even if they do not actually receive anything).
Gary Ashford, Chair of the CIOT’s Crypto Assets Working Group, said:
‘Many investors may be unaware that profits from crypto assets are subject to income tax or Capital Gains Tax (CGT) like any other asset, depending on how they’re held.
‘If you receive a ‘nudge letter’ from HMRC, it’s important to take it seriously. Even those who don’t receive a letter should review their crypto activity and file a tax return or use the capital gains real time transaction service if necessary.
‘Sometimes tax can be due even where the investor does not think his or her investments have been profitable. Selling, lending or ‘staking’ crypto assets – or potentially even just transferring assets between crypto sites and portfolios – will usually trigger a disposal in the tax year in question.’
Internet links: CIOT website
Scrap fuel duty cut, says RAC
The 5p cut in fuel duty to be scrapped in the upcoming Autumn Budget, according to the RAC
The motoring organisation says that motorists in the UK are ‘not gaining any benefit’ and retailers have failed to pass on lower petrol and diesel prices to drivers.
Prime Minister Keir Starmer recently refused to rule out a rise in fuel duty and warned that the Autumn Budget will be ‘painful‘.
The RAC suggested that average petrol prices should be reduced from 142p per litre to 136p per litre and diesel prices from 147p per litre to 139p per litre.
Simon Williams, Head of Policy at the RAC, said:
‘We’d normally be against any increase in duty. But we’ve long been saying drivers haven’t been benefitting from the current discount due to much higher-than-average retailer margins.
‘As more and more EVs come on to the roads the government will need to tax drivers differently. We think replacing fuel duty with a pay-per-mile system as soon as possible is the way forward as then the only tax levied on fuel would be VAT. This would give retailers nowhere to hide.’
Internet link: RAC website
Freelancers want to see fairer, simpler tax system from Autumn Budget
Freelancers want to see Chancellor Rachel Reeves use the Autumn Budget to move towards a fairer, simpler tax system, according to the Association of Independent Professionals and the Self-Employed (IPSE).
IPSE’s research found that 80% of freelancers believe that government tax policies, such as IR35, are harming their businesses.
Meanwhile, just under half of freelancers reported having less confidence in the UK’s economic outlook for the coming year compared to the past 12 months – down from 63% in findings from Q1 2024.
IPSE’s Director of Policy, Andy Chamberlain, said:
‘For the past two years, the impact of record high inflation has been the main story in the business world. But for millions of freelancers, who are our very smallest businesses, the biggest barrier to growth has always been the tax system.
‘This is about more than just rates of tax. Convoluted tax rules like IR35 are crushing freelancers and the businesses they’ve worked so hard to build.
‘Rachel Reeves faces her first big test as Chancellor with a Budget in October and has made no secret of the need to raise money. But freelancers will be hoping that the Chancellor is also open to building a fairer, simpler tax system for millions of sole proprietors going it alone.’
Internet link: IPSE website
UK has record number of self-employed workers aged 60 or over
The number of self-employed people aged 60 or over has reached a record level, according to analysis by Rest Less.
These numbers have increased by over a third in the past decade, totalling 991,432 self-employed people aged 60 or over in 2023.
The analysis found that while the number of self-employed workers in their 50s and older has grown since 2021, it is those in their 60s who have set the new high.
The total number of workers who are self-employed is about 4.3 million, after a two-year recovery following a sharp fall during the pandemic, according to the research.
Stuart Lewis, Chief Executive of Rest Less, said:
‘With the state pension age soon to be 67 and set to go higher still, many people are choosing to work beyond the point of traditional retirement.
‘For many, self-employment is a great option as it allows people to remain active and engaged in the community and workforce whilst also providing greater flexibility – leveraging their skills, experience and network to make an impact.
‘The decision to go self-employed can be driven by wildly different sets of circumstances from people living comfortably and pursuing an entrepreneurial passion to those who are forced to generate an income and have not been able to find a permanent solution in the mainstream workforce.’
Internet link: Rest Less website
Advisory fuel rates for company cars
New company car advisory fuel rates have been published and took effect from 1 September 2024.
The guidance states: ‘you can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.
The advisory fuel rates for journeys undertaken on or after 1 September 2024 are:
| Engine size | Petrol |
| 1400cc or less | 13p |
| 1401cc – 2000cc | 15p |
| Over 2000cc | 24p |
| Engine size | Diesel |
| 1600cc or less | 12p |
| 1601cc – 2000cc | 14p |
| Over 2000cc | 18p |
| Engine size | LPG |
| 1400cc or less | 11p |
| 1401cc – 2000cc | 13p |
| Over 2000cc | 21p |
HMRC guidance states that the rates only apply when you either:
- reimburse employees for business travel in their company cars
- require employees to repay the cost of fuel used for private travel.
You must not use these rates in any other circumstances.
The Advisory Electricity Rate for fully electric cars is 7p per mile.
If you would like to discuss your company car policy, please contact us.
Internet link: GOV.UK AFR
Latest guidance for employers
HMRC has published the latest issue of the Employer Bulletin. The August issue has information on various topics, including:
- electronic payment deadline falls on a weekend
- P11D and P11D(b) for tax year 2023 to 2024
- supporting employees with changes to the High Income Child Benefit Charge
- pensions for seasonal temporary staff
- getting your new employees on the right pay.
Please contact us for help with tax matters.
Internet link: Employer Bulletin
If you need help or advice with any of the matters in this article please call 020 3915 8585 or email us.
