Newsletter 198

May 2025

In this month’s Enews, we look at the new service launched by Companies House that allows individuals to verify their identity through GOV.UK and at the cost of tax red tape on small businesses. We also look at HMRC’s warning for those sole traders and landlords who will soon be required to use Making Tax Digital and the Chancellor’s plan to level the playing field for UK businesses. We have news on pensions reforms to update you on and more.

• Government calls time on red tape for pubs, clubs, and restaurants
• Pension reforms needed to help individuals through their retirements
• Companies House begins to verify identities
• Business group welcomes launch of Code of Practice
• Spending Review 'could brighten living standards outlook'
• Tax red tape costs small businesses nearly £25 billion a year
• Latest guidance for employers
• Sole traders and landlords get Making Tax Digital warning
• Chancellor unveils plans to maintain level playing field for British business
• Lack of trust and board expertise putting brakes on AI adoption
• HMRC launches new online help for compliance checks
• New crypto asset rules aim to protect consumers

Government calls time on red tape for pubs, clubs, and restaurants

Pubs, clubs and restaurants will benefit from a reduction in the red tape that has stifled hospitality business, the government said.

Action includes moves to improve the application of licensing laws and strengthening businesses’ competitiveness. This will give diners, pub and partygoers more time and more choice to enjoy what the UK hospitality has to offer, the government says.

The changes include a landmark pilot that could see more alfresco dining and later opening hours in London, as the Mayor of London is granted new ‘call in’ powers to review blocked licensing applications in nightlife hotspots.

The government says that if successful, this approach could be rolled out to other mayors to work with their own local police forces across England.

Businesses have long indicated that the current licensing system lacks proportionality, consistency, and transparency - creating barriers to growth and investment for business.

Chancellor of the Exchequer, Rachel Reeves, said:

‘British businesses are the lifeblood of our communities. Our Plan for Change will make sure they have the conditions to grow – not be tied down by unnecessarily burdensome red tape.

‘We’ve heard industry concerns and we’re partnering with businesses to understand what changes need to be made, because a thriving night time economy is good for local economies, good for growth, and good for getting more money in people’s pockets.’

Internet link: GOV.UK

Pension reforms needed to help individuals through their retirements

Reforms are needed to make the pension system easier to navigate successfully in order to help reduce the risk of a shortfall in retirement, according to the Institute for Fiscal Studies (IFS).

The think tank says that private sector employees are increasingly accumulating retirement savings in ‘defined contribution’ (DC) pensions (pension pots that do not guarantee a regular income through retirement).

Since 2015, people over 55 have been able to withdraw money from DC pensions in any way they choose.

According to the IFS, as this form of wealth becomes more important, people face too many complex and risky decisions through retirement.

This increases the risk that many exhaust their private resources and fall back purely on state pensions and benefits, especially later in retirement, the think tank added.

Bee Boileau, Research Economist at IFS, said:

‘The forthcoming Pension Schemes Bill is expected to introduce default retirement income solutions. Done well, these should improve outcomes for many, given the risks many face when drawing down pension savings through retirement at present.

‘But key questions remain – in particular, there will be some for whom a retirement income default will not be right. The government and pension providers must ensure that it is straightforward to opt out of whatever new defaults are introduced, and that as far as possible those making these decisions are sufficiently informed and helped.’

Internet link: IFS website

Companies House begins to verify identities

A new service has been launched that allows individuals to verify their identity directly with Companies House through GOV.UK.

The introduction of identity verification is one of the key changes to company law as part of the Economic Crime and Corporate Transparency Act 2023. Companies House has landmark new and enhanced powers to combat economic crime and boost economic growth.

More than six million people will be required to comply in the 12 months after identity verification becomes a legal requirement later this year. According to Companies House, identity verification will provide more assurance about who is setting up, running, owning and controlling companies in the UK.

Louise Smyth, CEO of Companies House, said: ‘Identity verification will play a key role in improving the quality and reliability of our data and tackling misuse of the companies register.

‘To save time later, we encourage directors, people with significant control of companies (PSCs) and those filing information with Companies House to verify their identity during the voluntary window.

‘We expect identity verification to become mandatory from Autumn 2025.’

Internet link: GOV.UK

Business group welcomes launch of Code of Practice

The Institute of Directors (IoD) has welcomed the launch of the government's new Cyber Governance package, which is underpinned by the Cyber Governance Code of Practice.

The Code of Practice shows boards and directors how to manage digital risks and protect their business from cyber-attacks.

It outlines how directors can build resilience to a wide range of cyber risks across their organisation.

The Code, which has been co-designed with technical experts from the National Cyber Security Centre (NCSC) and a range of governance experts across industry, focuses on the actions senior leaders should take to govern cyber risks effectively within their organisation.

Erin Young, Head of Innovation and Technology Policy at the IoD, commented: 'With cyber-attacks becoming more frequent, harmful and costly, cyber resilience is now a crucial boardroom responsibility. The new Cyber Governance Code of Practice provides practical guidance for boards and directors to effectively govern cyber risk and safeguard future growth.'

Internet link: IoD website

Spending Review 'could brighten living standards outlook'

Think tank the Resolution Foundation has suggested that the government's upcoming Spending Review could help to brighten the 'bleak living standards outlook' for low-to-middle income families.

The Foundation stated that the Review should prioritise spending on services they use the most, and that public services are crucial for quality of life. It said that household disposable income is expected to fall from 2025/26 but public service spending is rising by £18 billion a year in 2028/29 in real terms.

Public services are not, however, used equally across all households, the Resolution Foundation added. The allocation of extra funding between departments at the June Spending Review will determine which families benefit.

Emily Fry, Senior Economist at the Resolution Foundation, said: 'Britain's outlook for real disposable incomes is bleak, especially for poorer households after the benefit cuts announced at the Spring Statement. But the wider picture is more positive when the £18 billion boost to public services is included, as this will provide vital 'in-kind' benefits, particularly for poorer households.

'A focus on improving families' experience of a range of downtrodden services in the Spending Review could help boost quality of life for lower income families in a challenging living standards environment.'

Internet link: Resolution Foundation website

Tax red tape costs small businesses nearly £25 billion a year

Tax compliance costs the UK’s small businesses nearly £25 billion a year, according to recent research conducted by the Federation of Small Businesses (FSB).

The average small firm spends £4,500 and 44 hours a year on tax compliance, according to the research.

These annual totals could include time spent trying to contact HMRC, the cost of staff time used to manage compliance, and the price of software subscriptions and/or an external accountant, among other outlays.

Poor levels of customer service from HMRC are a recurring theme within the report, making tax compliance even more difficult and stressful for small businesses.

Tina McKenzie, FSB’s Policy Chair, said:

‘Tax compliance is far from a niche issue – it affects all five and a half million small businesses in the UK, costing them £4,500 and 44 hours a year each on average.

‘Collectively, that adds up to an annual total cost to the small business community of nearly £25 billion and over 240 million hours.

‘This is money and time that could be far, far better spent on building up their business, and the overall cost to the economy in terms of lost growth and wasted productivity is enormous.

‘Given the challenges facing the economy, and the need for growth, reducing the burden placed on small firms by tax compliance must be a priority – something the government has recognised as a priority for other regulators. HMRC should be included in the government’s drive to make regulation better support growth.’

Internet link: FSB website

Latest guidance for employers

HMRC has published the latest issue of the Employer Bulletin. The April issue has information on various topics, including:

• the new rates of the National Minimum Wage
• reporting expenses and benefits for the tax year ending 5 April 2025
• changes to notifications by employers to operate PAYE on a proportion of a globally mobile employee’s income and changes to Overseas Workday Relief.
• the tax treatment of double cab pickups.
• Capital Gains Tax — working out your adjustment for the 2024 to 2025 tax year.

Internet link: GOV.UK

Sole traders and landlords get Making Tax Digital warning

Sole traders and landlords with an income over £50,000 have been warned that there is less than a year before they will be required to use Making Tax Digital for Income Tax (MTD for IT).

HMRC says the launch of MTD for IT on 6 April 2026 will mark a significant and time-saving change in how these individuals will need to keep digital records and report their income to the tax authority.

HMRC says that by keeping digital records throughout the year, sole traders and landlords can save hours previously spent gathering information at tax return time – allowing them to spend more time focusing on their business activities.

Quarterly updates will spread the workload more evenly throughout the year, bring the tax system closer to real-time reporting and help businesses stay on top of their finances and avoid the last-minute rush.

HMRC is urging eligible customers to sign up to a testing programme on GOV.UK and start preparing now.

Craig Ogilvie, HMRC’s Director of MTD, said:

‘MTD for IT is the most significant change to the self assessment regime since its introduction in 1997. It will make it easier for self-employed people and landlords to stay on top of their tax affairs and help ensure they pay the right amount of tax.

‘By signing up to our testing programme now, self-employed people and landlords will be able to familiarise themselves with the new process and access dedicated support from our MTD Customer Support Team, before it becomes compulsory next year.’

Internet link: HMRC press release

Chancellor unveils plans to maintain level playing field for British business

Chancellor Rachel Reeves has said British businesses will be supported to trade freely as she takes action on practices that undercut fair trade, such as the dumping of cheap goods into the UK.

The government announced immediate action by the Trade Remedies Authority (TRA), the body responsible for defending the UK against certain unfair international trade practices.

The Chancellor also announced her intention to review the customs treatment of Low Value Imports, which allows goods valued at £135 or less to be imported without paying customs duty.

Major UK retailers have called on the government to amend the customs treatment, arguing that it disadvantages them by allowing international companies to undercut them.

William Bain, Head of Trade Policy at the British Chambers of Commerce (BCC), said:

‘There are still many twists and turns to go in the trade war between the US and China. It remains to be seen whether cheap Chinese goods will flood the UK as a result.

‘But the risk is present. It is sensible for the TRA to have all the necessary tools and resources to take action to prevent the UK being swamped with unfairly cheap products.

‘If domestic production suffers from a surge in imports or dumping of goods it is right that business has clearer access to make their case to the TRA. It must have the resources it needs to enforce a level playing field.’

Internet link: GOV.UK BCC website

Lack of trust and board expertise putting brakes on AI adoption

A lack of trust and a shortage of expertise at board level are limiting the adoption of AI in UK businesses, according to research from the Institute of Directors (IoD).

Just over half of survey respondents said limited expertise or understanding of models and tools at management and board level was restricting adoption of AI. In addition, 50% said that lack of trust in AI outcomes was their biggest concern.

Security risks, such as cyber, data protection and privacy, as well as employee skills gaps and ethical risks, are also significant barriers for business leaders.

Of the half of UK business leaders whose organisations use AI, 78% cite increased productivity and operational and administrative efficiencies as the most significant benefits.

Dr Erin Young, Head of Innovation and Technology Policy at the IoD, said:

‘While UK business leaders in early AI adoption are enthusiastic about greater productivity and efficiencies, they face a complex set of barriers to top-down implementation and governance – from skills and expertise gaps at board level, to a lack of trust and fundamental concerns about reliability, security and business value across AI capabilities, tools and applications.

‘Given a focus on addressing private sector user-adoption barriers in the UK government’s AI Opportunities Action Plan, it is important that these concerns are addressed strategically for businesses of all sizes across sectors in the Industrial Strategy.’

Internet link: IoD website

HMRC launches new online help for compliance checks

HMRC has launched a new online interactive tool to help guide both businesses and individuals through tax compliance checks.

The Interactive Compliance Guidance tool available on GOV.UK provides information to help customers understand:

•         HMRC compliance checks.
•         Why HMRC has requested specific information or documents.
•         How to request extra support due to health or personal circumstances.
•         How to appoint someone to act on your behalf.
•         What to do if you disagree with a decision made by HMRC.
•         How to pay a tax assessment or penalty.

The new tool brings together existing compliance guidance and videos in one place, making it easier to find and navigate the appropriate information, HMRC says.

Joanne Walker, Low Incomes Tax Reform Group (LITRG) Technical Officer and Customer Experience Advisory Group (CEAG) member, said:

‘When unrepresented customers have a tax compliance problem, it can be difficult for them to find the help they need.

‘This new interactive tool from HMRC makes compliance guidance readily accessible in one place, and easier for people to find the information that is relevant to them. The links to the extra support available will be especially valuable for the most vulnerable customers.’

Internet link: HMRC press release

New cryptoasset rules aim to protect consumers

The government is introducing legislation to regulate cryptoassets and improve consumer protection for the asset class.

The new rules will apply to firms offering services for cryptoassets like Bitcoin and Ethereum.

The government says that around 12% of UK adults now own or have owned crypto, up from just 4% in 2021. But it says owners have too often been left exposed to risky firms and scams.

Under the new rules, crypto exchanges, dealers and agents will be brought into the regulatory perimeter. Crypto firms with UK customers will also have to meet clear standards on transparency, consumer protection and operational resilience, like their counterparts in traditional finance.

Chancellor of the Exchequer, Rachel Reeves said that the UK and US will use the upcoming UK – US Financial Regulatory Working Group to continue engagement to support the use and responsible growth of digital assets.

Ms Reeves said:

‘Through our Plan for Change, we are making Britain the best place in the world to innovate — and the safest place for consumers. Robust rules around crypto will boost investor confidence, support the growth of Fintech and protect people across the UK.’

Internet link: GOV.UK

  

Newsletter 197

 

APRIL 2025

In this month’s Enews, we look at HMRC’s research into the economic benefits of Making Tax Digital (MTD), a change in the threshold for reporting trading income on side hustles and at the Chancellor of Exchequer’s first Spring Statement. There is news on the Employment Rights Bill, an update on the Loan Charge Review and news on UK exports to update you on. We also take a look at April’s increase in minimum wage rates and more.

• Financial benefit of MTD could be as high as £915 million
• Employment Rights amendments do little to address employer concerns
• Private sector activity expected to fall
• Side hustle trading threshold raised to £3,000 per year
• Chancellor unveils plan to cut red tape
• No further tax increases in Spring Statement
• Finance Act 2025 receives Royal Assent
• Minimum wage rose on 1 April
• Loan charge review calls for evidence
• UK firms show ‘resilience’ as exports grow in January

Financial benefit of MTD could be as high as £915 million

The financial benefits of MTD for VAT could be as high as £915 million, according to analysis carried out by HMRC.

Since April 2022 all VAT-registered businesses should be using MTD compatible software to keep digital records and submit returns.

HMRC used responses from a survey with businesses in MTD for VAT using fully functional software to estimate the average time savings businesses have made.

The results showed that, on average, businesses have saved time on their ‘business’ finances and record keeping’ compared to time spent before MTD. Across all VAT businesses using fully compatible software, the time saved is estimated to be between 26 hours and 40 hours per business per year.

HMRC said that if this was extrapolated to the population, it estimated a time saving of between 32 million hours and 49 million hours in the 2022/23 tax year across all businesses in MTD for VAT.

The financial value of this time is estimated to be between £603 million and £915 million.

HMRC said:

‘The results of our analysis provide strong evidence that Making Tax Digital is having a positive impact for businesses. The findings complement other published estimates of the administrative burden of Making Tax Digital and demonstrate a wider economic benefit, beyond any requirement to meet tax obligations.’

Internet link: GOV.UK

Employment Rights amendments do little to address employer concerns

The government’s proposed amendments to the Employment Rights Bill will do little to alleviate employer concerns, warns the Institute of Directors (IoD).

Changes to a number of proposals, including application of zero-hours contracts to agency workers and Statutory Sick Pay, have been announced.

In February, the IoD set out four key changes to the Employment Rights Bill which would significantly soften the negative impact of the reforms on hiring.

This included delaying protection against unfair dismissal so that they only come into effect after six months rather than on day one and increasing the planned reference period for the entitlement to guaranteed hours to 52 weeks.

Alexandra Hall-Chen, Principal Policy Advisor for Employment at the IoD, said:

‘While any steps to mitigate the impact of the government’s employment reforms on businesses are welcome, the changes announced today do not address the key areas of the reforms which are of particular concern to employers.

‘Substantial further amendments to the Bill will be required if it is to avoid undermining the government’s growth mission. Our own data shows that directors’ headcount expectations have dropped to lows last seen in the depths of the Covid-19 pandemic. Urgent and substantive action from government is needed to restore business confidence in hiring.’

Internet link: IoD website GOV.UK

Private sector activity expected to fall

Activity in the private sector is expected to fall for the fourth consecutive quarter, according to a Growth Indicator from the Confederation of British Industry (CBI).

Business volumes in the services sector are expected to decline to -23%, and distribution sales are anticipated to fall significantly in the three months to May.

Private sector activity fell again in the three months to February at a faster pace than the quarter to January.

However, manufacturers expect output to return to growth in the longer term.

Alpesh Paleja, Deputy Chief Economist at the CBI, said:

‘There are some glimmers of hope in our latest surveys. Growth expectations have become marginally less negative, driven by a predicted return to growth in the manufacturing sector. But overall, the data still paints a picture of a tough operating environment for businesses, with consumer-facing sectors faring particularly badly.

‘We do expect some tailwinds to growth over the year ahead. Rising real incomes will hopefully give households more confidence to spend, giving some relief to the sectors suffering the most.’

Internet link: CBI website

Side hustle trading threshold raised to £3,000 per year

The reporting threshold for trading income for self assessment is being lifted from £1,000 to £3,000 gross within this parliament, according to the Treasury. This involves people who already have a main income source.

This includes people trading clothes online eg; vinted,  dog-walking or gardening on the side, driving a taxi, or creating content online.

The Treasury says this will benefit around 300,000 taxpayers who will no longer need to file a self assessment tax return.

An estimated 90,000 of them will have no tax to pay and no reason to report their trading income to HMRC in the future at all. Others will be able to pay any tax they owe through a new simple online service.

The changes are part of the government’s Plan for Change, which it says will drive forward efficiency reform.

James Murray, Exchequer Secretary to the Treasury, said:

‘From trading old games to creating content on social media, we are changing the way HMRC works to make it easier for Brits to make the very most of their entrepreneurial spirit.

‘Taking hundreds of thousands of people out of filing tax returns means less time filling out forms and more time for them to grow their side-hustle.

‘We are going further and faster to overhaul the way HMRC works to make sure it delivers the Plan for Change that will help put more money in people’s pockets.’

Internet link: GOV.UK

Chancellor unveils plan to cut red tape

Chancellor Rachel Reeves has unveiled plans to cut red tape as the government aims to kickstart economic growth.

The government says its Action Plan will save businesses across the country billions of pounds by cutting the number of regulators, streamlining their core legal duties and cracking down on complexity in the regulatory system.

It says regulators have signed up to 60 growth boosting measures, including fast-tracking new medicines to market through a new pilot to provide parallel authorisations from key healthcare regulators, so that patients can access the medicine they need quicker

Other measures will aim to boost infrastructure building by simplifying guidance to protect bat habitats and streamlining mortgage lending rules, including making it easier to re-mortgage with a new lender and reduce mortgage terms.

The UK’s business groups welcomed the announcement.

Dr. Roger Barker, Director of Policy at the Institute of Directors (IoD), said:

‘The Government’s Better Regulation Action Plan is a welcome shift to a more growth friendly approach.

‘In addition to the measures announced today, we would also like to see the government apply more rigorous and timely impact assessment procedures when considering new regulation. Non-regulatory solutions should always be considered, and the business case for new regulation should be subject to proper independent scrutiny by the Regulatory Policy Committee. There should also be a commitment to reviewing the ongoing effectiveness of existing regulation at regular intervals.’

Kate Nicholls, Chief Executive of UKHospitality, said:

‘A plan to cut red tape and reduce the burden on businesses is long overdue.

‘In sectors like hospitality, businesses have been struggling with too much cost and too many regulations for decades, and it has held back growth.’

Internet link: GOV.UK IoD website UKHospitality website

No further tax increases in Spring Statement

Chancellor Rachel Reeves announced ‘no further tax increases’ in the 2025 Spring Statement.

The Chancellor’s Autumn Budget contained a record £40 billion in tax increases. However, it did not raise personal taxes including, Income Tax, employee National Insurance contributions or VAT.

Ms Reeves had pledged one fiscal event a year and confirmed that no taxes would be raised at the Spring Statement.

Instead, the Chancellor made a number of announcements on spending and economic forecasts.

The forecast from the Office for Budget Responsibility (OBR) halved the UK’s growth in 2025 from 2% to 1%.

However, Ms Reeves pointed out that the Organisation for Economic Co-operation and Development (OECD) downgraded this year’s growth forecast for every G7 economy.

The OBR forecasts show that inflation will average 3.2% this year before falling ‘rapidly’, meeting the Bank of England’s 2% target from 2027 onwards.

Ms Reeves said that defence spending will increase to 2.5% of GDP, by reducing overseas aid.

This means an extra £2.2 billion for the Ministry of Defence in the next financial year to address ‘increasing global uncertainty’.

The government will spend a minimum of 10% of the MoD’s equipment budget on innovative technology, boosting production in places such as Derby, Glasgow and Newport.

In addition, the Chancellor said that planning reforms will put the government 'within touching distance' of hitting its target of 1.5 million new homes over the course of this Parliament.

Ms Reeves said that this will increase the level of real GDP by 0.2% by 2029/30, adding £6.8 billion to the economy.

The Chancellor said:

‘Our task is to secure Britain’s future in a world that is changing before our eyes. The threat facing our continent was transformed when Putin invaded Ukraine. It has since escalated further and continues to evolve rapidly.

‘At the same time, the global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies.’

Internet link: GOV.UK

Finance Act 2025 receives Royal Assent

The first Finance Act of the Labour government (which reflects the 2024 Budget) has gained Royal Assent and passed into law.

The Finance Act 2025 makes major changes to the tax rules for non-doms, removes the VAT exemption for private school fees, increases some rates of Capital Gains Tax (CGT) and Stamp Duty Land Tax, and extends the energy profits levy on the oil and gas sector.

The abolition of the remittance basis of taxation for non-UK domiciled individuals sees it replaced with a residence-based regime with effect from 6 April 2025. This means all longer-term UK residents will be taxed by the UK on their worldwide income and gains as they arise.

The Act removes the VAT exemption on the supply of private school fees, vocational training and board and lodgings when supplied by a private school or similar institute.

The Act increases the main rates of CGT from 10% and 20% to 18% and 24% respectively for disposals made on or after 30 October 2024.

John Barnett, Chair of the Technical Policy and Oversight Committee at the Chartered Institute of Taxation (CIOT), said:

‘Moving from domicile to residence as the basis for taxing people who are internationally mobile makes sense.

‘As well as being a major simplification, it is a fairer and more transparent basis for determining UK tax.

‘Residence is determined by criteria far more objective and certain than the subjective concept of domicile. Replacing the outdated remittance basis is also sensible and the Temporary Repatriation Facility offers a helpful transition.’

Internet link: GOV.UK CIOT website

Minimum wage rose on 1 April

Increases to the National Living Wage and National Minimum Wage took effect from 1 April.

From April 2025, the NLW will increase by 6.7% and the NMW by as much as 18% depending on the category of the worker.

The NMW is the minimum amount per hour workers are entitled to be paid by law. Different rates apply depending on the category of the worker.

The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.

 

	NLW	18-20	16-17	Apprentices
From 1 April 2025	£12.21	£10.00	£7.55	£7.55

 

Peter Bickley, Technical Manager – Employer Taxes, ICAEW, said:

‘Although the rise in the minimum wage will be welcomed by many workers, it presents a further challenge for employers already facing significant changes from April 2025, not least the increase in the rate of, and secondary threshold for employers’ National Insurance contributions, albeit that the bigger employment allowance should help small employers.

‘Employers must ensure that they continue to comply with the requirements as it is a criminal offence not to pay someone the minimum wage.’

Internet link: GOV.UK ICAEW website

Loan charge review calls for evidence

The independent review into the loan charge has issued a call for evidence with examples of promotional material and marketing leaflets a priority for the review team.

The review was announced by the Treasury in January and is being led by Ray McCann, a former President of the Chartered Institute of Taxation.

It is now asking people affected by loan charge to get in touch with evidence of the schemes they were signed up to by noon on 30 May.

McCann said:

‘What the review needs most is documentary evidence, such as copies of marketing material, letters, emails and so on sent to you by the promoters of these schemes.

‘This will supplement the information the review already holds and add to the great deal of information, albeit mostly anonymous, that is in the public domain.

‘It will greatly help the review team understand why so many have become involved in these schemes, the responsibility the promoters have for bringing misery to so many and the difficulties you have had in bringing your involvement to a close.

‘The review team has suggested several questions in each section, these can be answered as they have been asked, where they are relevant, or used as a guide to the kind of information the review team needs. The review team also plan to speak to some of those involved as part of the review.’

Internet link: GOV.UK

UK firms show ‘resilience’ as exports grow in January

Total UK exports in goods and services rose by 2.8% in January, according to the latest trade data from the Office for National Statistics (ONS).

Goods exports were up by 3.5% on this while services exports up by 2.3% month on month.

Non-EU goods exports had strong growth in January with a rise of 5.7% in volume terms, while EU goods exports rose by 1.3% month on month.

Total import volumes into the UK fell by 0.9% in January, with goods imports down by 1.7% in volume terms, while services imports rose by 0.6% in January.

William Bain, Head of Trade Policy at the British Chambers of Commerce (BCC), said:

‘UK companies are showing resilience in a more difficult trading world.

‘With US tariffs now a reality, the prospect of more to follow, and retaliatory tariffs by some of our trading partners, the rest of 2025 could be challenging for UK exporters in particular.

‘That is why the forthcoming Industrial and Trade Strategies need to provide practical measures to help boost export performance in key UK sectors – from professional and business services, and advanced manufacturing, to defence and life sciences.

‘We also need to see the government push for a new settlement with the EU, our biggest trading partner, to help remove barriers for UK businesses and support them to grow and expand.’

Internet link: ONS website BCC website

Employee Pensions

 

The way that tax relief is given on employee pension payments depends upon what type of scheme it is. 

• If the scheme is a ‘net pay arrangement’, the total pension contribution is deducted from your pay before tax is calculated, therefore, full tax is given immediately on the full pension payment.

• If the scheme is a ‘relief at source’ arrangement, the pension contribution is deducted from the gross pay after tax has been calculated. The amount will be net of basic rate tax relief.

 

Further details of the two schemes is given below:

Net Pay Schemes

Net pay arrangements do not require the employee to do anything to get your tax relief. Employee pension contributions are deducted from the gross salary by the employer before income tax is calculated, so tax relief is given on the pension amount immediately at the highest rate of tax.

Relief at Source Schemes

Under relief at source schemes, employees pay pension contributions from their net pay that has already had tax deducted from it. The pension contribution is net of basic 20% tax relief. However, if they are higher rate taxpayers and, assuming they aren’t already completing self-assessment returns or making higher rate pension claims, then they need to make claims with HMRC for the additional 20% relief, giving them the tax relief up to the higher rate.

For example, if an employee is a higher rate taxpayer, and pays a £200 employee pension contribution from their wages under a relief at source scheme, that contribution is actually £250 less £50 tax relief at source (£250 @ 20%). If they are a higher rate taxpayer, they can claim another £50 tax back, to give the full 40% tax relief on £250. When multiplied by several months pay and possibly up to 4 tax years (see below) this could be a substantial additional amount of tax relief / refunds.

If they haven’t done so, employees can claim back 4 years. As we are only 4 weeks from tax year end this is worth considering soon to maximise any possible back claims

 

Here is a link to the HMRC guidance re making claims- 

https://www.gov.uk/guidance/claim-tax-relief-on-your-private-pension-payments

Newsletter 196

 

March 2025

In this month’s Enews, we look at the government’s decision to scrap powers for HMRC to collect data on the hours employees work, warnings from businesses over the impact of April’s employers’ National Insurance contributions (NICs) increase, at a government consultation on mandatory electronic invoicing for businesses and more.

• Proposed HMRC powers to collect data on hours worked scrapped
• 5 million file self assessment by 31 January deadline
• £35 million added to State Pension pots
• Government consults on mandatory e-invoicing
• Businesses warn of National Insurance ‘powder keg’
• Advisory fuel rates for company cars

Proposed HMRC powers to collect data on hours worked scrapped

The government has stopped controversial plans to collect information about the exact hours worked by every employee in PAYE returns.

The data collection on employee hours was meant to start from April 2026, but the plan has been scrapped as part of the government’s attempts to reduce red tape and regulatory burden for business.

The (Draft) The Income Tax (Pay As You Earn) (Amendment) Regulations 2024 will not be progressed further after the results of a consultation were published.

HMRC said:

‘The government has listened to businesses and acted on their feedback about the administrative burden the requirements in these regulations would bring.’

The Chartered Institute of Taxation (CIOT) warned last May that the estimated one-off cost to businesses of £58 million and ongoing costs of £10 million - an average per business of £29 and £5 respectively- were “significantly underestimated” and that gathering additional data to provide to HMRC would lead to extra work for many employers.

The CIOT added it was unclear why HMRC wanted to collect this information and what they were going to use it for.

Internet link: GOV.UK CIOT website

11.5 million file self assessment by 31 January deadline

More than 11.5 million taxpayers beat the self assessment deadline to file their tax return for the 2023/24 tax year by 31 January and avoid a £100 late filing penalty, according to HMRC’s data.

Almost three quarters of a million taxpayers left it to the last minute to file with 732,498 submitting returns on deadline day.

The most common time to file on 31 January was 16:00 to 16:59 when 58,517 people submitted returns. And 31,442 taxpayers cut it as close as possible by filing between 23:00 and 23:59.

Late filing and late payment penalties are charged for failure to meet the deadline. HMRC is urging anyone who has missed the deadline to file their tax return now and pay any tax owed.

The tax authority says one of the quickest ways to pay is via the free and secure HMRC app. Time to Pay arrangements are available for those who cannot pay their tax bill in full, it adds.

Internet link: HMRC press release

£35 million added to State Pension pots

People plugging gaps in their National Insurance contributions (NICs) have added £35 million to their State Pensions since last April, according to figures from HMRC.

More than 37,000 online payments have been made through the online service, equating to 68,673 years of contributions.

The average online top-up payment is £1,835 and the largest weekly State Pension increase is £113.76. HMRC says that 65% of the years topped up by customers are from 2017 onwards.

HMRC and Department for Work and Pensions (DWP) are reminding customers they only have until 5 April to check their NICs record and fill any gaps from 6 April 2006 onwards.

From 6 April 2025, people will only be able to make voluntary National Insurance contributions for the previous six tax years, in line with normal time limits.

The Check your State Pension forecast service on GOV.UK is the quickest and easiest way to check if action is required, says HMRC. The HMRC app can also be used.

Internet link: HMRC press release

Government consults on mandatory e-invoicing

The government has launched a consultation on plans for the rollout of electronic invoicing (e-invoicing) in the UK.

The 12-week consultation is being jointly conducted by HMRC and the Department of Business and Trade (DBT) and will consider whether to make e-invoicing mandatory for businesses in the UK.

E-invoicing is the digital exchange of invoice information directly between buyers and suppliers.

The government says this could help businesses get their tax right first time, reduce invoicing and data errors, improve the accuracy of VAT returns, help close the tax gap and save time and money.

It usually results in faster business to business payments, leading to improved cash flow and less paperwork, the government adds.

The 34-question consultation can be completed online and once the 12-week feedback session closes.

Internet link: HMRC press release

Businesses warn of National Insurance ‘powder keg’

The overwhelming majority of businesses say the rise in employers’ NICs will force them to change their plans, according to research by the British Chambers of Commerce (BCC).

With under six weeks until the NICs rise comes in, 82% of firms say the tax hike will cause them to rethink. In addition, 58% of surveyed businesses say it will impact recruitment plans, and 54% that it will affect their prices.

Meanwhile, more than a third of firms suggest investment and day-to-day operations will be impacted.

Internet link: BCC website

Advisory fuel rates for company cars

New company car advisory fuel rates have been published and took effect from 1 March 2025.

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 March 2025 are:

Engine size	Petrol
1400cc or less	12p
1401cc - 2000cc	15p
Over 2000cc	23p
Engine size	Diesel
1600cc or less	12p
1601cc - 2000cc	13p
Over 2000cc	17p
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.

Internet link: GOV.UK AFR

Newsletter 195

 

 JANUARY 2025

In this month’s Enews, we look at ways HMRC could save millions of hours and improve its customer service levels and their warning for the taxpayers yet to file their self assessment returns. There is also news on the government’s Industrial Strategy and warnings about their employment plan from small business as well as calls make changes to unfair VAT rules and much more.

• HMRC could save millions of hours with tracking system
• Government launches Industrial Strategy Advisory Council
• Millions yet to file their self assessment tax return
• Government must reset EU trade relations, urges BCC
• Employment plan will harm jobs, warns small firms
• CIOT calls on government to rewrite unfair VAT rules
• Regulators must grasp growth opportunity
• UK economy returns to growth as inflation dips
• Parliamentary watchdog accuses HMRC of deliberately ‘degrading’ phone services
• Labour market challenges remain as wages grow
• IMF upgrades UK’s economic outlook

 

HMRC could save millions of hours with tracking system

HMRC could save an estimated 1.7 million hours of call handlers’ time every year if it implemented an automated status tracking system, according to two of the leading bodies for tax advisers and chartered accountants.

A joint study by the Chartered Institute of Taxation (CIOT) and ICAEW tracked attempts to contact HMRC across phonelines and webchats for six weeks. It found that more than one-third of contact attempts were made to chase progress on existing enquiries, rather than to make a new enquiry.

The bodies say that, while improving customer service performance remained crucial, a significant reduction in the need for agents and taxpayers to contact HMRC in the first place was vital.

Only 33% of contact attempts to HMRC resulted in the query being fully resolved, the study found, with the average wait time across phone and webchat standing at 19 minutes.

The introduction of an automated tracking system to eliminate progress chasing calls could save more than 1.7 million hours each year, the equivalent of 1,000 full-time employees or approximately £36 million, CIOT and ICAEW said.

Additionally, an automated tracking system would reduce the number of staff needed to answer such calls, who could be redeployed elsewhere.

Ellen Milner, CIOT’s Director of Public Policy, said:

‘The report's recommendations are practical solutions which can deliver significant improvements for agents and taxpayers.

‘Additionally, from an HMRC perspective, resolving issues with progress chasing alone has the potential to save them over £36 million a year in staff costs. This seems a good place to start for releasing funds for much needed investment in training and digitalisation.’

Internet link: CIOT website

Government launches Industrial Strategy Advisory Council

The UK government has launched a new Industrial Strategy Advisory Council which brings together business leaders from across the UK to offer advice.

The government says the Industrial Strategy will help maintain a pro-business environment to capture a greater share of internationally mobile investment and motivate domestic business to boost their investment and scale up their growth.

It will channel support to sectors and geographical clusters that have the highest growth potential for the next decade, the government adds.

Anna Leach, Chief Economist at the Institute of Directors said:

‘We welcome the launch of the Industrial Strategy Advisory Council which will offer independent advice and recommendations to government as it develops the Industrial Strategy.

‘It’s incredibly important to see the role of businesses in designing and delivering the government’s growth mission given prominence. An industrial strategy which embeds stability and long-termism alongside astutely targeted investments can play an effective role in driving this mission.

‘It is also good to see that the council will have a role in holding the government to account in the effective delivery of industrial strategy through data, analysis and reporting. We look forward to engaging with the new council in creating the conditions for businesses to thrive in the UK.’

Internet link: GOV.UK IoD website

Millions yet to file their self assessment tax return

With less than a week to go millions of taxpayers still need to complete and pay their self assessment and avoid penalties, HMRC warns.

Anyone required to file a tax return for the 2023/24 tax year who misses the 31 January 2025 deadline could face an initial late filing penalty of £100.

Thousands of taxpayers have already done so by completing their tax returns before the fizz was barely flat on New Year’s Day.

HMRC revealed that more than 24,800 people filed on 1 January. A further 38,000 had even squeezed theirs in before the bells on 31 December 2024, with 310 filing between 23:00 and 23:59 on New Year’s Eve.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said:

‘We know completing your tax return isn’t the most exciting item on your New Year to-do list, but it’s important to file and pay on time to avoid penalties or being charged interest.

‘The quickest and easiest way to complete your tax return and pay any tax owed is to use HMRC’s online services – go to GOV.UK and search ‘self assessment’ to get started now.’

Internet link: HMRC website

Government must reset EU trade relations, urges BCC

The need for the UK government to reset trade relations with the EU continues to grow, according to a report from the British Chambers of Commerce (BCC).

The BCC report, assessing the fourth year of Brexit, identifies fresh challenges as regulations continue to diverge, creating ‘further headaches’ for traders on both sides of the Channel.

The Trade and Cooperation Agreement (TCA) was agreed on Christmas Eve in 2020 to allow tariff-free trade with the EU once Brexit took effect.

But services access is limited by rules on business mobility and only 15% of exporters think the deal is helping them to grow sales with Europe, while 41% disagree, according to a BCC survey.

Shevaun Haviland, Director General of the British Chambers of Commerce, said:

‘The government has talked a lot about a new era of trade relations with the EU. But firms are grappling with increasing costs off the back of the Autumn Budget and this change cannot come soon enough.

‘We need to see a smart and flexible approach to these negotiations. Our businesses are clear on what they want to see, less paperwork and bureaucracy, greater flexibility on business travel and a balanced Youth Mobility Scheme between the UK and EU.

‘There is no time to lose in driving forward the changes we need to see. Firms are suffocating under a blanket of rising costs and improving our trading relationship with the EU could provide the growth needed to transform the dour outlook many are facing.’

Internet link: BCC website

Employment plan will harm jobs, warns small firms

Small firms fear the new Employment Rights Bill will harm recruitment, according to a survey by the Federation of Small Businesses (FSB).

The research shows that 92% of small employers have concerns about measures in the Bill.

One of the main concerns cited in the Bill is changes to unfair dismissal legislation, which would expand the grounds for employees to take their new employer to a tribunal from their first day in the job.

In addition, 67% said the Bill would see them recruit fewer staff while 32% said they would reduce headcount before the measures become law.

Tina McKenzie, FSB’s Policy Chair, said:

‘Small firms have made it crystal clear that the Bill will not motivate them to hire more whatsoever. Their feedback is emphatic, resounding, and overwhelming.

‘Ministers must show they get the risk to jobs and avoid a cavalier, dogmatic or patronising approach to the loud and clear feedback from small businesses. The economy is in no fit state for a ‘war on work’.  

‘If employers fear they will be sued, fewer will hire – with knock-on effects including a rising benefits bill and a lasting drag on living standards across the UK.’

Internet link: FSB website

CIOT calls on government to rewrite unfair VAT rules

The Chartered Institute of Taxation (CIOT) is calling on the government to address unfair tax rules as interest rates on late payments rise.

The CIOT is urging the government to reintroduce rules which enable HMRC to waive interest on underpaid VAT when no actual tax loss to the Exchequer occurs.

This power was omitted from the new VAT interest regime which came into effect for VAT return periods starting on or after 1 January 2023.

The exposure to interest where there is no tax loss is due to the unique operation of the VAT regime.

The interest rate on late payment of tax is due to increase by a further 1.5% in April, with no equivalent increase in interest on overpaid tax.

Richard Wild, CIOT’s Head of Tax Technical, said:

‘It is possible for a taxpayer to under-declare an amount of VAT due to HMRC, in circumstances where that VAT is reclaimable by a third party, such as the taxpayer’s customer.

Under the previous interest regime the principle of commercial restitution could be applied, providing HMRC with discretion not to charge interest in these circumstances, because there had been no loss to the Exchequer.

Under the present system, HMRC no longer has statutory discretion to not charge interest in these circumstances. So, interest is now being charged in situations where there is no net loss of tax.

We do not understand this to be a deliberate decision on the previous government’s part, but it is vital that this unfairness is removed and commercial restitution reinstated.’

Internet link: CIOT website

Regulators must grasp growth opportunity

The UK’s regulators must grasp the opportunity to help small business grow, says the Federation of Small Businesses (FSB).

The FSB has written to seven of the UK’s regulators with a set of measures to unlock small business growth. The regulators are the Financial Conduct Authority (FCA), Finance Reporting Council (FRC), Ofgem, Ofwat, Ofcom, Competition and Markets Authority and Information Commissioner’s Office.

This follows requests from the Prime Minister, the Chancellor of the Exchequer and the Business Secretary for leading regulators to submit proposals by mid-January for reforms that will spur investments and back economic upturn.

The FSB is calling for a better regulatory policy atmosphere in various areas ranging from financial services to broadband and utilities to digital markets. It has asked the FCA to investigate the use of Personal Guarantees for limited companies, the FRC to include late payments in audits and Ofgem to ensure small firms get quarterly bills from energy companies.

Tina McKenzie, Policy Chair at the Federation of Small Businesses said:

‘We’re glad to see this drive at the start of a new government and new Parliament.

‘Regulators must grasp this opportunity to propose small business growth measures within their activities and remits. We’re also keen to see ministers and all public bodies to put their shoulders to the wheel on growth, alongside business and industry.

‘Regulating for growth doesn’t always mean deregulation – sometimes it means better protection for small firms as consumers.’

Internet link: FSB website

UK economy returns to growth as inflation dips

The UK economy grew for the first time in three months in November, according to the Office for National Statistics (ONS).

ONS figures showed an expansion of 0.1% in GDP after the economy shrank in each of the two previous months.

But the figure was lower than economists had expected, with declines in manufacturing and business rentals and leasing.

Figures showed the services sector drove the marginal growth in November, with pubs, restaurants and IT companies performing well.

UK inflation dipped in December for the first time in three months, the ONS reported.

Prices rose 2.5% in the year to December, down from 2.6% the month before, ONS said.

The ONS said while hotel prices and tobacco prices had fallen last month, the decreases were offset by the cost of fuel and second-hand cars rising.

Ben Jones, CBI Lead Economist said:

‘After a string of disappointing data, it’s good to see that growth returned to positive territory in November, though the economy is still only on track for a very modest expansion at best over the final quarter of last year.

‘In the wake of the Autumn Budget a mood of caution seems to have settled over UK businesses. Many firms are entering 2025 with a focus on reducing operational expenditure, which is likely to weigh on pay, hiring and investment in the months ahead.

‘The government can help shift the UK’s economic narrative with more determined focus on measures that could underpin growth.’

Internet link: ONS website ONS website CBI website

Parliamentary watchdog accuses HMRC of deliberately ‘degrading’ phone services

Parliament’s spending watchdog has accused HMRC of deliberately running down its phone services to force people to go online, according to a report.

The Public Accounts Committee’s (PAC) report into HMRC’s customer service levels found that the average call waiting time has passed 23 minutes.

It also found that 44,000 customers were cut off without warning after being on hold for more than an hour last year.

The report said:

‘HMRC’s customer services have deteriorated even further since this Committee last reported a year ago.’

It continued:

‘HMRC says it has not been adequately resourced to meet telephone demand from customers, but it must take responsibility for its own failings to offer sufficiently effective digital services to customers. We are concerned that it has sought to degrade its telephone service to drive taxpayers to digital channels.’

It added:

‘HMRC has been too willing to let its telephone services fail in the hope this forces people to use its digital services instead.’

The PAC report made this recommendation:

‘HMRC should ensure it understands how far its digital services can replace telephone services and what level of telephone service it needs to retain to meet customers’ needs - including those of small businesses. HMRC should ensure it meets a minimum level of service for all customers, including those seven million customers HMRC estimates can’t use digital services.’

Internet link: Parliament website

Labour market challenges remain as wages grow

The UK labour market remains challenging as employers cut staff numbers and wage growth accelerated, according to the latest data from the Office for National Statistics (ONS).

Average weekly earnings in the three months to November were 5.6 per cent higher than a year earlier, both including and excluding bonuses, the ONS said.

Payrolled employment fell by 0.1 per cent between October and November and was 11,000 lower in the three months to November than in the previous quarter, said the ONS

Early estimates for December suggest a bigger month on month drop of 47,000 to 30.3mn in the payrolled workforce.

Jane Gratton, Deputy Director Public Policy at the British Chambers of Commerce (BCC) said:

‘The labour market continues to be challenging for many businesses, with wage growth continuing to rise as firms compete for skilled workers. This is a concern as they face a significant rise in employment costs in April.

‘However, there are also signs of further loosening as unemployment ticks up, vacancies continue to fall and economic inactivity dips.

‘The full impact of the changes to national insurance and the minimum wage, announced at the Budget, won’t be fully seen until later in the year. However, the warning lights on recruitment, employment and training are already flashing.’

Internet link: ONS website BCC website

IMF upgrades UK’s economic outlook

The International Monetary Fund (IMF) has upgraded its growth forecast for the UK economy this year.

The global institution upgraded its prediction for UK growth to 1.6% for this year from its previous estimate of 1.5%.

As well as upgrading its outlook for the UK, the IMF suggested the UK economy would perform better than European economies such as Germany, France and Italy over the next two years.

However, the latest IMF figures suggested the UK economy had weaker growth last year than the organisation had expected.

Rachel Reeves, Chancellor of the Exchequer said:

‘The UK is forecast to be the fastest growing major European economy over the next two years and the only G7 economy, apart from the US, to have its growth forecast upgraded for this year.

‘I will go further and faster in my mission for growth through intelligent investment and relentless reform and deliver on our promise to improve living standards in every part of the UK through the Plan for Change.’

Internet link: IMF website HM Treasury website