Newsletter 207

 

MAY 2026

In this month’s Enews, we look at the government’s crackdown on late payments to small businesses, and the changes to taxing benefits-in-kind through the payroll. There is also a plea on skills planning for Gen Z, and we look at government efforts to reunite young people with their Child Trust Funds. There are also warnings for the government on the negative impact of business rates, information on the UK’s economic security to update you on, and more.

 

• Government unveils crackdown on late payments
• New procurement rules offer SMEs hope
• Tourist tax would hit consumers with £1.6 billion tax rise
• Countdown to taxation of benefits-in-kind via the payroll underway
• UK businesses should apply now for Vaping Products Duty
• Higher energy prices could leave typical British households £480 worse off this year
• Pensioners urged to be alert to Winter Fuel Payment scams
• Skills planning ‘vital’ to better engage Gen Z in workplace
• Latest guidance for employers
• Government boosts efforts to help young people find their Child Trust Funds
• Business rates system a major brake on UK investment and competitiveness
• UK’s economic security at risk

Government unveils crackdown on late payments

Small businesses to be backed by new, stronger measures to tackle late payments, the government has announced.

The Small Business Commissioner will be given sweeping new powers to investigate poor payment practices, adjudicate payment disputes, and fine the worst offenders – with fines worth tens of millions for firms that persistently pay late or fail to comply with the new laws.

The government says the measures will tackle a problem costing the UK economy £11 billion every year.

The changes will include a new 60-day cap on payment terms on all large firms when paying smaller suppliers. New mandatory interest on late payments will also be introduced, with a requirement for all commercial contracts to include statutory interest set at 8% above the Bank of England base rate.

Business Secretary Peter Kyle said:

‘Far too many businesses are forced to shut down because they have not been paid – that is simply unacceptable.

‘We are unveiling the strongest, most robust changes to payment laws in over a generation – laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier.’

Internet link: GOV.UK

New procurement rules offer SMEs hope

The government’s new procurement rules that target opportunities for smaller businesses offer hope to SMEs, according to the British Chambers of Commerce (BCC).

Government departments have, for the first time, set individual spending targets for SMEs to deliver over £7.4 billion a year to small businesses by 2028.

Departments have for the first time, individually set direct SME spending targets and will publish yearly progress updates ensuring they are held to account, those who fall behind will need to set out robust actions on how they will improve.

In 2024, the BCC and Tussell’s SME Procurement Tracker found only 20% of direct procurement spend from the wider public sector, including central government, went to SMEs.

Jonny Haseldine, Head of Business Environment policy at the BCC, said:

‘This shake up is long overdue as public procurement spend with SMEs has been stuck in a rut. Although the value of contracts with SMEs has continued to rise their slice of the pie is still far too small. For too many businesses, government contracts remain out of reach.  

‘This new scheme has the potential to be a game changer, giving smaller firms across the UK greater access to procurement opportunities and supply chains. 

‘As has been demonstrated by Chamber-led supply chains at major infrastructure projects such as Sizewell C and Hinkley Point, SMEs are a vital part of the ecosystem. They provide local skills and knowledge to projects as well as significantly boosting regional economic growth.’

Internet link: BCC website GOV.UK

Tourist tax would hit consumers with £1.6 billion tax rise

The government’s proposed tourist tax would constitute a £1.6 billion tax increase for holidaymakers, according to analysis by Oxford Economics.

The modelling, which was commissioned by UKHospitality, assumed a 5% levy is fully realised by 2030.

It showed a £2.2 billion reduction in GDP, £1.6 billion tax bill for UK holidaymakers, £688 million in reduced tax receipts for the Treasury and a loss of £101m in direct investment from hospitality and tourism businesses.

The modelling by Oxford Economics also considered a £2 levy per person per night and a £2 levy per room per night. All scenarios resulted in a reduction in GDP, tourism spending, nights spent in accommodation and total jobs.

Allen Simpson, Chief Executive of UKHospitality, said:

‘The numbers are clear. A holiday tax would hike costs for Brits, make staycations more expensive and decimate tourism.

‘There are no winners from a holiday tax. From coastal communities and city centres to local guesthouses, pubs and taxi firms, the impacts are stark and indiscriminate.

‘Taxes up, jobs lost and our high streets hit once again. Holidays are for relaxing, not taxing. The government should keep it that way and stop the holiday tax.’

Internet link: UKHospitality website

Countdown to taxation of benefits-in-kind via the payroll underway

There is now less than a year to go before all employers must tax benefits-in-kind via the payroll, the Chartered Institute of Taxation has warned.

Benefits-in-kind are non-cash benefits provided by employers to employees or directors. Common benefits include company cars, private medical insurance and gym membership.

While the benefit is paid for by the employer the recipient is required to pay Income Tax and potentially National Insurance contributions (NICs) on the value of the benefit, as if this value had been added to their salary.

Additionally, the employer must pay employer NICs on the value of the benefit. According to HMRC more than 3.5 million employees receive a taxable benefit-in-kind.

Currently, most employers compute the value of a taxable benefit after the end of the tax year and report it on a P11D form to HMRC and the employee. This means the employer potentially has up to 15 months to calculate, verify and report the value of a benefit.

From 6 April 2027 it will be a legal requirement to report and pay Income Tax and NICs on most benefits-in-kind and taxable expenses payments via payroll rather than waiting until the end of the tax year.

Sarah Hewson, Vice-Chair of the CIOT’s Employment Taxes Committee, said:

‘Mandatory payrolling of benefits will have a big impact on employers, employees and software providers. Don’t leave it too late to get ready for this change.’

Internet link: CIOT website

UK businesses should apply now for Vaping Products Duty

Vaping-related businesses and supply chains need to register now for Vaping Products Duty (VPD) and the Vaping Duty Stamps (VDS) Scheme, says HMRC.

Businesses need to provide the required information now to register for HMRC approval and begin the process of applying for duty stamps.

From 1 October 2026, this information will be used to determine when duty becomes payable, making registering now an essential step in early preparation.

Businesses can visit GOV.UK and search for ‘vaping duty’ to access guidance. It explains which vaping products are liable to the new excise duty, the key dates and milestones ahead, and the roles and responsibilities of manufacturers, importers, warehousekeepers and other businesses across the supply chain.

It also sets out how and when businesses need to register and apply for the relevant approvals, which will take at least 45 working days if further information is needed.

Rachel Nixon, HMRC’s Director of Indirect Tax, said:

‘From 1 April 2026, UK vape manufacturers, importers and warehousekeepers can apply to HMRC for VPD and VDS Scheme approval, which is essential for these businesses to continue trading legally from 1 October.

‘Our guidance brings all the key information together, and using it now will help firms prepare properly, avoid errors and ensure they can continue trading when the new requirements apply from October.’

Internet link: HMRC press release

Higher energy prices could leave typical British households £480 worse off this year

Higher energy prices due to the conflict in the Middle East are set to make the median working-age British household £480 worse off this year, according to the Resolution Foundation.

The think tank based its estimates on market-forecasts for the rise in energy prices consistent with market pricing after the announcement of a ceasefire.

For families with above average income, rising energy prices will likely tip living standards growth into negative territory, says the Foundation.

The typical household, previously on track for 0.9% growth, is now set to see its income fall by 0.6% – a difference of £480 – over the course of the current financial year.

It says that average income growth for the poorest fifth this year is now set to be just 1.2%, down from 2.8% before the conflict.

James Smith, Chief Economist at the Resolution Foundation, said:

‘Despite hopes for a sustained peace, the path of this conflict remains uncertain and energy prices remain well above pre-war levels, meaning many households face a decline in their purchasing power this year.

‘This squeeze will run right through the income distribution. Lower-income households will still see some income growth thanks to a long-awaited rise in real benefit levels, but inflation will likely knock more than a percentage point off what they stood to gain.

‘For those in the middle and towards the top of the income distribution, even the thin growth they had been expecting has tipped into negative territory.’

Internet link: Resolution Foundation website

Pensioners urged to be alert to Winter Fuel Payment scams

HMRC is warning pensioners to be on high alert for scams as the recovery of Winter Fuel Payments begins this month.

Almost two million people are expected to repay their winter 2025 payment due to their annual income being more than £35,000.

HMRC saw more than 25,000 Winter Fuel Payment scam referrals over the last 12 months. It is warning that scammers may now use the recovery process to target this group.

For most, the payment will be recovered through a change to their PAYE tax code from April 2026 with no need to contact HMRC.

For those in self assessment who file online, the payment should be pre-populated in their 2025/26 tax return. Customers should check and add it manually if it is not shown. Paper filers will need to add it on their tax return.

This applies across the UK – including in Scotland, where the payment is known as the Pension Age Winter Heating Payment and in Northern Ireland, where payments were made by the Department for Work and Pensions on behalf of the Northern Ireland Executive. In all cases, recovery is handled by HMRC.

Myrtle Lloyd, HMRC’s Chief Customer Officer, said:

‘Criminals are great pretenders and often use fake letters, emails, calls and texts to impersonate HMRC and trick people into giving them money.

‘I’d encourage anyone who’s unsure to use our online tool at GOV.UK to check whether and how their payment will be recovered – there’s no need to call us.’

Internet link: HMRC press release

Skills planning ‘vital’ to better engage Gen Z in workplace

Skills planning is ‘vital’ to better engaging Generation Z with the workplace, says the British Chambers of Commerce (BCC).

The report analysed Local Skills Improvement Plans (LSIPs) and found that they have engaged thousands of people and employers in the training and education that firms require.

However, the business group also found that the ‘fragmented’ nature of funding and a limited scope to target young people has led to a range of opportunities being missed.

A number of prospects have been identified to unlock potential, the BCC said.

These include a lack of influence in education for under-16s, opportunities to replicate the system for business support and more effective engagement with young people.

Kate Shoesmith, Director of Policy at the BCC, said:

‘LSIPs have been really successful – involving thousands of businesses, training providers and learners over the past four years, to deliver great employment outcomes.

‘But with almost one million Gen Zs not in employment, education or training, earlier intervention is essential to connect young people to the world of work.

‘The longer they are allowed to drift away from employment the harder it becomes. By linking the government’s Youth Guarantee scheme to ERBs who have strategic oversight of their local economies, a pathway into work can be created.

‘The tools required to do this already exist through LSIPs. It is just a matter of giving them the long-term funding and authority to make it happen.’

Internet link: BCC website

Latest guidance for employers

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

• Reminder of key dates and processes for reporting benefits in kind (BiKs).
• Real Time Information submission problems — Incorrect handling of Payroll ID.
• Removal of the tax relief for non-reimbursed homeworking expenses.
• The official rate of interest from 6 April 2026.
• The ‘Tell ABAB’ survey 2026.
• Statutory Sick Pay changes — what employers need to know.

Internet link: GOV.UK

Government boosts efforts to help young people find their Child Trust Funds

The government will contact thousands of young people about forgotten Child Trust Funds (CTFs) in a bid to reunite account holders with their accounts that are now worth £2,200 on average.

CTFs were introduced by the government in 2005 and applied to children born between 1 September 2002 and 2 January 2011.

The government is now undertaking an extensive awareness campaign urging young people to locate their CTFs through the free ‘Find My Child Trust Fund’ service on GOV.UK.

Many young people are unaware they have a CTF and over 750,000 accounts are unclaimed. The government says it is determined to act so every young person that has a CTF is aware of how to access it.

In order to build on existing efforts, HMRC will be writing to all 21-year-olds whose accounts remain unclaimed to make them aware they have a CTF.

Economic Secretary to the Treasury, Lucy Rigby, said:

‘Hundreds of thousands of young people in this country don’t know they have a CTF, let alone how to access it. Some will have a couple of thousand pounds sat there that would really help them as they begin adult life.

‘I’m determined that those who have CTFs are made aware they have this money.

‘Together, we will ensure funds from these Child Trust Funds can be accessed by young people to help give them the best start to adult life.’

Internet link: HM Treasury website

Business rates system a major brake on UK investment and competitiveness

The UK’s business rates system is acting as a major brake on investment, productivity and economic growth, warns the Confederation of British Industry (CBI).

Almost a third of the 700 firms surveyed said that the system has played a significant role in cancelling, reducing or delaying planned investment in their property.

The CBI says that for the second consecutive year, the UK has the highest property tax levels in the OECD, with property tax as a share of GDP four times higher than Germany.

Businesses say that the level of their business rates bills and the system’s unpredictability, complexity and ‘cliff edges’ are undermining confidence and deterring investment, it adds.

The CBI is urging governments at a national and devolved level to deliver fundamental reform to boost competitiveness and support long-term investment across the UK.

Louise Hellem, Chief Economist at the CBI, said:

‘Business rates are no longer just a cost of doing business – they’re a major tax on ambition and one that effectively penalises investment.

When a single refurbishment can trigger a 40% increase in rateable value, or a £1 change can move a firm from one band to another and add £39,000 to their bill, the system is clearly not fit for purpose in a competitive, modern economy. Reform of the business rates system is no longer a ‘nice to do’, it’s an economic necessity.’

Internet link: CBI website

UK’s economic security at risk

The government must prioritise the UK’s economic security, after 10 years of geopolitical shocks have repeatedly damaged growth, says the British Chambers of Commerce.

Businesses in the UK have been left permanently bruised by the Pandemic, Brexit, wars in Ukraine and the Middle East, supply chain chaos and US tariffs.

The business group sets out urgent steps needed to secure vital manufacturing inputs and stop British competitiveness declining in an increasingly unstable world.

It says the Prime Minister must take cross-government responsibility for protecting the UK economy from external crises after years of neglect by successive governments.

The BCC argues that keeping the UK’s position as a major trading nation depends on secure access to key inputs such as energy, steel, semiconductors and growth minerals. Demand for some materials is set to rise massively over the next decade, and domestic production cannot meet future needs.

Shevaun Haviland, Director General of the BCC, said:

‘Over the past decade, British businesses have weathered some of the toughest economic shocks we’ve faced in the past 100 years. Through sheer resilience and ingenuity, they have kept trading in an increasingly unpredictable global environment.

‘But it’s clear that this is not enough. The UK’s inadequate economic security has become a drag on growth, competitiveness and national strength; yet it is still not given the focus and urgency it demands.

‘The message from business is clear: delay is a luxury the UK can’t afford. The Prime Minister must act now, match the pace of our competitors, and put economic security at the heart of our national growth strategy.’

Internet link: BCC website