NUMBER OF EARLY SELF ASSESSMENT FILERS DOUBLES IN FIVE YEARS

The number of self assessment taxpayers filing their tax return on the first day of the tax year has more than doubled since 2018, HMRC has revealed.

More than 77,500 customers submitted their tax return for the 2022/23 tax year on 6 April 2023, compared to almost 37,000 customers on 6 April 2018.

The deadline to file tax returns for the 2022/23 tax year is 31 January 2024 and customers have been able to submit theirs since the start of the new tax year.

HMRC says that by completing their self assessment return early, customers avoid the stress of last-minute filing – something which encouraged more than 860,000 customers to file their tax return for the 2021/22 tax year on 31 January 2023.

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

‘Filing your self assessment early means you can spend more time building your business or doing the things that you enjoy and less time worrying about completing your tax return.’

Internet link: GOV.UK

‘FRESH THINKING’ NEEDED IN REGARD TO MTD FOR ITSA

The Institute of Chartered Accountants in England and Wales (ICAEW) has written to HMRC regarding how Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) can be better shaped to suit the needs of small property businesses and the self-employed.

On 19 December 2022, HMRC announced the deferral of MTD for ITSA’s start date and an informal review into the initiative.

The ICAEW has written to HMRC to outline key points that it believes should be considered before the implementation of MTD for ITSA. These include rethinking the ‘disproportionate’ administrative burden associated with quarterly updates; decoupling the requirements to maintain digital records and to submit details of income from self-employment and property directly from software; and refocusing the MTD for ITSA initiative on digital record keeping and filing from software.

HMRC intends to make its final recommendations on MTD for ITSA to the Financial Secretary to the Treasury in June 2023.

Internet link: ICAEW

AIRBNB HOSTS TARGET BY HMRC INVESTIGATION

UK Airbnb hosts suspected of not declaring their rental earnings are facing a potential tax investigation from HMRC that covers six years of income information, as part of a wider crackdown on the sector’s activities by the UK tac authority.

It comes as Airbnb was forced to share the income details of all UK hosts on its platform dating back to the 2017-2018 financial year with HMRC, which has set out to identify owners who rent out their properties as short-term lets without declaring how much they are earning each year.

HMRC reported that it had sent 800 letters since February to hosts that it believed had not paid sufficient tax, following previous suggestions by the Treasury that more than 50 per cent of owners did not realise it was necessary to pay tax on their incomes earned from renting out their properties.

Airbnb hosts have been made aware that their data is being disclosed to HMRC and the company is promising to support them when it comes to understanding tax compliance and their obligations.

Under the current laws, since data sharing began back in 2018, hosts renting out properties through online rental platforms are able to make £1,000 a year before tax under a ‘tax allowance’, with any profits above that amount needing to be declared to HMRC. However, those renting out a single room in their property have a much higher income threshold of £7,500 before they have to pay tax as part of the government’s ‘Rent-a-Room’ scheme.

However, those who fail to pay their income duties are being warned that they could face criminal prosecution as well as strict penalties of up to 30 per cent of the tax they owe. Should HMRC uncover evidence that hosts have not paid any or enough tax in previous financial years, it would also have the authority to open an investigation to obtain evidence dating back 20 years under so-called ‘discovery laws’.

Hosts or owners deemed to have made an innocent error or to have been careless could potentially face no penalty at all, though those deemed to have made deliberate errors in disclosing their incomes would likely face harsher penalties and possible criminal charges.

If you believe you may be affected by this and need any help disclosing income to HMRC, please contact us at 01492 593345.

HMRC INCREASES LATE PAYMENT INTEREST RATE

Following the Bank of England’s latest increase in the base rate, HMRC has increased both late paid tax and the rate paid on repayments of tax.

The Bank increased the base rate to 4.5% from 4.25% on 11 May, the 12the consecutive rise.

The late payment and repayment interest rates follow this rise and are applied to the main taxes and duties that HMRC currently charges and pays interest.

The late payment interest rate will increase by 0.25% to 7% from 31 May. This is the highest rate since the start of the financial crisis in November 2008.

Late payment interest is payable on late tax bills covering income tax, National Insurance contributions, capital gains tax, corporation tax pay and file, stamp duty land tax, stamp duty and stamp duty reserve tax. The corporation tax pay and file rate also increases to 7%.

Repayment interest will also be increased from the current 3.25% rate to 3.5%.

Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments rose to 5.25% from 5% a week earlier on 22 May.

Internet link: GOV.UK

UK RATE OF INFLATION FELL SHARPLY IN APRIL

The UK rate of inflation fell to 8.7% in April from 10.1% in March, according to the latest data from the Office of National Statistics (ONS).

The fall has been attributed to energy price rises slowing from their hikes in 2022.

The rate at which grocery prices rose slowed marginally in the year to April, but at 19.1% is close to record highs.

The ONS said that while food price inflation was still close to its recent peak, the prices of staples like bread, cereal, fish, milk and eggs were rising slightly less quickly.

Chancellor Jeremy Hunt said:

‘The IMF said yesterday we’ve acted decisively to tackle inflation but although it is positive that it is now in single digits, food prices are still rising too fast.

‘So, as well as helping families with around £3,000 of cost-of-living support this year and last, we must stick resolutely to the plan to get inflation down.’

Internet link: ONS

ONLINE VAT FILING PORTAL TO CLOSE IN MAY

HMRC has reminded businesses that file VAT returns annually that the online VAT filing portal will close from 15 May 2023.

The VAT portal closed to standard quarterly filers on 7 November 2022, but was kept open for a longer period for those who file annual returns.

In emails to businesses and tax agents, HMRC urged all VAT registered businesses to use Making Tax Digital for VAT (MTD for VAT) compatible software to keep VAT records digitally and file VAT returns.

Following the closure of the portal, businesses that file VAT returns annually will no longer be able to use their VAT online account and instead must use compatible software to file future VAT returns.

HMRC said that businesses that fail to do so may have to pay a penalty.

If a business is already exempt from filing VAT returns online or if it is subject to an insolvency procedure, it is automatically exempt. Business owners can apply for an exemption if it’s not reasonable or practical for them to use computers, software or the internet to follow the MTD for VAT rules.

Internet link: GOV.UK

TAXPAYERS GIVEN MORE TIME FOR VOLUNTARY NATIONAL INSURANCE CONTRIBUTIONS

The government has extended the voluntary national insurance deadline to give taxpayers more time to fill gaps in their contributions and boost their state pensions.

The extension comes after members of the public voiced concerns over the previous deadline of 5 April 2023.

As part of transitional arrangements to the new state pension, taxpayers have been able to make voluntary contributions to any incomplete years in their national insurance record between April 2006 and April 2016. After an increase in customer contact, the government has extended the deadline to 31 July 2023 to ensure people have time to make their contributions.

The extension of the deadline was announced via a written Ministerial Statement, and HMRC is urging taxpayers to ensure they do not miss out.

Individuals with gaps in their national insurance record from April 2006 onwards now have more time to decide whether to fill the gaps to boost their new state pension. Any payments made will be at the lower 2022-2023 tax year rates.

Victoria Atkins, the Financial Secretary to the Treasury, said:

‘We’ve listened to concerned members of the public and have acted. We recognise how important state pensions are for retired individuals, which is why we are giving people more time to fill any gaps in their national insurance record to help bolster their entitlement.’

Internet link: HMRC website

UK INFLATION FALLS TO 10.1% IN MARCH

UK inflation has dropped, but remains in double-digit levels, as the cost-of-living crisis eased slightly in March.

The annual consumer prices index dropped to 10.1% in March, down from 10.4% in February, the Office for National Statistics (ONS) reported.

It was widely expected to fall below 10%, but food prices remained stubbornly high, rising at their fastest rate in 45 years.

Increased prices for bread, cereal and chocolate meant the cost of living rose more than expected last month.

David Bharier, Head of Research at the BCC, said:

‘Prices continue to rise at an alarming rate. Driven largely by housing and food costs, this is on top of an already high growth rate from this time last year.

‘Our research shows that inflation is still by far and away the top concern for UK SMEs. This has been driven by three years of global lockdowns, supply chain crises, energy shocks, and new trade barriers with the EU.

‘Small businesses, particularly those in the retail and hospitality sector, have been the least able to absorb cost rises, and we see that most have not invested or grown.

‘Businesses need to see a reduction in the cost and burden of exporting and importing, particularly with the EU, as well as increased support to deal with the unprecedented energy price shock.’

Internet link: ONS website BCC website

NO SIGN OF HIRING DIFFICULTIES EASING, SAYS BCC

Businesses are still facing major difficulties in hiring new staff, according to a survey conducted by the British Chambers of Commerce (BCC).

The latest Quarterly Recruitment Outlook (QRO), a survey of more than 5,000 UK firms, found that 80% of those attempting to recruit have faced challenges.

While recruitment difficulties are being experienced across the economy, firms in the hospitality and manufacturing sectors were the most likely to report recruitment difficulties. This is closely followed by the construction and engineering sector and then professional services; and the public, education and health sector.

The BCC is calling on the government to work with business on solutions including skills training, investment and urgent reform of the Shortage Occupations List (SOL).?

Jane Gratton, Head of People Policy at the BCC, said:

‘People shortages are a massive issue and employers can see little sign of improvement. The high number of unfilled job vacancies is damaging businesses and the economy. Firms are struggling to fulfil order books and turning down new work.

‘There is no quick fix and employers and the government need to work together to find solutions. While firms can do more to make workplaces more flexible and jobs easier to access, the government must redouble its efforts to encourage and help people into work.’

Internet link: BCC website

BANK OF ENGLAND RAISES UK INTEREST RATES

Interest rates have been increased to 4.25% from 4% by the Bank of England (BoE) as it tries to slow rising prices.

The BoE’s decision to increase rates for the 11th time in a row comes after figures showed that the cost of living has risen by more than expected. Data published recently by the Office for National Statistics (ONS) showed that inflation jumped to 10.4% in the year to February, despite predictions it would fall.

The Monetary Policy Committee (MPC) voted in favour of the latest rise by a majority of seven to two.

Commenting on 23 March, David Bharier, Head of Research at the British Chambers of Commerce (BCC), said:

‘Today’s decision to increase the interest rate indicates the Bank are still pursuing strong action following yesterday’s surprise rise in inflation. Record high inflation remains the top issue of concern for SMEs and it has been wiping out their ability to invest and grow for almost two years now.

‘However, an interest rate rise alone is a blunt instrument that doesn’t address some of the fundamental causes of inflation, such as failure in the energy market and global supply chain shocks.’

Internet link: BoE website BCC website