UK AT RISK OF RECESSION AFTER ECONOMY SHRINKS

The UK is at risk of recession after revised figures showed the economy shrank between July and September, according to data from the Office for National Statistics (ONS).

Gross domestic product, which measures the health of the economy, contracted by 0.1% after previous estimates suggested growth has been flat.

Meanwhile, there was zero growth between April and June, after it was first calculated to have risen by 0.2%.

A recession is typically defined as when the economy shrinks for two three-month periods – or quarters – in a row.

Meanwhile, the UK’s inflation rate fell to 3.9% in the year to November, the ONS confirmed.

The fall was bigger than the ONS had anticipated with lower petrol prices contributing to the reduction in the inflation rate.

Price increases for bread and cakes are also easing, according to the ONS.

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

‘Today’s data showing the CPI rate grew at 3.9% in November, a greater slowdown than expected, is welcome confirmation that the headline rate of inflation is continuing to ease. However, prices are still rising from a very high base following multiple economic shocks and core CPI remains stubborn at 5.1%.

‘Persistent inflation and high interest rates are likely to remain a barrier to business growth for some time to come. Businesses are desperate for a clear, long-term plan for growth which sets out a vision for infrastructure, skills and green innovation.’

The fall in inflation followed the Bank of England’s decision to hold interest rates at 5.25%, marking the third time in a row that the Bank has left the rate unchanged.

Bharier said:

‘While a cut in the interest rate could have provided some relief for firms ahead of Christmas, [the] decision to hold at 5.25% was expected and allays fears of further rises.

‘UK businesses have been faced with the twin shock of an inflation crisis and increased borrowing costs.

‘The BCC’s latest Economic Forecast expects only a 0.25% point cut in the interest rate for the whole of 2024, although businesses need to be prepared for any unexpected changes given the uncertain policy landscape.’

Internet link: ONS website ONS website BCC website Bank of England website BCC website

COUNTDOWN FOR 5.7 MILLION TO FILE THEIR 2022/23 SELF ASSESSMENT TAX RETURN

With less than a month to go to the self assessment deadline 5.7 million taxpayers have been urged to file their 2022/23 tax returns by HMRC.

HMRC data shows almost 6.5 million customers have already beaten the self assessment clock by filing their tax return.

This includes 49,317 taxpayers who used the New Year holiday to get a head start on their tax obligations:

  • 25,593 taxpayers filed their tax return on New Years Eve, with the most popular time being between 12:00 and 12:59, when 2,677 customers filed
  • 127 taxpayers saw in the New Year by filing their tax return between 00:00 and 00:59 on 1 January
  • 23,724 taxpayers filed on New Year’s Day, with the most filing between 15:00 and 15:59.

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

‘The clock is ticking for those customers yet to file their tax return. Don’t put it off, kick start the new year by sorting your self assessment.’

Internet link: HMRC press release

HMRC LAUNCHES CRACKDOWN ON SIDE HUSTLES

The beginning of 2024 sees the start of new rules requiring websites such as Vinted, Etsy, Upwork, Uber, Fiverr, Airbnb, Deliveroo & Ebay to record how much money people are making through them and report it to HMRC. The new rules for these platforms are part of a wider crackdown on tax avoidance from people boosting their income through working side hustles, freelancing and self-employment.

In the UK, you can earn £1,000 in additional income each tax year alongside your regular job – known as your Trading Allowance. If you make more than this, then you will need to register yourself as self-employed and pay tax on these earnings.

If you have any queries regarding this or need additional help, please contact us at the office on 01492 593345.

MERRY CHRISTMAS AND A HAPPY NEW YEAR

Merry Christmas and a Happy New Year from all at Gareth Hughes & Co.

Our office will close at 1pm on Friday 22 December 2023 and re open at 9am on Tuesday 2 January 2024.

NATIONAL INSURANCE CHANGES ‘EASE BURDEN ON STRIVERS

The changes to National Insurance contributions (NICs) announced by Chancellor Jeremy Hunt in the Autumn Statement will help to ‘ease the burden on strivers up and down the country‘, according to the Federation of Small Businesses (FSB).

Mr Hunt used his Autumn Statement speech to cut the main rate of employee NICs from 12% to 10% for 27 million workers across the UK. This is set to take effect from 6 January 2024. The Chancellor said that, for the average employee earning £35,400 per year, the change amounts to a £450 annual tax cut.

For the self-employed, the Chancellor also abolished Class 2 NICs and cut Class 4 NICs from 9% to 8%, effective from 6 April 2024.

Tina McKenzie, Policy Chair at the FSB, said:

‘The Chancellor’s decision to reduce the rate of self-employed NICs and abolish the Class 2 element is extremely welcome, easing the burden on strivers up and down the country.

‘The FSB has long campaigned for the abolition of the Class 2 element of NICs and the reduction of Class 4, and we are therefore pleased that the Chancellor has acted.’

Internet link: GOV.UK FSB website

CHANCELLOR MAKES FULL EXPENSING PERMANENT IN AUTUMN STATEMENT

Chancellor Jeremy Hunt used his Autumn Statement to make Full Expensing permanent for those businesses investing in IT equipment, plant and machinery.

The Chancellor said he was aiming to stimulate economic growth and highlighted 110 measures for businesses in the Statement.

Full Expensing was first announced in the March Budget and was scheduled to last for three years. The rules allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is unused and not second-hand.

Mr Hunt has now made it permanent and said it represents the ‘largest business tax cut in modern British history‘, worth £11 billion per annum.

The Chancellor also extended the tax reliefs and incentives for Freeports and the Investment Zones programme from five to ten years. In addition, he announced three advanced manufacturing Investment Zones, which will be established in Greater Manchester, the East Midlands and the West Midlands.

There is also a business rates support package worth £4.3 billion over the next five years to help high streets and protect small businesses. This includes a rollover of the 75% retail, hospitality and leisure relief.

Rain Newton-Smith, Chief Executive of the Confederation of British Industry (CBI), said:

‘Making full capital expensing a permanent feature of the tax system can be transformational for accelerating growth and improving living standards in the long-term. Helping firms to unleash pent-up investment is critical to getting momentum into the economy.’

Internet link: GOV.UK CBI website

HMRC IS ‘MAKING TAX DIFFICULT’ WITH MTD PROGRAMME

HMRC is ‘Making Tax Difficult’ for taxpayers as Making Tax Digital (MTD) adds to the burdens they face, according to a report by the Public Accounts Committee (PAC).

The report says that HMRC has lost sight of the need to put taxpayers at the heart of changes to the tax system.

The PAC says that HMRC is increasing the burdens imposed on some taxpayers through the MTD initiative. It said that in seeking further investment in MTD, HMRC has not been transparent enough about the ‘substantial costs’ MTD will impose on many taxpayers.

According to the Committee, the design of MTD fails to take into sufficient account the realities facing business taxpayers and agents.

It said that while MTD will ‘substantially benefit’ HMRC by improving its systems, taxpayers are asked to spend more and do more in order to be compliant.

The report revealed that HMRC excluded more than £2 billion in upfront transitional MTD costs for taxpayers from its 2022 and 2023 business cases for the scheme. It also found that ‘widespread and repeated‘ failures in HMRC’s planning, design and delivery of MTD have led to increased costs and delays to the initiative.

Meg Hillier, Chair of the PAC, said:

‘When reporting on proposals for digitalising the tax system, our committee should not have to be recommending that HMRC start with what taxpayers need – in an ideal world, one would hope this would simply go without saying. But seven years and £640 million into the MTD programme, we are concerned HMRC is also succeeding in making tax difficult.’

Internet link: Parliament website

MANY FIRMS STILL FACING RECRUITMENT PROBLEMS

Many UK firms are still facing hiring issues as a result of challenging economic conditions, according to a report from the British Chambers of Commerce (BCC).

73% of firms surveyed by the BCC reported having recruitment problems, with businesses in the hospitality sector the most likely to report challenges.

The construction and manufacturing industries are also experiencing issues, and 72% of retail businesses said they have had recruitment problems.

Adverse economic conditions are restricting investment in workplace training, the BCC found.

Jane Gratton, Deputy Director of Public Policy at the BCC, said:

‘The scale of the recruitment crisis remains huge, despite a welcome fall in the number of firms reporting hiring problems.

‘We have just under a million job vacancies in the economy, and skills shortages are damaging businesses’ ability to operate profitably – as well as impacting the wellbeing and morale of remaining staff.

‘Businesses and the government need to work together to resolve this problem. Bringing more people back into the workforce, with rapid retraining programmes and comprehensive support, will help. While many employers remain sharply focused on investment in training, most businesses need more help to get the workforce skills they need.’

Internet link: BCC website

JEREMY HUNT CUTS NATIONAL INSURANCE IN AUTUMN STATEMENT

Chancellor Jeremy Hunt has announced a bigger than expected cut in national insurance in his autumn statement. The main rate for employee Class 1 national insurance will go down from 12% to 10% from 6 January 2024.

HMRC state that “This measure will have a positive impact on individuals, households and families across the United Kingdom by providing a tax cut for around 29 million individuals in tax year 2024 to 2025.

An average employee on £35,400 will receive a tax cut in the 2024 to 2025 tax year of over £450.”

More details on the reduction can be found at https://www.gov.uk/government/publications/changes-to-national-insurance-contributions-from-6-january-2024

National Living Wage & National Minimum Wage increases from April 2024

The government have confirmed the increases to the national minimum wage and national living wage that will come into effect from 1 April 2024, the increases were as follows:

 

Category Current rate (2023/2024 tax year) New rate for 1 April 2024 (2024/2025 tax year) Percentage increase to minimum wage
National Living wage (21+) £10.42 £11.44 9.8%
Age 18-20 £7.49 £8.60 14.8%
Under 18 £5.28 £6.40 21.2%
Apprentice rate £5.28 £6.40 21.2%

 

This will mean that an employee who is 21 or older who is working 37.5 hours a week will earn £22,308 a year from 1 April 2024, an increase of £1,989 a year compared to the current rate.

Please do not hesitate to contact us at Gareth Hughes & Co on 01492 593345 if you have queries with regards to this or any other payroll matter.