INFLATION FALLS TO 6.8% IN JULY

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The UK’s annual inflation rate fell to 6.8% in July, down from 7.9% in June, according to the latest data from the Office of National Statistics (ONS).

It is the smallest increase in the cost of living since February 2022.

A fall in gas and electricity, as well as a slowing down in the increase of food prices, are the major drivers behind the inflation rate decrease, according to the ONS.

However, core inflation, which strips out volatile items such as fuel and food remained unchanged at 6.9% in July while service sector inflation rose from 7.2% to 7.4%.

Martin McTague, National Chair of the Federation of Small Businesses (FSB) said:

‘While a drop in inflation provides some comfort, the figures show less of a drop in inflation than hoped for and will renew fears of a wage-price spiral, and of yet more base rate hikes in future.

‘The worry now is that rising wages ignite a fresh wave of inflation in September, which will threaten the momentum from June’s GDP growth.

‘The cost of doing business crisis still has a grip on the small business community, as prices for many key inputs, from energy to components and raw materials, remain far above where they were a year ago.

‘Any reduction in inflation is good news, but the huge toll that spiralling prices have inflicted is still being keenly felt by small firms.’

Internet link: ONS website FSB website

HMRC SHOULD INCREASE REWARDS FOR WHISTLEBLOWERS, SAYS LAW FIRM

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HMRC should increase the rewards it pays out to whistleblowers in line with the US system, according to law firm RPC.

The tax authority paid out over £509,000 to individuals providing evidence about tax fraud over the past year, RPC’s research found.

That figure is up from £495,000 in 2021/22 and a 75% increase from the £290,000 paid five years ago, the law firm added.

However, it is just 1.7% of the sum paid to informants by the US Internal Revenue Service (IRS).

The IRS pays whistleblowers 15-30% of the additional tax collected through investigations instigated as a consequence of information received. In 2022, $37.8 million was paid by the IRS to 132 whistleblowers – 58 times the amount paid to UK whistleblowers.

Adam Craggs, Partner and Head of RPC’s Tax, Financial Crime and Regulatory team, said:

‘More individuals, with evidence of serious tax fraud, would come forward if they knew they could be in line for a life-changing amount of money.

‘Paying a proportionate amount for high quality information that helps secure criminal convictions and the recovery of substantial amounts for the Exchequer would be a sensible step. HMRC has been making payments for information on an ad hoc basis for many years and would benefit from improving the system and placing it on a more formal basis.’

Internet link: RPC website

ANOTHER MILLION SAVERS TO BE HIT WITH TAX ON INTEREST

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The frozen Savings Allowance combined with rising interest rates will push over one million taxpayers into paying tax on their savings this tax year, according to research by investment platform AJ Bell.

In the 2023/24 tax year it is estimated that over 2.7 million individuals will pay tax on interest, up by a million in a year.

This year’s predicted total includes nearly 1.4 million basic rate taxpayers, a figure which has quadrupled in just four years, AJ Bell’s research found.

Individuals pay tax on interest they earn on savings that exceeds the personal Savings Allowance, which currently stands at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Additional rate taxpayers get no exemption and pay tax on all interest they receive.

Laura Suter, Head of Personal Finance at AJ Bell, said:

‘These figures highlight just how many taxpayers are facing a tax bill for their savings interest this year – a huge leap when compared to last year. The combination of higher interest rates and people having shunned ISA accounts in recent years means that the number paying tax on their savings has more than tripled in the past four years.

‘Rising rates and a frozen personal Savings Allowance means some individuals are being taxed despite having relatively modest pots of cash set aside for a rainy day. To add insult to injury, because inflation is so high, they aren’t even making a real return on their money – yet they are still being taxed.’