UK INFLATION FALLS AS ECONOMY SHRINKS IN MAY

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The UK’s rate of inflation fell to 7.9% in the year to June while the country’s economy shrank in May, according to the latest Consumer Prices Index (CPI) published by the Office for National Statistics (ONS).

The inflation rate is currently at its lowest annual rate since March 2022, the ONS said.

Price rises have slowed by more than experts anticipated. According to the ONS, falling fuel prices helped the rate of inflation to drop, and food prices rose less quickly when compared to June 2022.

Core inflation also fell from 7.1% to 6.9%, the data showed.

Meanwhile, the UK economy contracted by 0.1% in May following growth of 0.2% in April, ONS data showed.

The rising cost of living and higher interest rates have been squeezing households and businesses, the ONS said.

It said the manufacturing, energy and construction sectors fell in May, along with sales at pubs and bars.

David Bharier, Head of Research at the British Chambers of Commerce (BCC), said the figures provide ‘further evidence of the precarious state of the UK economy’.

He added:

‘While businesses have been incredibly resilient in stomaching multiple waves of economic crises, our latest Quarterly Economic Survey shows that most firms are still not reporting improved business conditions.

‘Positively, slightly fewer businesses report inflationary pressures, but interest rates have grown as a concern for businesses. We are starting to see more businesses report rising borrowing costs, but we are yet to understand the full impact of rising interest rates.

‘Businesses are operating in a climate with a high degree of uncertainty, and government and Bank of England policy both need to be very responsive to developments.’

Internet links: ONS June inflation data ONS May GDP data BCC website

HMRC INCREASES LATE PAYMENT INTEREST RATE

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HMRC has increased interest rates with late payment bills charged 7.5% from 11 July, the highest rate since 2001.

The move follows the Bank of England’s June increase in the base rate with HMRC also increasing the rate paid on repayments of tax.

The Bank increased the base rate to 5% from 4.5% on 22 June, the 13th 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 has increased by 0.5% to 7.5% from 11 July.

Late payment interest is payable on late tax bills covering income tax, national insurance contributions (NICs), Capital Gains Tax (CGT), corporation tax pay and file, Stamp Duty Land Tax (SDLT), stamp duty and stamp duty reserve tax.

Repayment interest was also increased from the current 3.5% rate to 4%.

Internet link: GOV.UK

HMRC EXTENDS DEADLINE FOR VOLUNTARY NICS

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HMRC has extended the voluntary national insurance contributions (NICs) deadline until 2025.

Extending the voluntary NICs deadline until 2025 will give people more time to consider whether paying voluntary contributions is right for them, and also ensures individuals do not miss out on the possibility of boosting their State Pension entitlements.

The original deadline was extended to 31 July 2023 earlier this year. HMRC said the new extension allows thousands more people to add extra years to their national insurance record.

HMRC stated that all relevant voluntary NIC payments will be accepted at the rates applicable in 2022/2023 until 5 April 2025.

Victoria Atkins, Financial Secretary to the Treasury, said:

‘People who have worked hard all their lives deserve to receive their State Pension entitlement, and filling gaps in national insurance records can make a real difference.

‘With the deadline extended, there is no immediate rush for people to complete gaps in their record and they will have more time to spread the cost.’

Internet link: HMRC press release