In this week’s eNews, there is a call for the Chancellor to make changes to National Insurance and Income Tax rates in the Autumn Budget, news on the potential for AI to boost the world economy, a report into the cost of failed housing transactions, and how the digitally excluded can apply for a Making tax Digital exemption. There is also news on HMRC’s ability to recover debts from bank accounts and a warning about the damage long-term sickness is doing to the economy to update you on.
- Chancellor urged to cut National Insurance but hike Income Tax in Autumn Budget
- AI to boost trade by nearly 40% by 2040 if gaps are bridged, says WTO
- Failed housing transactions cost £1.5 billion a year
- Digitally excluded can apply for MTD for Income Tax exemption now
- HMRC to resume taking tax owed by debtors directly from their bank accounts
- Long-term sickness blighting UK economy
Chancellor urged to cut National Insurance but hike Income Tax in Autumn Budget
Chancellor Rachel Reeves has been urged to cut National Insurance contributions (NICs) and increase Income Tax to create a ‘level playing field’ and protect workers’ pay.
The Resolution Foundation said the Chancellor should make a 2p cut to NICs as well as a 2p rise in Income Tax in the Autumn Budget.
The think tank said the move would help to address ‘unfairness’ in the tax system.
Adam Corlett, Principal Economist at the Resolution Foundation, said:
‘Significant tax rises will be needed for the Chancellor to send a clear signal that the UK’s public finances are under control.
‘Any tax rises are likely to be painful but given the fallout from the recent employer NICs rise, the Chancellor should do all she can to avoid loading further pain onto workers’ pay packets.
‘She can do this by switching our tax base away from employee NICs and onto Income Tax, which is paid by a far broader group in society. This should form part of wider efforts to level the playing field on tax, such as ensuring that lawyers and landlords face the same tax rates as their clients and tenants.
‘These sensible reforms would raise revenue while doing the least possible harm to workers and the wider economy. And by acting decisively, the Chancellor can turn her full attention back onto securing stronger economic growth.’
Internet link: Resolution Foundation website
AI to boost trade by nearly 40% by 2040 if gaps are bridged, says WTO
Artificial intelligence (AI) could boost the value of cross-border flows of goods and services by nearly 40% by 2040 thanks to productivity gains and lower trade costs, according to a World Trade Organization (WTO) report.
However, the report says that for AI and trade to contribute to inclusive growth policies need to be in place to bridge the digital divide, invest in workforce skills, and maintain an open and predictable trading environment.
William Bain, Head of Trade Policy at the British Chambers of Commerce (BCC), said:
‘This report is a call to action for business and policymakers worldwide to ensure we realise the full benefits of AI in boosting global trade, productivity and skills.
‘It identifies a possible AI premium for global economic growth of 12-13% and goods export growth of up to 37% by 2040. AI can boost exports by reducing red tape, speeding up journey times, and cutting customs delays. AI-services are also highly exportable, and can be a major source of growth, in an area where the UK is already a world leader.
‘But tariff and technical barriers to trade need to be dealt with to allow AI to realise these full gains. We also need to ensure that electronic transmission of services across the world remains tariff-free.’
Internet link: WTO website BCC website
Failed housing transactions cost £1.5 billion a year
Failed housing transactions cost consumers and the economy at least £1.5 billion every year, according to research published by Santander.
The research says that over 530,000 transactions fall through every year due to the UK’s antiquated homebuying process.
The economic analysis shows that the direct cost to consumers of this through expenditure on elements such as mortgage and solicitors’ fees that consumers cannot recoup, is £560 million annually.
However, the impact is not just limited to consumers. The repercussions on the broader economy include the loss of work output due to stress and the time taken to buy a property within work hours, estimated at £380 million per year.
There is also the cost of people’s reduced wellbeing, estimated to be £400 million and wasted leisure time, approximately £170 million.
David Morris, Head of Homes at Santander UK, said:
‘The homebuying journey is still operating in the confines of a framework that was established a century ago. This antiquated system is an increasingly heavy anchor weighing on the economy and fixing it must be key.
‘While the government has put the housing market firmly on its agenda – as this research shows – the scale of the challenge remains largely underappreciated, and that’s why we’re calling for powerful reforms to give buyers and sellers more confidence, ease the financial and emotional strain and create a housing system fit for the needs of today’s consumers and economy.’
Internet link: Santander website
Digitally excluded can apply for MTD for Income Tax exemption now
HMRC has opened up a service for landlords and self-employed to apply for exemption from Making Tax Digital (MTD) for Income Tax phase one.
From next April, people who are self-employed and landlords, and declare more than £50,000 of gross income in their 2024/25 self assessment tax return, will be legally required to follow the new MTD for Income Tax rules from April 2026 onwards.
Anyone who thinks they may be eligible for exemption must phone or write to HMRC. Third parties such as relatives and agents can do this on behalf of taxpayers if they are authorised. It will take up to 28 days for HMRC to respond with a decision.
Sharron West, Technical Officer at the Low Incomes Tax Reform Group (LITRG), said:
‘Because HMRC will deal with applications on a case-by-case basis, we don’t yet know how generous their interpretation of the rules will be, but we know that HMRC are keen to see as many people as possible manage their taxes online.
‘If you are already exempt from MTD for VAT, HMRC say you should contact them when the exemption application process opens so they can check your circumstances and confirm if you’ll also be exempt from MTD for Income Tax.
‘The clock is ticking and it’s time to get ready.’
Internet link: GOV.UK Chartered Institute of Taxation website
HMRC to resume taking tax owed by debtors directly from their bank accounts
HMRC has resumed its programme allowing direct recovery of money from debtors’ bank accounts.
The Direct Recovery of Debts (DRD) policy, which was paused during the Covid-19 pandemic, has restarted in a ‘test and learn’ phase’, the tax authority has confirmed.
DRD targets individuals and businesses who can afford to pay their debts but deliberately choose not to, HMRC said.
This power enables HMRC to compel banks and building societies to transfer funds directly from a debtor’s account. It applies to debts of £1,000 or more, with safeguards against undue hardship and for vulnerable customers.
Before debts are considered for recovery through DRD, every debtor will receive a face-to-face visit from HMRC agents to personally identify the taxpayer to confirm it is their debt and to discuss options to resolve the debt.
Safeguards include only taking action against those who have established debts, have passed the timetable for appeals, and have repeatedly ignored HMRC’s attempts to make contact.
The safeguards also include leaving a minimum of £5,000 in the debtor’s accounts to ensure that sufficient money is available to pay wages, mortgages or essential business or household expenses.
HMRC said:
‘The vast majority of taxpayers pay their taxes in full and on time, but a minority choose not to pay, even though they have the means to do so.’
Internet link: GOV.UK
Long-term sickness blighting UK economy
The UK must tackle its status as the sick man of the G7 if it wants to grow the economy, warns the British Chambers of Commerce (BCC).
Businesses want to see a major shake-up of the UK’s approach to ill-health which is excluding people from work and hobbling the economy, says the BCC.
It says around 7% of the UK workforce, almost 2.8 million people, is currently out of work due to long-term sickness, whereas the equivalent figure in Japan is just 3.5%.
The government’s own calculations put the lost economic output from this inactivity at a minimum of £130 billion, a figure which does not include welfare payments.
The BCC is calling for joint action by government and businesses to halt the rising tide of sickness and help people suffering ill-health to get back into work or stay there.
Shevaun Haviland, Director General of the BCC, said:
‘Sickness absenteeism is a growing concern. The UK has more than nine million people who aren’t working with one third of them suffering from long-term health conditions.
‘This is a devastating loss of potential – for these individuals, the businesses that need them and our local economies.
‘If the government is serious about growth, then we must turn the tide on this loss of talent. The evidence is also clear that being in work is good for health.
‘Employers recognise the problem and want to do more, but the increasing cost and complexity of the landscape means many lack the resources to respond quickly and effectively.’
Internet link: BCC website
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