In this month’s eNews we look at HMRC’s extension to the deadline for voluntary NICs and the temporary closure of the self assessment helpline. We also update you on cost overruns on Making Tax Digital and the latest on UK inflation. With guidance on the National Minimum Wage and another increase to the UK’s base interest rate, there is a lot to update you on.
- HMRC extends deadline for voluntary NICs to April 2025
- HMRC closes self assessment helpline for three months
- MTD expected to cost £1 billion more than originally forecast
- UK inflation stays at 8.7%
- Bank of England raises UK base interest rate to 5%
- More than 200 companies named and shamed for minimum wage breaches
- Post-Brexit trade plan must be replaced with ‘ambitious strategy’, says think tank
- Industrial strategy required to ‘focus on innovation’, says IoD
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
HMRC is planning to close its self assessment tax helpline for three months over the summer to focus call centre resources on dealing with other problem calls.
All calls to the helpline will be redirected to digital services over the period to give HMRC time to deal with other more urgent phone enquiries.
The helpline will be closed for three months from Monday 12 June until Monday 4 September.
During this time HMRC said it will ‘trial directing self assessment queries from the helpline to the department’s digital services, including its online guidance, digital assistant and webchat’.
HMRC will increase the number of advisers available on webchat, the online service helpline and the extra support team helpline.
Angela MacDonald, Deputy CEO and Second Permanent Secretary at HMRC, said:
‘We continually review our services to see how they can best serve the public and we are taking steps to improve them.’
We are experienced in self assessment matters and dealing with HMRC. Please contact us if you have any queries.
Internet link: GOV.UK
A report published by the National Audit Office (NAO) has found that HMRC’s Making Tax Digital (MTD) initiative is expected to cost around £1 billion more than its initial £226 million budget, which was forecast in 2016.
MTD is intended to modernise the tax system for income tax self assessment, VAT and corporation tax. It requires taxpayers to keep records digitally and submit quarterly tax returns.
The NAO labelled HMRC’s initial timeframe for the implementation of MTD as ‘unrealistic’. It stated that bosses ‘failed to take the scale of the task into account’.
According to the NAO, HMRC’s ability to secure value for money from MTD now relies on exploring the options for reducing costs, resolving questions about design and rigorously managing delivery risks.
The NAO has recommended that HMRC prepares a separate business case for MTD for Income Tax Self Assessment (MTD for ITSA) so that those making decisions can better understand the costs, benefits and risks associated with the initiative. It has urged HMRC to include ‘greater clarity’ on how taxpayers will be affected.
Gareth Davies, Head of the NAO, said:
‘The repeated delays and rephasing of MTD have undermined the programme’s credibility and increased its costs. They put at risk the support of taxpayers and delivery partners, including those who are essential to the programme succeeding.
‘HMRC’s plan to digitalise the tax system has the potential to improve the system’s efficiency and effectiveness. It has made some recent progress on VAT but it has not yet tackled the most complex elements of the programme and significant delivery risks remain.’
Internet link: National Audit Office website
The UK’s rate of inflation plateaued at 8.7% in May, data published by the Office for National Statistics (ONS) has shown.
Inflation was expected to fall in May but remained at 8.7% – the same rate as was recorded in April. The rate of 8.7% is higher than economists had expected, and many now anticipate a rise in interest rates.
Experts have stated that so-called ‘core inflation’ – which excludes volatile elements such as food, fuel and energy prices – is now at its highest level in the UK for over 30 years. Many warn that the high inflation rate will have knock-on effects for mortgages.
UK inflation is higher than inflation rates in comparable countries, the data revealed: Germany recorded a rate of inflation of 6.3%; France’s rate is currently 6%; and the USA’s inflation rate is 2.7%.
Chancellor Jeremy Hunt said:
‘We need to squeeze every last drop of high inflation out of the economy.
‘Inflation is the biggest, the most invidious, tax rise the British people are facing right at the moment because it is eroding the value of their salaries – so that is our primary priority.’
Internet link: Office for National Statistics website
The Bank of England has raised UK interest rates to a 15-year high of 5% as it continues its battle against inflation.
Despite concerns that mortgage-holders face a timebomb of higher rates, the Bank’s Monetary Policy Committee (MPC) decided to raise its benchmark rate from 4.5% to 5%, an increase of half a percentage point.
It is the 13th increase in UK interest rates in a row, going back to December 2021.
Chancellor Jeremy Hunt said:
‘High inflation is a destabilising force eating into pay cheques and slowing growth.
‘Core inflation is higher in 14 EU countries and interest rates are rising around the world, but the lesson from other countries is that if you stick to your guns, you bring inflation down.
‘Our resolve to do this is watertight because it is the only long-term way to relieve pressure on families with mortgages. If we don’t act now, it will be worse later.’
Internet link: Bank of England website
Over 200 employers have been named by the government for failing to pay their lowest paid employees the minimum wage.
The 202 employers were found to have failed to pay their workers almost £5 million in a clear breach of the National Minimum Wage (NMW) law, leaving around 63,000 workers out of pocket.
Companies named and shamed range from major high street brands to small businesses and sole traders.
The businesses named have since paid back what they owe to their employees and have also been given financial penalties.
The employers named previously underpaid workers in the following ways:
Minister for Enterprise, Markets and Small Business, Kevin Hollinrake, said:
‘Paying the legal minimum wage is non-negotiable and all businesses, whatever their size, should know better than to short-change hard-working staff.
‘Most businesses do the right thing and look after their employees, but we’re sending a clear message to the minority who ignore the law: pay your staff properly or you’ll face the consequences.’
Internet link: GOV.UK
The Resolution Foundation think tank has called for the government to replace the initial post-Brexit trade plan with a ‘far more ambitious’ strategy to help protect Britain’s manufacturing firms and seek new markets for UK services firms.
A report published by the Foundation found that the UK’s initial post-Brexit trade plan to secure Free Trade Agreements (FTAs) with other countries had ‘been largely successful’.
However, it suggested that this approach has ‘run out of road’ as FTAs with the US and China ‘are not on the horizon’. According to the think tank, Britain’s high value manufacturing sector is ‘particularly vulnerable’ following the UK’s exit from the EU as it often relies on being part of European supply chains.
It warned that manufacturing firms’ positions in these chains will erode over time as a result of higher trade costs.
The Resolution Foundation said that a new ‘twin-track‘ trade strategy is needed, with a defensive focus on goods and a fresh approach to promoting the UK’s strengths as the world’s second largest exporter of services.
Sophie Hale, Principal Economist at the Resolution Foundation, said:
‘For the first time in half a century Britain needs a trade strategy. But it does not have one.
‘A new strategy must recognise the nature of the UK economy, developments in global trade patterns, and rising geopolitical tensions regarding goods trade in particular. That requires a twin-track approach, protecting important high value manufacturing sectors, from cars to chemicals, struggling to retain their place in European supply chains, while focusing on new markets for its world-leading services firms.’
Internet link: Resolution Foundation website
Industrial strategy required to ‘focus on innovation’, says IoD
The Institute of Directors (IoD) has urged the government to create an industrial strategy to help ‘define specific long-term priorities for the UK economy’.
A survey carried out by the IoD revealed that 88% of its members favour the development of an industrial strategy. Less than 10% of IoD members think economic growth should be generated by market forces.
The survey found that firms want an industrial strategy that focuses on reinforcing the UK’s capabilities as a centre of excellence for Research and Development (R&D) and green investment.
The survey found that 58% of firms believed that the strategy should also focus on the development of skills, and 57% would like it to champion developing infrastructure.
Dr Roger Barker, Director of Policy at the IoD, said:
‘The recent priority for UK government policy has been on regaining economic and financial stability, and in laying the groundwork for the return of economic growth.
‘However, this is not enough to sustain the competitiveness of UK business. Business leaders clearly see the value of a longer-term policy framework which places innovation at its core, and which enables innovations to be commercially exploited in the UK.
‘Experience suggests that UK policymakers are ill-suited to ‘picking winners’, either in terms of companies or sectors.’
Internet link: IoD website
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