General

The Bank of England’s Monetary Policy Committee (MPC) met on 22 March 2023 and voted 7-2 in favour of raising interest rates by 25 basis points to 4.25% in a move to tackle continued, rising inflation. This is the eleventh time the MPC has increased interest rates with rates now the highest they have been since November 2008.

This means that the late payment interest rate applied to the main taxes and duties that HMRC charges interest on increases by 0.25% to 6.75%.

These changes will come into effect on:

• 3 April 2023 for quarterly instalment payments
• 13 April 2023 for non-quarterly instalments payments

The HMRC repayment interest rates applied to the main taxes and duties will increase by 0.25% to 3.25% from 13 April 2023. The repayment rate is set at the Bank Rate minus 1%, with a 0.5% lower limit.

The government published the Spring Finance Bill 2023 on 23 March 2023. The Bill is officially known as the Finance (No 2) Bill, because it is the second Finance Bill of the 2022–23 Parliamentary session. The Bill contains the legislation for many of the tax measures announced in the recent Spring Budget as well as previously announced changes. The Bill is 478 pages long, with 352 clauses and 24 schedules. Explanatory notes to the Bill have also been published.

Some of the many measures included within the Bill are:

• The introduction of full expensing for expenditure on plant and machinery
• The extension of the 50% First Year Allowance
• The permanent increase to £1m of the Annual Investment Allowance
• Changes to R&D relief
• Changes to the Seed Enterprise Investment Scheme
• Abolition of the pension's lifetime allowance charge
• Changes to alcohol duty               
• Air Passenger duty changes

The Bill received its first reading in Parliament on Tuesday 21 March, and the majority of measures will come into effect for financial year 2023-24. It will now follow the normal passage through Parliament.

The Scottish Parliament has approved a new 3% rent cap for most private renters that will come into effect from 1 April 2023 for an initial six-month period with the option to extend for another six-month period if required.

These changes follow a temporarily freeze on rent increases for private and social tenants, and for student accommodation, which comes to an end on 31 March 2023.

The changes to the Cost of Living (Tenant Protection) Act will mean that from 1 April 2023:

• If a private landlord chooses to increase a tenant’s rent mid-tenancy, the increase will be capped at 3%.
• Private landlords will alternatively be able to apply for a rent increase of up to 6% to help cover certain increases in costs in defined and limited circumstances.
• Enforcement of evictions will continue to be paused for up to six-months except in a number of specified circumstances.
• Increased damages for unlawful evictions of up to 36-months’ worth of rent will continue to apply.

The rent cap for student accommodation is to be suspended after the Scottish government recognised that this measure was having a limited impact on annual rents set on the basis of an academic year.

The Scottish Tenants' Rights Minister said:

“It is clear that many households in the private rented sector in particular continue to struggle, which is why we are capping in-tenancy rent increases in the private sector at 3% from next month, with safeguards in place recognising the effects the cost of living crisis may have on some landlords. Our restrictions on evictions will continue across all sectors, with the social sector rent cap being replaced with voluntary agreements from landlords to keep rents affordable.”

The Chancellor had previously announced that the energy price guarantee cap, which will see the average household have their energy bills capped at £2,500 a year, would remain in place until the 31 March 2023. It was announced as part of the Spring Budget measures that this cap will now be extended for a further 3-months until 30 June 2023.

From 1 July 2023 (rather than 1 April 2023 as previously announced), this guarantee will change so that the typical household will pay on average £3,000 a year (an increase of £500). The government will also adjust the energy price guarantee scheme from 1 July 2023 to bring charges for comparable direct debit and Prepayment meter (PPM) customers into line until April 2024 when the scheme is set to end. This measure will help over four million households on prepayment meters.

No changes were announced to the previously announced business Energy Bills Discount Scheme that will replace the current Energy Bill Relief Scheme from 31 March 2023. The new scheme will offer support to eligible non-domestic energy customers, including UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals from 1 April 2023 – 31 March 2024. A substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries.

The Scottish Winter Heating Payment is a new Scottish Government benefit that replaces the Department for Work and Pensions’ (DWP) Cold Weather Payment. It can be claimed by eligible claimants on low incomes living in Scotland from 1 November 2022. The Cold Weather Payment is paid to eligible individuals on benefits in England and Wales. Northern Ireland runs a separate scheme which mirrors the Cold Weather Payment scheme in England and Wales. 

The Scottish Winter Heating Payment is not linked to a sustained period of cold weather in a specific location but is a reliable annual £50 payment. The first winter payments to around 400,000 people were processed at the end of February. 

Those eligible for the Scottish Winter Heating Payment will receive it automatically, with no need to apply. It is paid through Social Security Scotland and people will get a letter to let them know they are eligible.

The Minister for Social Security Scotland said:

'The Payment will reach significantly more people than the benefit it has replaced. On average only 185,000 people received the equivalent Cold Weather Payments from the UK Government over the last seven years – whereas we will pay everyone eligible every year.

The Scottish Government is investing around £20 million per year compared with an average of £8.3 million annually paid out through Cold Weather Payment. We will also uprate the next Winter Heating Payment by 10.1%, to £55.05.'

The amount of Bereavement Support Payment you can claim will depend on your relationship to the person who died and when you make your claim.

Your payments will be paid into your bank, building society or credit union account.

If you were married or in a registered civil partnership with the person who died

If you were receiving Child Benefit when your partner died (or did not get it but were entitled to it), you will get the higher rate.

This is made up of:

• a first payment of £3,500; and
• up to 18 monthly payments of £350.

If you were not entitled to Child Benefit, you’ll get the lower rate unless you were pregnant when your partner died.

This is made up of:

• a first payment of £2,500; and
• up to 18 monthly payments of £100.

You must claim within 12 months of your partner’s death to get the first payment. If you claim after this time, you will only get monthly payments.

If you were living together as though you were married with the person who died

You’ll get a first payment of £3,500 and then up to 18 monthly payments of £350.

You may get fewer payments if:

• your partner died after 9 February 2023, and you claim more than 3-months after your partner’s death; and
• your partner died before 30 August 2018.

If you receive benefits

Bereavement Support Payment will not affect your benefits for a year after your first payment. After a year, money you have left from your first payment could affect the amount you get if you renew or make a claim for another benefit.

You must tell your benefits office (for example, your local Jobcentre Plus) when you start receiving Bereavement Support Payments.

A new consultation has been published jointly by HM Treasury and the Bank of England to consider the launch of a potential digital pound, or central bank digital currency (CBDC). The possible new digital pound has also been referred to as ‘digital sterling’ and ‘Britcoin’.

The digital pound would be a new type of money issued by the Bank of England for individuals and businesses to use for day-to-day spending in-store or online and to make payments. The digital pound would be denominated in sterling and its value would be stable, just like banknotes. £10 in digital pounds would always have the same value as a £10 banknote.

If introduced a digital pound would be interchangeable with cash and bank deposits, complementing (not replacing) cash. The Bank of England has committed to continue to issue cash for as long as people want to keep using it.

The digital pound would not be a cryptocurrency or cryptoasset. As opposed to cryptocurrencies, which are issued privately, the digital pound would be issued by the Bank of England and be backed by the Government.

Whilst no decision has yet been made, other countries around the world are considering similar proposals including the Eurozone and the US and China.

HM Treasury has stated that a decision about implementation of a digital pound will be taken around the middle of the decade and will be based on future developments in money and payments. The earliest stage at which the digital pound could be launched would be the second half of the decade.

Homeowners and landlords will have seen a significant increase in their mortgage payments due to the rise in the Bank of England Base rate over the past 6-months if any fixed rate agreements have expired in this period or if you have a variable rate arrangement.

And mortgage payers who are nearing the end of their fixed deals will likewise see a significant rise in their monthly payments as lenders’ variable rates are currently as high as 7%.

If your variable loan repayments have increased, a visit to your mortgage broker may pay dividends if they can place your loan with a lower interest, fixed rate deal. 

A reminder for buy-to-let non-corporate borrowers

Mortgage interest is not allowed as a deduction against your rental income. Income Tax relief is limited to a 20% tax credit (20% of qualifying mortgage interest).

Consequently, taxpayers whose rental profits are taxed at higher Income Tax rates could be paying Income Tax at 40% or 45% and only receiving tax relief on their mortgage interest at 20%.

Regional differences in Income Tax rates may apply in Scotland.

The government introduced new passport fees for all applications from 2 February 2023, the first time in 5 years that the cost of applying for a passport has increased.

The new fees include the following changes:

• the fee for a standard online application made from within the UK increased from £75.50 to £82.50 for adults and £49 to £53.50 for children;
• postal applications increased from £85 to £93 for adults and £58.50 to £64 for children;
• priority service fees have been aligned so all customers now pay the same;
• the fee for a standard online application when applying from overseas for a UK passport increased from £86.00 to £94.00 for adults and £56 to £61.00 for children; and
• overseas standard paper applications increased from £95.50 to £104.50 for adults and £65.50 to £71.50 for children.

The new fees will help the Home Office move towards a system that meets its costs through those who use it, reducing reliance on funding from general taxation. The government does not make any profit from the cost of passport applications.

The fees will also contribute to the cost of processing passport applications, consular support overseas, including for lost or stolen passports, and the cost of processing British citizens at UK borders. The increase will also help enable the government to continue improving its services.

The new fees apply to those newly applying or renewing their passport.

Since January last year, over 95% of standard applications have been processed within 10 weeks and customers are advised that they should apply in good time before travelling. 

The Bank of England’s Monetary Policy Committee (MPC) met on 2 February 2023 and voted 6-3 in favour of raising interest rates by 50 basis points to 4% in a move to try and continue to tackle upward pressures on inflation. This is the tenth time in a row that the MPC has increased interest rates with rates now the highest they have been since November 2008.

This means that the late payment interest rate applied to the main taxes and duties that HMRC charges interest on increased by 0.5% to 6.50%.

These changes came into effect on:

• 13 February 2023 for quarterly instalment payments
• 21 February 2023 for non-quarterly instalments payments

The repayment interest rates applied to the main taxes and duties that HMRC pays interest on also increased by 0.5% to 3% on 21 February 2023. The repayment rate is set at the Bank Rate minus 1%, with a 0.5% lower limit.