General

Following the recent increase in the Bank of England base rate from 2.25% to 3% HMRC has confirmed there will be changes to the rates of interest they charge.  

The BoE’s Monetary Policy Committee (MPC) voted 7-2 in favour of raising interest rates by 75 basis points to 3% in a move to try and reign in upward pressures on inflation. Inflationary pressures in the United Kingdom has continued to intensify since the MPC’s previous meeting. This is the eighth time in a row that the MPC has increased interest rates.

Accordingly, the HMRC late payment interest rate applied to the main taxes and duties increases by 0.75% to 5.50%.

These changes will come into effect on:

• 14 November 2022 for quarterly instalment payments; and
• 22 November 2022 for non-quarterly instalments payments.

The repayment interest rates applied to the main taxes and duties that HMRC pays interest on will increase by 0.75% to 2% from 22 November 2022. The repayment rate is set at the Bank Rate minus 1%, with a 0.5% lower limit.

Fraudsters are continuing to target taxpayers with scam emails in advance of the deadline for submission of Self-Assessment returns for the 2021-22 tax year. In fact, in the 12 months to August 2022, HMRC received more than 180,000 reports of suspicious contact from the public, of which almost 81,000 related to bogus tax rebate referrals. 

A number of these scams purport to tell taxpayers they are due a rebate / refund of tax from HMRC and ask for bank or credit card details in order to send the fake tax refund. The fraudsters use various means to try and scam people including making contact by phone calls, texts or emails. In fact, fraudsters have been known to threaten victims with arrest or imprisonment if a bogus tax bill is not paid immediately.

HMRC operates a dedicated Customer Protection team to identify and close down scams but continues to advise taxpayers to identify fraud and avoid becoming victims themselves. For example, HMRC will only contact taxpayers due a refund by post and never use emails, text messages or external companies for this activity. Genuine organisations like HMRC and banks will never contact customers asking for their PIN, password or bank details.

If you think you have received a suspicious call or email claiming to be from HMRC you are asked to forward the details to phishing@hmrc.gov.uk and texts to 60599. If you have suffered an actual financial loss, you should contact Action Fraud on 0300 123 2040 or use their online fraud reporting tool.

The new Chancellor of the Exchequer, Jeremy Hunt, was only appointed on Friday 14 October 2022. However, following another turbulent weekend, the Chancellor made not one but two important statements on 17 October 2022 about the future of the economy. The first, an emergency televised statement to the nation and the second, a statement to MPs in the House of Commons.

HM Treasury had prefaced these events with a short press release stating that the announcements followed the Prime Minister's statement on Friday, and further conversations between the Prime Minister and the Chancellor over the weekend, to ensure sustainable public finances underpin economic growth.

The previous Prime Minister’s statement on Friday had confirmed that the planned increase in Corporation Tax that was set to come into effect in April 2023 will now go ahead. This move represented a second major U-turn by the government following the mini-budget. The first U-turn being the announcement to scrap the proposed removal of the 45p personal tax rate from April 2023.

The Corporation Tax main rate will now increase from 19% to 25% on 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% will apply for companies with profits of up to £50,000. There will also be a marginal rate of Corporation Tax for companies making profits of between £50,000 and £250,000 meaning an incremental rise in the Corporation Tax rate from 19% to 25% depending on how much profit a firm makes.

On Monday (17 October 2022), the Chancellor went even further and announced a reversal of almost all of the remaining tax measures set out in the Growth Plan (23 September 2022) by the previous Chancellor, Kwasi Kwarteng, that have not yet been legislated for in parliament.

In his emergency statement, the Chancellor confirmed that the following tax policies will no longer be taken forward:

• Cutting the basic rate of income tax to 19% from April 2023. This means that the basic rate of income tax will remain at 20%. The Chancellor said that any reduction in the basic rate will now only take place when economic conditions allow for it and a change is affordable.
• Cutting dividends tax by 1.25% from April 2023. This means that the 1.25% increase, which took effect in April 2022, will remain in place.
• The moves to simplify IR35 rules, including the repeal of the 2017 and 2021 reforms will not go ahead. The reforms will now remain in place.
• The planned introduction of a new VAT-free shopping scheme for non-UK visitors to Great Britain will not go ahead.
• Freezing alcohol duty rates from 1 February 2023 for a year. This will see the price of beer, cider, wine and spirits increase.

The changes are estimated to be worth around £32 billion a year.

It was also announced that the Energy Price Guarantee Scheme that came into effect on 1 October 2022 to help tackle the energy crisis and was set to remain in place for two years will now only be guaranteed until April 2023. There is also a parallel Energy Bill Relief Scheme to help cut energy bills for non-domestic energy customers, including UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals that was due to remain in place until 31 March 2023. HM Treasury has announced that a new review will be launched to consider how to support households and businesses with energy bills after April 2023.

The government has confirmed the move to reverse the 1.25% rise in National Insurance contributions (NICs) that came into effect at the start of the 2022-23 tax year on 6 April 2022 remains in place. This will see the reversal of the NIC increase from 6 November 2022 and will cover Class 1 (both employee and employer), Class 1A , Class 1B and Class 4 (self-employed) NICs. It was also confirmed that the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will not now go ahead as originally planned.

The increase in the Stamp Duty Land Tax (SDLT) nil rate band to £250,000 (from £125,000), effective since 23 September 2022 will also remain in place as will the increased SDLT bands payable for first-time buyers.

The increase in the Annual Investment Allowance threshold (to £1 million) will also remain in place.

The Chancellor is expected to deliver a full autumn statement on 17 November 2022.

The Prime Minister, Liz Truss delivered a hastily arranged press conference on Friday 14 October. At the press conference, the Prime Minister confirmed that she had sacked the Chancellor, Kwasi Kwarteng after less than six weeks in office. This was done in order to try and deal with the market and political turmoil that had increased significantly following the Growth Plan, commonly referred to as the mini-budget, on 23 September.

The Prime Minister also used the press conference to confirm that the planned increase in Corporation Tax that was set to come into effect in April 2023 will now go ahead. This move represents a second major U-turn by the government following the mini-budget. The first U-turn being the announcement to scrap the proposed removal of the 45p tax rate from April 2023.

The Corporation Tax main rate will now increase from 19% to 25% on 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% will apply for companies with profits of up to £50,000. There will also be a marginal rate of Corporation Tax for companies making profits of between £50,000 and £250,000 meaning an incremental rise in the Corporation Tax rate from 19% to 25% depending on how much profit a firm makes.

The Prime Minister accepted that elements of September’s Growth Plan went further and faster than markets were expecting. However, there was no sign of an apology for the recent economic crisis and her position is appearing increasingly untenable.

It was also confirmed that the Prime Minister has appointed Jeremy Hunt as the new Chancellor of the Exchequer and he becomes the fourth person to hold the position this year. Mr Hunt has held a number of Cabinet positions in the past including foreign minister and health secretary and was a previous leadership contender.

The new Chancellor will deliver the Medium-Term Fiscal Plan on 31 October, detailing action to get debt falling as a percentage of GDP over the medium term. The Corporation Tax increase is expected to raise around £18 billion a year although it remains to be seen if there will be further tax increases and spending cuts.

If you turned 18 on or after 1 September 2020 there may be cash waiting for you in a dormant Child Trust Fund (CTF). If your children recently turned 18 you should also check if they have claimed the money to which they are entitled. The actual amount of money depends on many factors but averages some £2,100.

Children born after 31 August 2002 and before 3 January 2011 were entitled to a CTF account provided they met the necessary conditions. These funds were invested in long-term saving accounts for newly born children. HMRC has confirmed that there are many thousands of teenagers that have turned 18 and not yet claimed the cash to which they are entitled.

HMRC’s Second Permanent Secretary and Deputy Chief Executive, said:

'Teenagers could have a pot of money waiting for them worth thousands of pounds and not even realise it. We want to help you access your savings and the money you’re entitled to. To find out more search ‘Child Trust Fund’ on GOV.UK.'

An estimated 6.3 million CTF accounts were set up throughout the duration of the scheme, containing about £9 billion. If a parent or guardian was not able to set up an account for their child, HMRC opened a savings account on the child’s behalf.

If you are over 18 and already know who your CTF provider is, you can contact them directly to access your cash. This might be a bank, building society or other savings provider. If this information has been lost or is unavailable you can check and track down your provider online using a simple online tool created by HMRC.

The Chancellor, Kwasi Kwarteng has announced plans to scrap the proposed removal of the 45p tax rate from April 2023. The proposed removal of the 45p Rate was first announced as part of the Growth Plan measures on 23 September 2022. However, the change sparked a backlash that has sent shockwaves through the financial markets and even saw many members of the Conservative party actively campaigning against the move. 

The Prime Minister and the Chancellor initially refused to backdown on the measure but eventually accepted that they were left with little choice but to U-turn on their proposal. The announcement of the U-turn was made earlier this week on the second day of the Conservative Party conference in Birmingham. 

A Twitter statement from the Chancellor announcing the move said:

‘It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country. As a result, I’m announcing we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened. This will allow us to focus on delivering the major parts of our growth package.’

This means that the Additional Rate of Income Tax of 45% that applies to taxpayers with an annual income over £150,000 will remain in the 2023-24 tax year. 

The new Chancellor of the Exchequer, Kwasi Kwarteng, delivered a fiscal statement referred to as The Growth Plan 2022 on 23 September 2022. The statement to a packed House of Commons centred on the government’s plans for generating growth.

Colloquially referred to as a mini-budget, it would perhaps be more fitting to refer to the statement as a maxi-budget. In his first major statement since becoming Chancellor, a number of striking measures were announced representing a major shift in policy direction for the Exchequer.

Paying an estimated £45 billion for these measures will see borrowing levels soar as the government attempts to grow the economy and avoid a deep recession. It is hoped that these measures will help to reduce peak inflation by around 5%.

The Chancellor was also keen to remind the House of the measures already announced to tackle spiralling energy costs. This included the Energy Price Guarantee which will see the average household have their energy bills capped at £2,500 a year for the next two years, a £400 energy rebate for UK households as well as more support for vulnerable households.

A new Energy Bill Relief Scheme to help cut energy bills in the non-domestic sector will also apply to energy usage from 1 October 2022 to 31 March 2023 and will automatically be applied to qualifying businesses fuel costs.

National Insurance

Before the Chancellor rose to his feet, a number of other important announcements had already been made. The first of these related to the new Prime Minister’s pledge to reverse the 1.25% rise in National Insurance contributions (NICs) that came into effect at the start of the 2022-23 tax year on 6 April 2022. This will see the reversal of the increase from 6 November 2022 and will cover Class 1 (both employee and employer), Class 1A , Class 1B and Class 4 (self-employed) NICs.

It was also confirmed by the Chancellor that the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will not go ahead as originally planned. These measures will provide average savings of around £135 in this tax year and £330 in 2023-24 for almost 28 million people across the UK as well as a tax cut for 1 million businesses. The 1.25% increase to the rate of Income Tax on dividends which took effect in April 2022 will remain in place until April 2023.

Income Tax

The Chancellor announced that the government will reduce the basic rate of Income Tax to 19% (from 20%) with effect from April 2023. This brings forward the planned 1p cut in the basic rate by 12 months. According to HM Treasury, the 19% rate is the lowest the basic rate has ever been in the modern Income Tax system. There will also be a four-year transition period for Gift Aid relief to maintain the Income Tax basic rate relief at 20% until April 2027 to help support almost 70,000 charities.

The reductions will not apply to the non-savings and non-dividend income of Scottish taxpayers because the power to set these rates is devolved to the Scottish Government. However, the Scottish government will receive additional funding which they can use as they see fit, including a reduction on Income Tax or other taxes, or increased spending. The Income Tax rate cuts will apply to Welsh taxpayers.

The Chancellor also announced plans to scrap the 45% additional tax rate from April 2023 but following a significant backlash this move was cancelled on 3 October 2022.

Income Tax and dividend income

The tax rates payable on dividend income will revert back to those that applied before April 2022, from April 2023 in line with the 1.25% decrease in NIC contributions.

The rates that will apply in all regions of the UK from 6 April 2023 are:

• Dividends that form part of the basic rate band – 7.5% (8.75% 2022-23)
• Dividends that form part of the higher rate band – 32.5% (33.75% 2022-23)
• Dividends that form part of the additional rate band – 38.1% (39.35% 2022-23)

The dividend tax is charged on taxable dividend income an individual receives that falls outside of the personal allowance and that exceeds the dividend allowance. The current £2,000 dividend tax-free allowance is unchanged.

Stamp Duty Land Tax (SDLT)

The Chancellor announced a permanent increase of the SDLT nil rate band to £250,000 (from £125,000) with immediate effect from the date of his announcement, 23 September 2022.

Prior to the announcement, no SDLT was payable for first-time buyers making a purchase of up to £300,000. This limit has now been increased by £125,000 with immediate effect to £425,000. The first-time buyers relief also increases the nil-rate threshold to £425,000 (£300,000 prior to 23 September 2022) for first-time buyers of properties costing up to £625,000 (£500,000 prior to 23 September 2022). There is no relief available for first-time buyers spending more than £625,000 on a property. There are a number of requirements that must be met in order to qualify for the relief.

These measures will reduce stamp duty bills across the board for all movers by up to £2,500 with first-time buyers able to access up £11,250 in relief.

It is important to note that these measures apply to England and Northern Ireland only. Any changes to the Land and Buildings Transaction Tax in Scotland or the Land Transaction Tax in Wales will be announced separately

Reversal of Corporation Tax increase

The Corporation Tax main rate had been set to increase from 19% to 25% from 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% was also to have been introduced from the same date for companies with profits of up to £50,000 with a marginal rate of Corporation Tax. This would apply to companies making profits of between £50,000 and £250,000 meaning an incremental rise in the Corporation Tax rate from 19% to 25% depending on how much profit a firm was making.

The Chancellor has now confirmed that these planned rises have been cancelled in full. This means that the Corporation Tax rate will remain at 19% for all firms, regardless of the amount of profits made. The Chancellor was excited to inform the House that this means the UK will have the lowest Corporation Tax rate in the G20 group of the world's major economies.

Annual Investment Allowance threshold

The Annual Investment Allowance (AIA) was permanently set at £200,000 for all qualifying expenditure on or after 1 January 2016. Following the pandemic, this limit had been temporarily increased (with a number of extensions) to £1 million.

This increased threshold was set to expire on 31 March 2023, but the Chancellor announced that the limit will be permanently extended to £1 million. This will give business owners thinking about high-value investments in qualifying assets some comfort and remove the need to rush any capital acquisitions.

Investment Schemes

The Seed Enterprise Investment Scheme (SEIS) is to be extended to help more UK start-ups raise higher levels of finance.

The Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) will be extended beyond 2025.

Investment Zones

As part of the Growth Plan, the government is in discussions with 38 local authorities to establish investment zones in England.

The government will also work with the devolved administrations and local partners to deliver this opportunity to drive local growth in Scotland, Wales and Northern Ireland.

These Investment Zones will be designed to encourage investment and new economic activity, supporting growth and jobs. The Investment Zones will benefit from lower taxes and more relaxed planning frameworks to encourage rapid development and business investment.

VAT

The Chancellor announced that VAT-free shopping for overseas visitors is to be reintroduced to help encourage more tourists to the UK. The VAT Retail Export Scheme was cancelled on 1 January 2021. The old paper-based system will be replaced with a modern, digital one and will be put in place as soon as possible.

Miscellaneous

• The planned increases next year in the duty rates for beer, cider, wine and spirits in line with RPI have all been cancelled.
• The cap on bankers’ bonuses is to be scrapped to enhance London’s reputation as a worldwide banking centre.
• The Office of Tax Simplification is to be wound down with responsibility for tax simplification being handed to Government.
• There will be moves to simplify IR35 rules, including the repeal of the 2017 and 2021 reforms.

The new Chancellor, Kwasi Kwarteng, recently met in London with various market and city leaders to set out the Prime Minister’s new, pro-growth economic approach.

The new approach focuses on providing immediate support for families and businesses to cope with soaring inflation and rising fuel costs whilst at the same time supporting the economy to grow in a fiscally sustainable way.

At the meeting, the Chancellor also underlined his support for the Bank of England’s moves to keep inflation under control as much as possible, which is central to tacking cost of living challenges.

In a press release from HM Treasury, Mr Kwarteng stressed that the government will support the economy to grow. He recognised that the rate of growth has been too low and committed to a radical supply side agenda to deliver lasting economic growth. This will mean creating the right conditions for business investment and innovation, reducing burdensome regulation and taxes, which will in turn create jobs, wealth and drive economic growth.

Since the new Prime Minister, Liz Truss, took office on 6 September 2022 we have seen the introduction of a cap in energy bills at £2,500 for the average household from 1 October 2022. The new Chancellor will also make further important announcements in the mini-Budget on Friday 23 September.

HM Land Registry's property alert service is a free service to help protect property owners from fraud. The counter-fraud security measure was introduced by the Land Registry to monitor registered properties where there is a concern that it might be subject to a fraudulent sale or mortgage. The alert service can be used to monitor up to ten properties. It is a particularly useful fraud warning tool if you have an unencumbered property.

The property alert service can be used to monitor any property in England or Wales that is registered with the Land Registry. Once registered, owners or other interested parties will receive email alerts when certain activity occurs on their monitored properties, allowing them to act if necessary. For example, this could be an alert that a new mortgage has been taken out. You don't have to own a property to set up an alert.

Tenanted, unoccupied and mortgage-free properties have been known to be particularly vulnerable to fraud. Fraudsters can attempt to acquire ownership of a property either by using a forged document to transfer it into their own name, or by impersonating the registered owner. They can then use this bogus evidence to support a mortgage application. Once the mortgage is completed the offender disappears, leaving the property owner to pay the bill.

Private owners and companies who feel their property might be at risk can also apply to have a restriction entered on their title register which is designed to help prevent forgery.

It has been confirmed that the date of Her Majesty Queen Elizabeth II’s State Funeral will be Monday, 19 September 2022 following 10-days of national mourning. King Charles III approved an order that the day of the Queen’s funeral will be a national bank holiday across the UK.

A press release from the Department for Business, Energy & Industrial Strategy (BEIS) stated that this will allow individuals, businesses and other organisations to pay their respects to Her Majesty and commemorate Her reign, while marking the final day of the period of national mourning.

The government has confirmed that the bank holiday will work in the same way as other bank holidays, and that there would be no statutory entitlement to time off. Employers may include bank holidays as part of a worker’s leave entitlement.

It is expected that many places of businesses will be closed on the day. The press release also said the BEIS “expects employers to respond sensitively to requests from workers who wish to take the day of the funeral off work”. Schools will also be closed.

The government also stated that no decision has yet been made on whether King Charles' Coronation Day will be a bank holiday. A date for the Coronation is unlikely to be announced until after the mourning period for the Queen has ended.