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In this month’s Enews we look at the latest data on UK
inflation and warnings for this winter’s energy bills. We also
update you on the Government’s new Business Climate Hub and the
increase in savers being caught in the tax net. With guidance for
employers and the latest advisory fuel rates, there is a lot to
update you on.
Inflation falls to 6.8% in July 2023
The UK’s annual inflation rate fell to 6.8% in July, down
from 7.9% in June, according to the latest data from the Office of
National Statistics (ONS).
It is the smallest increase in the cost of living since February
2022.
A fall in gas and electricity, as well as a slowing down in the
increase of food prices, are the major drivers behind the inflation
rate decrease, according to the ONS.
However, core inflation, which strips out volatile items such as
fuel and food remained unchanged at 6.9% in July while service
sector inflation rose from 7.2% to 7.4%.
Martin McTague, National Chair of the Federation of Small
Businesses (FSB) said:
‘While a drop in inflation provides some comfort, the
figures show less of a drop in inflation than hoped for and will
renew fears of a wage-price spiral, and of yet more base rate hikes
in future.
‘The worry now is that rising wages ignite a fresh wave
of inflation in September, which will threaten the momentum from
June’s GDP growth.
‘The cost of doing business crisis still has a grip on
the small business community, as prices for many key inputs, from
energy to components and raw materials, remain far above where they
were a year ago.
‘Any reduction in inflation is good news, but the huge
toll thatspiralling prices have inflicted is still being
keenly felt by small firms.’
Internet link: ONS websiteFSB website
UK set for five years of lost economic growth, warns Think
Tank
The UK is set for five years of lost economic growth, according
to research from Think Tank the National Institute for Economic and
Social Research (NIESR).
The NIESR said the series of shocks from Brexit, Covid and
Russia’s invasion of Ukraine had badly affected the economy. It
added that the spending power of workers in many parts of the UK
will remain below pre-pandemic levels until the end of 2024.
Despite pay increases, high inflation has forced up prices and
the rising cost of living has left households throughout the UK
feeling squeezed.
The NIESR forecasts that inflation, the rate at which prices
rise, will remain continually above the Bank of England’s 2%
target until early 2025, meaning the cost of living will also
continue to rise.
Jagjit Chadha, Director at the NIESR, said:
‘The problem we face is that rarely has
therebeen more urgent need, arguably never since the late
1970s, to address this country’s economic problems. But at the
same time rarely have they been so entrenched that it is hard to
think of any quick fixes that will materially improve living
standards across the income distribution within a single
Parliament.
‘The economy seems constrained by its pre-Covid peak in
activity and is being held back by a sharpnormalisation in
policy rates, a sequence of persistent negative shocks to supply
capacity and a marked slowing in world growth.
‘Brexit has done a great service by revealing even more
clearly the underlying problems in the British economy but has not
yet located solutions. In truth, shock therapy has tended not to
work in any country and, so far, neither has Brexit.’
Internet link: NIESR website
Over a third of households across England will pay higher
energy bills this winter
More than a third of English households will see higher energy
bills this winter than they did last winter, according to research
published by the Resolution Foundation.
Almost half of those hit by the higher bills will be in the
poorest tenth of households, the report said.
Ofgem is expected to announce a reduction in the energy price
cap from October 2023, with typical annual energy bills falling
from £2,100 last winter to around £1,923 this
winter.
This fall is largely driven by falling wholesale gas prices.
Although the price per unit of energy is falling, this will be
offset by a rise in the daily standing charge, and the fact that
last winter’s universal £400 energy support is not being
repeated.
As a result, the biggest falls in bills will be seen by
households who use the most energy – while households who
consume relatively little energy will face higher energy bills this
winter.
Jonny Marshall, Senior Economist at the Resolution Foundation,
said:
‘The cost of living squeeze is far from over. And,
although government schemes have improved their targeting of
support throughout the crisis to those most in need, significant
gaps remain which should be urgently addressed to help the most
vulnerable get through the challenging months ahead.
‘In the longer term, the Government needs to reduce the
UK’s dependency on gas and improve the state of our home
insulation to prevent the winter energy crisis from becoming an
annual occurrence.’
Internet link: Resolution Foundation website
HMRC should increase rewards for whistleblowers, says law
firm
HMRC should increase the rewards it pays out to whistleblowers
in line with the US system, according to law firm RPC.
The tax authority paid out over £509,000 to individuals
providing evidence about tax fraud over the past year, RPC’s
research found.
That figure is up from £495,000 in 2021/22 and a 75%
increase from the £290,000 paid five years ago, the law firm
added.
However, it is just 1.7% of the sum paid to informants by the US
Internal Revenue Service (IRS).
The IRS pays whistleblowers 15-30% of the additional tax
collected through investigations instigated as a consequence of
information received. In 2022, $37.8 million was paid by the IRS to
132 whistleblowers – 58 times the amount paid to UK
whistleblowers.
Adam Craggs, Partner and Head of RPC’s Tax, Financial Crime
and Regulatory team, said:
‘More individuals, with evidence of serious tax fraud,
would come forward if they knew they could be in line for a
life-changing amount of money.
‘Paying a proportionate amount for high quality
information that helps secure criminal convictions and the recovery
of substantial amounts for the Exchequer would be a sensible step.
HMRC has been making payments for information on an ad hoc basis
for many years and would benefit from improving the system and
placing it on a more formal basis.’
Internet link: RPC website
Another million savers to be hit with tax on interest
The frozen Savings Allowance combined with rising interest rates
will push over one million taxpayers into paying tax on their
savings this tax year, according to research by investment platform
AJ Bell.
In the 2023/24 tax year it is estimated that over 2.7 million
individuals will pay tax on interest, up by a million in a
year.
This year’s predicted total includes nearly 1.4 million
basic rate taxpayers, a figure which has quadrupled in just four
years, AJ Bell’s research found.
Individuals pay tax on interest they earn on savings that
exceeds the personal Savings Allowance, which currently stands at
£1,000 for basic rate taxpayers and £500 for higher
rate taxpayers. Additional rate taxpayers get no exemption and pay
tax on all interest they receive.
Stuart Coombe, Chartered Financial Planner at
Old Mill, said:
‘In the last ten or fifteen years, you’d have to
have very high balances to earn more than £1,000 of interest
as rates were so modest. Now some 1 year fixed rates are offering
6.2% gross interest, so in theory you only need to have around
£17,000 or thereabouts to get to that sum. As tax is
not deducted it is important to declare this in your tax return or
to advise HMRC if you don’t currently complete a tax
return. Interest from ISAs (Individual Savings Accounts)
or Premium Bonds are not included, so it may be worth reviewing
your savings and considering your own position.’
Government launches Business Climate Hub
The Government has launched the UK Business Climate Hub to offer
firms advice and support on reducing their energy bills and cutting
their carbon emissions.
The Hub includes a free carbon calculator and a suite of new
tools to help businesses measure, track and report on their
emissions.
It also offers detailed advice on topics, including sourcing
products from green suppliers and reducing emissions from freight
and logistics, as well as the most cost-effective ways of
installing solar panels and electric vehicle (EV) charging
points.
The Hub is aimed at SMEs, which the government says are often
keen to tackle climate change but find it difficult to know how to
reduce their carbon footprint.
Minister of State for Energy Security and Net Zero, Graham
Stuart, said:
‘The UK has cut its emissions more than any other major
economy in the world. More and more businesses are recognising the
business benefits of reaching net zero and we’re determined to
empower them to do so.
‘The new UK Business Climate Hub is a one-stop-shop for
businesses to find practical advice to reduce their carbon
footprint and save on their energy bills.
‘Whether it’s fitting a low-carbon heat pump,
generating energy with solar panels, or reducing the emissions from
shipping goods, the new support will ensure businesses can drive
towards net zero.’
Internet link: Business
Climate Hub
Latest guidance for employers
HMRC has published the latest issue of the Employer Bulletin.
The August issue has information on various topics, including:
- tax relief on employee contributions to registered pension
schemes - ceasing your PAYE scheme
- the National Minimum Wage
- helping customers steer clear of tax avoidance schemes
- Income Tax Self Assessment – preparing for the new tax
year basis - helping your new employees get paid correctly
- tackling non-compliance in the umbrella company market.
Please contact us for help with tax matters.
Internet link: Employer Bulletin
Advisory fuel rates for company cars
New company car advisory fuel rates have been published and took
effect from 1 September 2023.
The guidance states: ‘you can use the previous rates for
up to one month from the date the new rates apply’. The
rates only apply to employees using a company car.
The advisory fuel rates for journeys undertaken on or after 1
September 2023 are:
| Engine size | Petrol |
| 1400cc or less | 13p |
| 1401cc – 2000cc | 16p |
| Over 2000cc | 25p |
| Engine size | LPG |
| 1400cc or less | 10p |
| 1401cc – 2000cc | 12p |
| Over 2000cc | 19p |
| Engine size | Diesel |
| 1600cc or less | 12p |
| 1601cc – 2000cc | 14p |
| Over 2000cc | 19p |
HMRC guidance states that the rates
only apply when you either:
- reimburse employees for business travel in their company
cars - require employees to repay the cost of fuel used for private
travel.
You must not use these rates in any other circumstances.
The Advisory Electricity Rate for fully electric cars is 10p per
mile. Electricity is not a fuel for car fuel benefit purposes.
Internet link: GOV.UK AFR
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
