To comply with the new digital platform regulations effective from 1 January 2024, platform operators must register with HMRC. Here are the key details regarding registration and reporting:

Who Needs to Register: Any platform operator facilitating the sale of goods, services, accommodation, or transportation within the scope of the new regulations must register with HMRC if they are subject to UK laws. This includes platforms that are UK tax residents, incorporated in the UK, or have their place of management in the UK .
Registration Process:

Platform operators must notify HMRC that they are subject to the reporting obligations by 31 January 2025 for the 2024 calendar year.
HMRC will provide an online reporting service, and platform operators must register to use this service before submitting reports. This registration will enable them to upload seller information in a digital format (usually XML files).

Due Diligence and Data Collection: After registration, operators are responsible for collecting and verifying information about sellers (such as name, address, and tax identification number) and transaction data for reporting. Sellers must also receive a copy of the data submitted to HMRC .
Penalties for Non-Registration: Failure to register or comply with these obligations may result in penalties. Initial fines can reach £5,000 and continuing daily fines of up to £600 may apply if operators do not fulfil their reporting duties .

Platform operators should begin preparations to ensure timely registration with HMRC and compliance with the new data reporting requirements to avoid penalties.

HMRC’s Personal Tax Accounts (PTAs) serve as an online tool that enables taxpayers to view and update their information in real time. The PTA can be used for many routine requests and services and help you bypass the need to call or write to HMRC.

Every individual in the UK that pays tax has a PTA, but taxpayers must sign up in order to access and use the service. This can be achieved by using the Government Gateway. You may need to verify your identify when using the service.

The following services are currently available on your PTA:

check your Income Tax estimate and tax code
fill in, send and view a personal tax return
claim a tax refund
check your Child Benefit
check your income from work in the previous 5 years
check how much Income Tax you paid in the previous 5 years
check and manage your tax credits
check your State Pension
check if you’ll benefit from paying voluntary National Insurance contributions and if you can pay online
track tax forms that you’ve submitted online
check or update your Marriage Allowance
tell HMRC about a change of name or address
check or update benefits you get from work, for example company car details and medical insurance
find your National Insurance number
find your Unique Taxpayer Reference (UTR) number
check your Simple Assessment tax bill

The PTA is a key component of HMRC’s broader strategy to transition to a fully digital tax service.

Changes to the High Income Child Benefit Charge (HICBC) came into effect on 6 April 2024. The income threshold at which HICBC starts to be charged increased to £60,000 (from £50,000).

The charge is calculated at 1% of the full Child Benefit award for every £200 (2023-24: £100) of income between £60,000 and £80,000. (2023-24: between £50,000 and £60,000). For taxpayers with income above £80,000 (2023-24: £60,000) the amount of the charge is the same as the amount of Child Benefit received. The HICBC therefore either reduces or removes the financial benefit of receiving Child Benefit.

For new Child Benefit claims made after 6 April 2024, any backdated payment will be treated for HICBC purposes as if the entitlement fell in the 2024-25 tax year if backdating would otherwise create a HICBC liability in the 2023-24 tax year.

Even if HICBC applies to you or your partner, it’s generally still beneficial to claim Child Benefit as doing so can safeguard certain benefits and ensure your child receives a National Insurance number. Claims can be made by using the HMRC app or online resources. New claims are automatically backdated for up to 3 months or to the child’s birth date if later.

Taxpayers can choose to continue receiving Child Benefit – and pay the tax charge – or opt to stop receiving benefits and avoid the charge.

Employees who are working from home may be eligible to claim a tax deduction on certain work-related bills. If their employer does not cover these expenses or allowances, they can claim tax relief directly from HMRC.

You can claim tax relief if you are required to work from home, such as if your job requires you to live far from your office or if your employer does not have an office. However, tax relief is typically not available if you choose to work from home, even if your employment contract allows it or if your office is occasionally full.

Employees can claim tax relief of £6 per week (or £26 per month for those paid monthly) to cover additional costs of working from home without needing to keep specific records. The amount of tax relief you receive depends on your highest tax rate. For instance, if you pay the 20% basic rate of tax, you will receive £1.20 per week in tax relief (20% of £6). Alternatively, you can claim the exact amount of additional costs incurred, but you must provide evidence to HMRC. HMRC accepts backdated claims for up to four previous tax years.

You may also be eligible to claim tax relief for using your own vehicle, whether it’s a car, van, motorcycle, or bike. Generally, there is no tax relief for regular commuting to and from your usual workplace. However, the rules differ for temporary workplaces, where such expenses are typically allowable, or if you use your own vehicle for other business-related mileage. Additionally, you may be able to claim tax relief on equipment purchased for work, such as a laptop, chair, or mobile phone.

If you are an employee who is working from home, you may be able to claim tax relief for some of your bills that are related to your work. If your expenses or allowances are not paid by your employer, then you can claim tax relief directly from HMRC.

Pension Credits can provide extra income to those over State Pension age and on a low income. The credits were first introduced back in 2003 to help keep retired people out of poverty.

The Department for Work and Pensions has launched a Pension Credit awareness drive, urging pensioners to check their eligibility for Pension Credit in order to secure this year’s Winter Fuel Payment. This follows the Chancellor’s recent announcement that the Winter Fuel Payment will be means tested in future.

Approximately 1.3 million households in England and Wales are expected to continue receiving Winter Fuel Payments. The government is eager to increase the uptake of Pension Credit to ensure that low-income pensioners who qualify for these payments continue to receive the Winter Fuel Payment. Pensioners must apply by 21 December 2024 in order to make a backdated claim for Pension Credit and be eligible for the Winter Fuel Payment.

Pensioners whose weekly income is below £218.15 for a single person or £332.95 for a couple should check to see if they are eligible. If your income is higher, you might still be eligible for Pension Credit if you have a disability, you care for someone, you have savings or you have housing costs. Not all benefits are counted as income.

Claimants entitled to the Pension Credit could be entitled to a support package worth an average of £3,900 per year. Details of how to make an application for Pension Credit can be found on GOV.UK at https://www.gov.uk/pension-credit/how-to-claim

The Chancellor of the Exchequer, Rachel Reeves commented that:

“The dire state of the public finances we inherited from the previous government means we’ve had to make some very difficult decisions.

Our commitment to supporting pensioners remains, which is why we are maintaining the triple lock.

We want pensioners to get the support they are entitled to. That’s why I urge all pensioners to check whether they are eligible for the Pension Credit.”

The American presidential election may have significant effects on the United Kingdom, impacting various aspects of the relationship between the two countries. Here are some key areas where the UK might feel the influence:

1. Trade Relations

• Post-Brexit Trade Deals: The UK's ability to negotiate a favourable trade deal with the US is closely tied to who is in the White House. A US president more inclined towards free trade and close UK relations would likely expedite a comprehensive trade agreement, while a more protectionist leader could complicate these negotiations.
• Regulatory Alignment: Changes in US economic policy, such as shifts in regulations or standards, might influence how the UK aligns its own policies post-Brexit, particularly in sectors like finance, pharmaceuticals, and agriculture.

2. Economic Impact

• Market Volatility: US elections often lead to fluctuations in global financial markets. The UK's economy, deeply interconnected with global markets, could experience volatility, impacting everything from the value of the pound to erratic stock market fluctuations.
• Investment Flows: US policy shifts, particularly regarding corporate taxes or international trade, could alter the flow of investments between the two nations. For instance, a US focus on domestic production might reduce American investments in the UK.

3. Foreign Policy and Defence

• NATO and Defence Spending: The US president's stance on NATO and international defence commitments could influence the UK's own defence policies and spending. A US leader pushing for higher NATO contributions might pressure the UK to increase its defence budget.
• Global Diplomacy: The UK often aligns its foreign policy with the US, particularly on issues like the Middle East, climate change, and relations with China and Russia. Changes in US diplomatic priorities could prompt the UK to adjust its own strategies.

4. Climate Change Policy

• Environmental Agreements: The US’s approach to global climate agreements, such as the Paris Agreement, can affect the UK's climate policy. A US administration committed to environmental action might encourage the UK to strengthen its own climate goals, while a less committed US might lead to a more cautious approach.

5. Cultural and Social Influence

• Public Opinion and Cultural Ties: The American president often shapes global cultural and social trends. The UK's media and public opinion can be influenced by the tone and policies of the US administration, particularly on issues like immigration, race relations, and social justice.

6. Security and Intelligence Cooperation

• Intelligence Sharing: The UK's security depends significantly on intelligence cooperation with the US. Changes in the US administration might affect the level of cooperation or the focus of shared intelligence, particularly regarding terrorism, cyber threats, and international crime.

In summary, the outcome of the US presidential election will likely have profound effects on the UK, influencing its economy, trade policies, foreign relations, and more. The exact nature of these effects will depend on the policies and priorities of the elected US president.

Interest rates are a powerful lever in our economy. Increase rates and economic activity tends to slow down, and vice versa if interest rates fall.

The recent hikes in rates, to control inflation, were reversed recently when the Bank of England (BoE) reduced rates to 5% (from 5.25%). The following notes are a summary of recent BoE commentary on this topic.

The Bank of England has recently hinted at the possibility of further reductions in interest rates, following a recent decision to lower the Bank Rate to 5% in August 2024. The decision was influenced by a variety of economic factors, including lower-than-expected inflation, which has stabilized around the 2% target, after reaching over 11% in late 2022. The Bank's Monetary Policy Committee (MPC) continues to monitor inflationary pressures closely, particularly those arising from global economic conditions, energy prices, and domestic wage growth.

The MPC's latest projections suggest that while inflation may slightly increase towards the end of 2024, it is expected to stabilize or even decrease afterward. This has led some market participants to anticipate further rate cuts, with expectations that the Bank Rate could be reduced by an additional 50 basis points by the end of the year.

50 basis points is equivalent to half a percent (0.5%). In financial terms, a basis point is one-hundredth of a percentage point (0.01%), so 100 basis points equal 1 percent. Therefore, 50 basis points equal 0.5 percent.

The decision to lower rates further will depend on a range of factors, including the persistence of inflationary pressures and the overall economic outlook. The Bank remains cautious, aiming to balance the need to control inflation with supporting economic growth and employment.

For more detailed insights, you can visit the Bank of England's official site.

Summary

If inflation stays at the current level, circa 2%, it is hoped that the downward movement in interest rates will continue. This will have obvious benefits for mortgage borrowers and business owners with high levels of borrowings.

Since Rachel Reeves was appointed Chancellor of the Exchequer in May 2024, she has made several significant announcements aimed at addressing the UK's economic challenges as well as the much publicised tax changes already described in previous posts on our blog.

Her primary focus has been on fiscal responsibility, economic stability, and reforming key areas of public policy.

Economic Policy and Public Spending

Reeves emphasised the importance of economic stability, particularly in keeping taxes, inflation, and mortgages low. She has committed to adhering to robust fiscal rules, which include not increasing National Insurance, Income Tax, or VAT. In her first actions, Reeves implemented a spending audit across government departments, identifying areas where immediate savings could be made. This resulted in £800 million in savings for the current year, with plans to save £1.4 billion next year by scrapping unfunded projects from the previous government. These include the controversial Rwanda migration partnership and the "Advanced British Standard" education program.

Reforms and Cost-Cutting Measures

Reeves announced the cancellation or review of several infrastructure and transport projects that were deemed unaffordable or mismanaged. For instance, she halted projects under the "Restoring our Railways" program and other unfunded road schemes, projecting savings of around £785 million next year. She also initiated a reset of the New Hospitals Programme, which had been criticised for its lack of progress and unrealistic funding commitments.

Support for Public Services

Despite the need for a cautious approach with government finances, Reeves confirmed that the government would accept the recommendations of independent pay review bodies, regarding public sector pay increases. However, this comes at an additional cost of £9 billion, leading her to demand further savings from government departments, including a 2% cut in back-office costs.

National Wealth Fund and Private Investment

To stimulate economic growth, Reeves plans to establish a National Wealth Fund, with the aim of stimulating private sector investment in emerging industries. This is part of a broader strategy to reform the planning system, making it more growth-focused and reducing the bureaucratic delays that have stalled significant projects.

State Benefits and Social Care

Reeves made it clear that reforms to adult social care would not proceed in their current form due to budget constraints, saving over £1 billion by the end of next year. Additionally, she addressed issues in the NHS, where previous commitments, like the construction of 40 new hospitals, have been put under review due to lack of funding and progress.

Summary

Reeves’ tenure as Chancellor so far has been marked by a focus on fiscal discipline, cutting costs from unfunded or mismanaged projects, and prioritising stability in economic management. Her approach indicates a departure from the previous government's spending strategies, with an emphasis on ensuring that all commitments are financially sustainable and contribute to long-term economic stability.

Much speculation has focused on likely tax increases in the forthcoming October 2024 budget, and we will be covering this event in some detail once the fine print is available for analysis.

Tax relief on private pension scheme contributions is a significant incentive in the UK, encouraging individuals to save for retirement. Here’s how it works according to GOV.UK:

1. Basic Rate Tax Relief (20%): If you are a basic rate taxpayer, your pension contributions receive tax relief at 20%. For example, if you contribute £80 into your pension, the government adds £20, making the total contribution £100.
2. Higher Rate Tax Relief (40%): Higher-rate taxpayers can claim additional tax relief. For every £100 contribution, they can claim back £20 via their tax return, effectively increasing the relief to 40%.
3. Additional Rate Tax Relief (45%): Those in the additional rate tax band can claim even more, an extra 25%, making the effective relief 45%.
4. Annual Allowance: The total amount you can contribute to your pension each tax year and still get tax relief is subject to an annual allowance, which is currently £60,000 for most people. Contributions above this limit may incur a tax charge although any unused allowances in the previous three years can be considered.
5. Lifetime Allowance: There was previously a limit on how much you could save into your pension pot over your lifetime before incurring extra tax charges, known as the Lifetime Allowance. However, in the 2023 Spring Budget, it was announced that the Lifetime Allowance charge would be removed from April 2024.

But will Rachel Reeves be tempted to reduce the tax relief on these contributions to create an additional revenue source that would help plug the £22bn black hole in the UK’s finances in the forthcoming budget?

For example, she could limit tax relief to say 30% or the basic rate (20%).

If she does, it is doubtful that any changes in relief will be back-dated before the budget announcements on the 30 October. Which means contributions made before the budget will likely achieve tax relief based on the current rules.

In which case, if you have agreed your contributions for 2024-25 with your pensions and tax advisors why not make the contributions before the 30 October as a hedge against loss of tax relief from 1 November?

Liz Kendall recently set out how Britain’s system of employment support must be fundamentally reformed to tackle the “most urgent challenge” of spiralling economic inactivity.

In a Department for Work & Pensions press release issued 23 July 2024 it was announced:

• Work and Pensions Secretary Liz Kendall will use landmark first speech to set out the Government’s plans to reverse dire labour market inheritance and drive up Britain’s employment.
• Major new reforms will be at heart of Government’s ambition to reach an 80% employment rate, with a white paper on getting Britain working again.
• Kendall set to empower local leaders to tackle economic inactivity, alongside a new Labour Market Advisory Board to help drive change and get Britain working again.

Ms Kendall will argue:

“The fundamental problem we face is that the current system of employment support is designed to address the problems of yesterday – not today, tomorrow and beyond.

“She will say over the last 14 years the DWP has focused almost entirely on the benefits system, and specifically on implementing Universal Credit, and that “nowhere near enough attention has been paid to the wider issues – like health, skills, childcare and transport – that determine whether people get work, stay in work and get on in work.

“She will call time on the approach of the previous government and instead seek employment opportunity unleashed for all as part of the government’s long-term ambition to reach 80 per cent employment, with better quality of work, and higher earnings.

“Over the last 14 years millions of people have been denied their rightful chance of participating in the labour market, and the hope of a brighter future. They’ve been excluded, left out, categorised and labelled. Britain isn’t working.

“We need fundamental reform so the department for welfare becomes a genuine department for work.

“We’ll pursue an ambitious plan alongside the government’s goals to raise productivity and living standards and to improve the quality of work. To get Britain growing again, get Britain building again and get Britain working again.”

As part of her drive to tackle economic inactivity, the Secretary of State will also announce a new group of external experts who will provide labour market insight and advice to drive change throughout the system.

The Labour Market Advisory Board, which will be chaired by Paul Gregg – Former Director of the Centre for Analysis of Social Policy at the University of Bath – is expected to meet quarterly and will provide advice to the Work and Pensions Secretary and offer insight, expertise, and challenge to the department’s plans.

The speech follows the announcement by the Work and Pensions Secretary, that the Government will, as part of the Growth Mission, publish a White Paper which will build on manifesto commitments of a three-pillared approach to support people into work:

• A new national jobs and career service to help get more people into work, and on in their work.
• New work, health and skills plans for the economically inactive, led by Mayors and local areas.
• A youth guarantee for all young people aged 18 to 21.

It forms part of a cross-government approach to help people into work, including the launch of Skills England, and cutting NHS waiting lists to build the healthy society needed for a healthy economy.

From April 2025, the present tax breaks enjoyed by owners of Furnished Holiday Lets (FHLs) will cease and FHL income and gains will be taxed in the same way as other property businesses.

Currently, FHL owners benefit from tax advantages, as compared to non FHL owners, in four key areas:

• exemption from finance cost restriction rules (which restrict loan interest to the basic rate of Income Tax for other landlords);
• more beneficial capital allowances rules;
• access to reliefs from taxes on chargeable gains for trading business assets; and
• inclusion as relevant UK earnings when calculating maximum pension relief.

According to HMRC, the distinction for a furnished holiday let was introduced in 1984 and provided different and more beneficial tax treatment for short-term lettings within the property investment sector. Repealing the beneficial tax treatment for furnished holiday lettings promotes fairness by removing the tax advantages that furnished holiday let landlords have over other residential property landlords.

From April 2025

These tax changes will take effect from 6 April 2025 for income tax and capital gains tax (CGT) purposes, and from 1 April 2025 for corporation tax on corporate income and gains.

The changes will remove the tax advantages that current FHL landlords have received over other property businesses in 4 key areas by:

• applying the finance cost restriction rules so that loan interest will be restricted to basic rate for Income Tax;
• removing capital allowances rules for new expenditure and allowing replacement of domestic items relief;
• withdrawing access to reliefs from taxes on chargeable gains for trading business assets; and
• no longer including this income within relevant UK earnings when calculating maximum pension relief.

After repeal, former furnished holiday let properties will form part of the person’s UK or overseas property business and be subject to the same rules as non-furnished holiday let property businesses.

Transitional arrangements

According to HMRC the following transitional arrangements will apply:

• Businesses with FHL properties will no longer be eligible for more beneficial capital allowances treatment but will instead be eligible for ‘replacement of domestic items relief’ in line with other property businesses. Where an existing FHL business has an ongoing capital allowances pool of expenditure, they can continue to claim writing-down allowances on that pool. Any new expenditure incurred on or after the operative date must be considered under the property business rules.
• Under current rules a loss generated from a FHL property business can only be carried forward and used against future profits of that same FHL business. After the changes, former FHL properties will be part of the person’s UK or overseas property business as appropriate, that property business will then include the amalgamated profits and losses of all the properties in that business.
• Persons may have losses to carry forward from their FHL business after repeal. Losses generated from this FHL business will be permitted to be carried forward and be available for set off against future years’ profits of either the UK or overseas property business as appropriate.
• Under current rules FHL properties are eligible for roll-over relief, business asset disposal relief, gift relief, relief for loans to traders, and exemptions for disposals by companies with substantial shareholdings. After the changes eligibility for the reliefs will cease, however, where criteria for relief includes conditions that apply in a future year these specific rules will not be disturbed where the FHL conditions are satisfied before repeal.
• In relation to business asset disposal relief, where the FHL conditions are satisfied in relation to a business that ceased prior to the commencement date, relief may continue to apply to a disposal that occurs within the normal 3-year period following cessation.
• There is also an anti-forestalling rule which will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules. This rule applies from 6 March 2024.

Opportunity knocks

Which means between now and April 2025 there is still time for present FHL owners to capitalise on the current, generous tax breaks.

To see how you could benefit, if you own FHL properties, please call so we can help you consider your options. And don’t forget, many of these options will close April 2025.

The following notes are copied from draft legislation published by HMRC, to be included in the Finance Bill 2024-25.

• As of 1 January 2025, all education services and vocational training supplied by a private school, or a “connected person”, for a charge will be subject to VAT at the standard rate of 20%. Boarding services closely related to such a supply will also be subject to VAT at 20%.
• Any fees paid from 29 July 2024 pertaining to the term starting in January 2025 onwards will be subject to VAT.
• Where pupils are placed in a private school because their needs cannot be met in the state sector, and they have their places funded by their Locally Authority (LA), a devolved government, or a nondepartmental public body, their funder will be compensated for the VAT they incur on these pupils’ fees.
• The government will legislate to remove eligibility of private schools in England to business rates charitable rates relief. However, the government recognises some pupils have special educational needs that can only be met in a private school. Therefore, the government will consider how to address the potential impact of these changes in cases where private school provision has been specified for pupils through an Education, Health and Care Plan (EHCP) – a plan given to children and young people who need more support than is available through special educational needs (SEN) support.
• The policy intention is for nurseries (both standalone nurseries and those attached to a private school) to remain exempt, and for the fees of children in the first year of primary school in a private school upwards to become taxable. This is the year in which children turn compulsory school age, often referred to as “reception” in England and Wales, “Primary 1” in Scotland, and “Year 1” in Northern Ireland.
• Education and vocational training provided either at sixth forms attached to private schools or standalone private sixth form colleges will also be subject to VAT. This is to ensure parity of tax treatment between further education supplied at sixth forms attached to private schools catering to children of compulsory school age (which are captured by the above definition of a private school), and those private sixth form colleges that only provide education to pupils aged 16-19. The legislation is also drafted in this way to ensure that private schools are not incentivised to artificially separate their sixth forms from the parts of their school catering to children of compulsory school age.
• Other “closely related” goods and services other than boarding (i.e. goods and services that are provided by a private school for the direct use of their pupils and that are necessary for delivering the education to their pupils) will remain exempt from VAT.

As set out in the draft legislation, “private schools” are defined as schools at which full-time education is provided for pupils of compulsory school age or, in Scotland, school age (whether or not such education is also provided for pupils under or over that age), or an institution at which full-time education is provided for persons over compulsory school age but under 19 and which is principally concerned with providing education suitable to the requirements of such persons (for example, a sixth form college), and where fees or other consideration are payable for that provision of full-time education.

Education and boarding provided by state schools (including academies) are not affected by this policy change, meaning they will continue to be exempt from VAT. This reflects the fact that state schools and academies will continue to be “eligible bodies”.