HMRC will raise interest rates on tax debt to 6.5% from 21 February following latest increase in base rate
The late payment and repayment interest rates applied to the main taxes and duties that HMRC currently charges and pays interest on will rise to:
- late payment interest rate — 6.5% from 21 February 2023
- repayment interest rate — 3% from 21 February 2023
This means that the late payment interest rate will increase by 0.5% to 6.5% from 21 February. The rate last increased to 6% on on 6 January. This is the highest rate since the start of the financial crisis in November 2008.
Late payment interest is payable on late tax bills covering income tax, National Insurance contributions, capital gain tax, stamp duty land tax, stamp duty and stamp duty reserve tax. The corporation tax pay and file rate also increases to 6%.
Repayment interest will also be increased from the current 2.5% rate to 3%.
Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments rises to 5%.
The interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments rises to 3.75%.
Nadhim Zahawi has agreed to pay millions of pounds in tax to HMRC following a dispute over his family’s financial affairs
The former chancellor has agreed to pay a seven-figure sum to the tax authority to settle a tax dispute totalling £3.7m related to his family trust, Balshore Investments.
In July, HMRC examined the tax affairs of MP Nadhim Zahawi after an inquiry was launched by the National Crime Agency (NCA) in 2020.
The Serious Fraud Office (SFO) had also investigated Zahawi’s finances, according to a report in the Independent.
The investigation probed Zahawi’s involvement in a scheme to avoid tax by using an offshore company to hold shares in YouGov – the polling company he co-founded.
His family trust, Gibraltar-registered Balshore Investments, held a stake worth more than £20m, but sold up in 2018, with the proceeds being transferred to an unknown recipient.
Tax Policy Associates, a think tank, has estimated that Balshore’s sale of YouGov shares should have incurred capital gains tax (CGT) of about £3.7m.
Zahawi has insisted that he ‘does not have, and never has had’ an interest in Balshore Investments and that he was ‘not a beneficiary’.
A spokesperson for Zahawi said: ‘As he has previously stated, Mr Zahawi’s taxes are properly declared and paid in the UK. He is proud to have built a British business that has become successful around the world.’
Contesting the news, Zahawi stated: ‘There have been news stories over the last few days which are inaccurate, unfair and are clearly smears. It’s very sad that such smears should be circulated and sadder still that they have been published.
‘These smears have falsely claimed that the Serious Fraud Office (SFO), the National Crime Agency (NCA), and HMRC are looking into me. Let me be absolutely clear. I am not aware of this. I have not been told that this is the case.
‘I’ve always declared my financial interests and paid my taxes in the UK. If there are questions, of course, I will answer any questions HMRC has of me.’
Labour chair Anneliese Dodds has said there were ‘serious questions’ for Zahawi to answer, saying: ‘Why did Nadhim Zahawi claim last summer that he had paid his taxes in full, and that he wasn’t aware of an investigation? When was he made aware of an investigation? Was the prime minister aware of an investigation when he appointed Nadhim Zahawi to the cabinet?’
The rate of inflation was down fractionally to 10.5% in December from 10.7% the previous month as energy and food prices remained high
Inflation eased slightly to 10.5% in December, down from 10.7% in November and a 41-year high of 11.1% in October.
The easing in the annual inflation rate reflected price drops in transport costs as petrol and diesel prices fell. There were also limited price falls in clothing and footwear, and recreation and culture, , according to the latest figures from the Office for National Statistics (ONS)..
Prices at restaurants and hotels continued to grow and made the largest impact on the inflation figures, followed by food and soft drinks. Food prices rose 16.8% in the year to December, reaching the highest level seen since 1977.
The current inflation rises in the economy is largely due to supply chain problems linked to Covid-19 and Russia’s invasion of Ukraine, which has exacerbated the cost of energy and all other goods that require energy input.
Annual inflation rates for the consumer price index (CPI) including occupiers’ housing costs (CPIH) rose by 9.2% in the 12 months to December 2022, down from 9.3% in November.
Yael Selfin, chief economist at KPMG UK, said: ‘We expect inflation to continue falling throughout this year, reaching the Bank of England’s 2% target by mid-2024.
‘Falling inflation will also come as a relief to Bank of England’s policymakers who may see this is an opportunity to slow the pace of further rate rises. With the effects of past rate rises still passing through the UK economy, we could see the base interest rate peak at 4% in the first quarter of the year.’
The Bank of England is expected to increase interest rates next month by 0.5% as it struggles to bring inflation down to the 2% target.
Commenting on the figures, ONS chief economist Grant Fitzner, said: ‘Inflation eased slightly in December, although still at a very high level with overall prices rising strongly during the last year as a whole.
‘Prices at the pump fell notably in December, with the cost of clothing also dropping back slightly. However, this was offset by increases for coach and air fares as well as overnight hotel accommodation. Food costs continue to spike with prices also rising in shops, cafes and restaurants.’
Average petrol and diesel prices stood at £1.55 and £1.79 per litre in December and were last lower in February 2022, when petrol was £1.47 per litre, and in April 2022, when diesel was £1.76. Fuel prices rose by 11.5% in December, down from 17.2% in November.
While inflation is easing slightly, there is considerable pressure on households.
Alpesh Paleja, the CBI’s lead economist, said: ‘The cost of living crisis will continue to be a very real problem for both households and businesses, as price pressures remain high in the short term. Against the backdrop of a recession, firms will continue to face higher costs and weak demand conditions.’
HMRC’s new penalty regime for late filing and late payments of VAT will be fairer but more complex with interest being charged on all late payments
From 1 January 2023, HMRC will introduce a fixed rate, points based penalty system for VAT submissions. Initially HMRC has said there will be a ‘light touch’ approach to the new regime in the first year of operation.
Under the new rules, there will be a single penalty point for each late submission of a VAT return. When a business has exceeded the points threshold, a fixed rate penalty of £200 will be issued for each subsequent late return.
For businesses on standard quarterly returns the threshold is four points in any two-year period. For those on monthly returns, it will be five points and for those submitting annual VAT returns, just two points.
Points will be reset to zero when all returns have been filed and there has been a continuous period of good compliance (12 month for quarterly filings, six months for monthly filings and 24 months for annual filings).
Alan Pearce, VAT partner at Blick Rothenberg said: ‘The new regime will be fairer to businesses by penalising those that persistently file and pay late, rather than those that make the odd slip up.
‘It will replace the current default surcharge regime that has been widely criticised for levying significant penalties where payment is only one day late. However, unlike the current regime, there will be a more complex multi-tier penalties system with interest also being charged on all late payments.’
The new regime will effectively have four different types of charges:
- a fixed penalty amount for late filings based on a points system (a similar concept to totting up points for driving offences);
- an initial two-part fixed rate penalty for late payments of 2% and 4% (applying to the first 15 and 30 days);
- ongoing 4% daily interest-based penalty (applying after 30 days); and
- interest charged at 2.5% above the Bank of England base rate (applying from the outset).
‘The new penalty regime is more complicated than the current default surcharge regime. However, it appears to be fairer to those businesses that might occasionally pay late and rewards those that do their best to pay outstanding tax as early as possible,’ added Pearce.
‘Under the current rules businesses are often hit with large surcharges of between 2% and 15% for simply being one day late. This can often be caused by a one-off administration error or banking delay.
‘The change should therefore be welcomed and should avoid the need for many default surcharge appeals where the amount of the penalty is disproportionate to the amount and timing of the late payment.
‘For many defaulters, the new rules will result in a relatively small penalty and interest having to be paid. However, for businesses that persistently fail to submit their VAT returns on time and are frequently more than 30 days late in paying, they will suffer the highest level of penalties and interest. It seems that HMRC have struck a balance of penalising serial offenders more heavily while incentivising compliance and being more lenient on those that make the occasional slip up.’
Pearce expanded on the ‘light touch’ approach in year one.
He added: ‘HMRC has announced it will apply a “light touch” for the first year of operation. Specifically, where a business is doing its best to comply, HMRC will waive the first 2% fixed penalty for VAT periods up to the end of 2023.
‘This effectively means that provided payments is received within 30 days of the due date (or, during this period, an approach to HMRC has been made for a time to pay application) penalties can be avoided. However, even where agreement is reached with HMRC, interest will still apply.’
Penalty points threshold
|Submission frequency||Penalty points threshold||Period of compliance|
Millions of workers will be able to request flexible working on day one of employment under new rules under new government plans to make flexible working the default
Currently employees can only request flexible working after completing 26 weeks of service. This will be removed so that employees will be able to request flexible working from day one of employment.
Employers will have to respond to requests within two months, down from three months currently.
Flexible working covers working from home and in the office, job-sharing, flexitime, and working compressed, annualised, or staggered hours.
The day one right to request flexible working will be delivered through secondary legislation in the Employment Relations (Flexible Working) Bill.
The raft of new measures will give employees greater access to flexibility over where, when, and how they work, improving work life balance.
‘By removing some of the invisible restrictions to jobs, flexible working creates a more diverse working environment and workforce, which studies have shown leads to improved financial returns,’ the government said.
If an employer cannot accommodate a request to work flexibly, they will be required to discuss alternative options before they can reject the request. For example, if it is not possible to change an employee’s working hours on all days, they could consider making the change for certain days instead.
The new legislation, backed in the government’s response to the Making flexible working the default consultation, will also remove the requirement for employees to set out the effects of their flexible working requests to employers, removing a large administrative burden for both sides.
Minister for small business Kevin Hollinrake said: ‘Greater flexibility over where, when, and how people work is an integral part of our plan to make the UK the best place in the world to work.’
The government has also outlawed exclusivity clauses for low paid workers, earning a guaranteed weekly income on or below the Lower Earnings Limit of £123 a week. This removes rules restricting them from working for multiple employers and will affect around 1.5 million low paid workers.
While not everyone will want a second job, the laws on exclusivity clauses remove unnecessary red tape that prevents those who do – for example, gig economy workers, younger people, or carers who cannot commit to a full-time role.
A recruiter, a pension administrator and a payroll services provider all avoided tax bills totalling £13.8m and face millions of pounds in fines from HMRC
During the month of November, HMRC identified £13.8m in unpaid tax by the businesses and individuals named in the quarterly deliberate defaulters’ list, £3.2m less than the £17m that was identified in the last quarter.
HMRC’s list names over 100 individuals and businesses who have failed to pay their taxes and been identified in the last three months.
In November, the level of penalties handed out amounted to £8m in total for outstanding tax evasion, as HMRC hammered down on deliberate tax defaulters.
At the top of the list of deliberate tax defaulters was a real estate agent who failed to pay a tax bill of £2,695,693 over a four-year period between April 2014 and 2018. Simon Karimzadeh, sole director of Euroland 3, now faces a penalty of £1,227,997 related to income from capital gains.
According to Companies House, Karimzadeh is listed as the director of Euroland 3 Limited, Euroland 2 Limited, and Euroland 1 Limited, which are all still active and trading. The companies buy and sell real estate.
Second place goes to a former technology consultant who failed to pay £993,729.79 in tax payments between April 2010 and 2019. Stephen Bernard Wheatley, former director of Westward Technology Limited and Qorbis Holdings Limited, received penalties amounting to £457,555.08.
In the meantime, a pension administrator failed to pay £729,596 worth of tax between April 2018 and 2020. Based in London, Avril Patricks Stewart Limited entered into compulsory liquidation in February 2011, and was fined £491,831.44 for unpaid tax by HMRC.
A recruitment and payroll service provider has been fined £533,270.96 for tax evasion over a two-year period. Arrow Logistics Ltd, based in London, failed to pay £627,377.61 in tax between April 2020 and 2022.
Bolton-based payroll services provider Ditto Payroll Ltd takes the fourth spot after not paying £542,238 worth of tax between April 2020 and 2022. HMRC handed the business a £515,126.31 fine and the group entered into a creditors voluntary liquidation in April 2021.
In addition, an international telecoms company called Akal Nation Limited based in London avoided paying £381,038 worth of tax between February and July 2019. HMRC handed the business a £220,049.44 fine.
Finally, a printing company based in Bradford avoided £359,358 in tax payments. A&S Printers was fined £211,122.66 by HMRC for tax evasion over a 10-year period, between May 2010 and July 2020.
UK crypto fraud totalled £226m in 2021-22, with almost half a billion pounds being lost to scams over the past three years, according to data from Action Fraud
Cases of cryptocurrency scams have surged by almost a third this year as fraudsters continue to rake in hundreds of millions.
The value of UK crypto fraud hit £226m in 2021-22, up from £171m in 2020-21 and £71m the year before, the data from Action Fraud revealed.
Around 10,030 reports on crypto fraud were made in 2021-22, up from 8,676 the previous year.
Law firm Pinsent Masons, which obtained the information, said despite the decline of many cryptocurrencies, small investors were still being charmed by ‘get rich quick’ schemes.
Hinesh Shah, senior associate forensic accountant at Pinsent Masons, said: ‘Whenever times are tough, fraudsters always seek to prey on less experienced investors by promising huge returns.
‘Given the huge sums which some crypto investors made during the boom, scams involving cryptocurrencies can be especially potent for smaller investors who may be desperate to make a ‘quick buck’.’
Many investors continue to lack the necessary skills and experience to tell a legitimate cryptocurrency investment from a fraudulent one, Shah warned.
Shah added: ‘People should always be cautious when they receive an unsolicited suggestion to invest, from sources which they don’t recognise. This is especially true when it comes to cryptocurrencies.’
The firm also warned of ‘rug pulls’ where developers of tokens steal funds raised from investors and ‘pump and dump’ scams where they create excitement around an asset and sell their holdings when the price rises, leaving investors exposed to any falls in value.
In addition, there are fraudulent initial coin offerings, where a new token being launched does not exist.
This follows after the collapse of the cryptocurrency exchange FTX and the resignation of its founder, Sam Bankman-Fried.
The crypto exchange, which was valued at $32bn (£26bn), filed for bankruptcy after a surge in withdrawals saw an $8bn black hole in its finances.
FTX currently owes around $3.1bn (£2.6bn) to its largest creditors after allegedly using customer funds to prop up its losses.
The threshold for the additional rate of income tax will be reduced to pull more top earners into the 45p tax bracket
The Autumn Statement reduces the income tax additional rate threshold from £150,000 to £125,140, increasing taxes for those on high incomes from 6 April 2023.
The threshold change will raise £420m in 2023-24, rising to £790m in 2024-25.
Chancellor Jeremy Hunt said: ‘We have tried to be fair by following two broad principles, by asking those with more to pay more. I have not raised headline rates of tax.
‘This means that those earning £150,000 or more will pay just over £1,200 more a year.’
At the same time, the thresholds for base rate and higher rate taxpayers will be frozen until 2028, a further two years added to current plans which will drag more people into higher rates of tax.
Rachel McEleney, associate tax director at Deloitte, said: ‘Those with income between £125,140 and £150,000 will pay an extra 5% income in excess of the new threshold. They will also lose their eligibility for the £500 personal savings allowance, resulting in extra tax on savings income of up to £225. These measures are expected to raise nearly £5bn over the next five years.’
Alex Davies, CEO and founder of Wealth Club said: ‘However necessary, this announcement is brutal for higher earners and investors.
‘Around 250,000 more people will be paying the top rate of tax, many allowances will be frozen until 2028 and the dividend and capital gains tax allowances are being slashed.
‘The good news is there are still plenty of perfectly legitimate ways you can reduce the tax you pay, from investing in pensions and ISAs to crystallising capital gains liabilities now rather than next year.’
Justine Riccomini, head of tax at ICAS said: ‘The Chancellor’s announcement that the 45p additional rate band for income tax will apply at £125,140 from 6 April 2023, instead of the current level of £150,000. This will not apply to Scottish taxpayers in respect of earned income, but will apply to interest income as tax rates are set at a UK wide level.’
The Autumn Statement set out a package of targeted support to help with business rates costs worth £13.6bn over the next five years
The business rates multipliers will be frozen in 2023-24, and upward transitional relief caps will provide support to ratepayers facing large bill increases following the revaluation.
From 1 April 2023, business rate bills in England will be updated to reflect changes in property values since the last revaluation in 2017.
The relief for retail, hospitality and leisure sectors will be extended and increased, and there will be additional support for small businesses.
Upwards transitional relief will support properties by capping bill increases caused by changes in rateable values at the 2023 revaluation. This £1.6bn of support will be funded by the Exchequer rather than by limiting bill decreases, as at previous revaluations.
The ‘upward caps’ will be 5%, 15% and 30%, respectively, for small, medium, and large properties in 2023-24, and will be applied before any other reliefs or supplements.
The 300,000 properties with falls in rateable values will see the full benefit of that reduction in their new business rates bill from April 2023.
Over the life of the three-year list the scheme will support around 700,000 ratepayers.
Support for eligible retail, hospitality, and leisure businesses is being extended and increased from 50% to 75% business rates relief up to £110,000 per business in 2023-24. Around 230,000 properties will be eligible to receive this increased support worth £2.1bn.
Rates increases for the smallest businesses losing eligibility or seeing reductions in small business rate relief (SBRR) or rural rate relief (RRR) will be capped at £600 per year from 1 April 2023. This is support worth over £500 million over the next three years and will protect over 80,000 small businesses who are losing some or all eligibility for relief.
This means no small business losing eligibility for SBRR or RRR will see a bill increase of more than £50 per month in 2023-24.
At Autumn Budget 2021 the government announced a new improvement relief to ensure ratepayers do not see an increase in their rates for 12 months as a result of making qualifying improvements to a property they occupy. This will now be introduced from April 2024. This relief will be available until 2028, at which point the government will review the measure.
Gerry Biddle, business rates lead at Deloitte, said: ‘The Chancellor’s package of benefits for business rate payers was surprisingly generous, amounting to savings of £14bn over next five years.
‘Hospitality, leisure and retail businesses will benefit from a further freeze of the current 50% relief before it increases to 75% with effect from 1 April 2023. It will be available for 12 months, capped at £110,000 relief per business.
‘A typical retailer occupying a unit of £60,000 rateable value will save £7,500 in the 12 months from 1 April 2023.’
Online sales tax abandoned
The government has also announced that it will not go ahead with the online sales tax due to its complexity.
The idea of an online sales tax was put forward by certain stakeholders to ‘rebalance’ the business rates bills paid by in-store retailers in comparison to their online counterparts.
The government’s decision reflects concerns raised about the complexity of the proposed tax and the risk of creating unintended distortion or unfair outcomes between different business models. Stakeholders also expected it would lead to higher prices for consumers.
‘Bringing in a brand new tax to remedy perceived unfairness in the business rates regime would have been a disproportionate way of addressing the challenges facing the high street,’ said the Chartered Institute of Taxation.
‘Introducing a tax that required all transactions to be deemed in or out of its scope, especially where borderlines exist such as goods versus services, business versus private consumers, and the nature of any exemptions or special rules, would have been hugely complex.
‘It has always been our view that online sales tax should not be seen as an alternative to wider business rates reform.’
Employees will see a cut in their National Insurance contributions this month following the reversal of the rise in National Insurance announced in April
National Insurance contributions rose by 1.25% in July for employees and employers under the new health and social care levy designed to raise up to £14bn to fund social care and deal with the NHS backlog following the Covid pandemic.
Following this, since the start of July, workers and employers have been paying an extra 1.25p in the pound.
However, the measure, which was introduced by Boris Johnson’s government, was reversed by former chancellor Kwasi Kwarteng in his mini Budget in September.
It is one of the few economic policies planned by Liz Truss and Kwarteng that has not been scrapped by new chancellor Jeremy Hunt.
The NI cut will be worth an extra £330 on average in 2023-24 affecting almost 28 million people across the UK, while 920,000 businesses will save an average of £10,000.
Working people across the UK will begin receiving the tax cut in their payslips this month via their employer’s payroll, though for some it could be December or January.
The reverse follows the rise in National Insurance thresholds in July, which aimed to lift 2.2 million of the poorest people in the UK out of paying the tax.
All workers earning over the annual national insurance threshold of £12,570 will see a fall in their national insurance bill in November compared to July. Above that level, the rate has gone back down from 3.25% to 2%.
Taken together, the higher thresholds and the Levy reversal means that almost 30 million people will be better off by an average of £500 in 2023-24.
Funding for health and social care services will be maintained at the same level as if the levy were in place.