HMRC has revised interest rates with late payment bills charged 7.75% from 22 August, the highest rate since 2001
The late payment and repayment interest rates follow the rise in the Bank of England base rate to 5.25% on 3 August and are applied to the main taxes and duties that HMRC currently charges and pays interest. The rates will rise to:
- late payment interest rate — 7.75% from 22 August 2023
- repayment interest rate — 4.25% from 22 August 2023
This means that the late payment interest rate will increase by 0.25% to 7.75% from 22 August. The last rate increase was on 11 July. Rates were last this high in August 2007.
Late payment interest is payable on late tax bills covering income tax, National Insurance contributions, capital gain tax, corporation tax pay and file, stamp duty land tax, stamp duty and stamp duty reserve tax. The corporation tax pay and file rate also increases to 7.75%.
Repayment interest will also be increased from the current 4% rate to 4.25%.
Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments rises to 6.25% from 6% for the earlier date of 14 August.
With late payment interest now 2.5% above the Bank of England base rate, HMRC continues to pay lower interest to taxpayers affected by overpayments of tax at 4.25%, up from 4%.
The interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments rises to 5% from 4.75% from 14 August.
Following a trial, messages on the estimated time it will take to speak to an adviser were extended to more HMRC helplines from 4 July
The message will be played at the start of the call so taxpayers can make an informed choice about whether they want to hang on, use HMRC’s online services or call back another time.
During the trial period, it was clear that callers abandoned calls as the average wait time halved from 40 to 20 minutes. HMRC did not provide figures on how many callers refused to wait for a call handler and used alternative HMRC services to resolve queries, or called back later when lines could have been less busy.
Call wait time messages are based on the previous day’s average and will be included on the following helplines:
- child benefit;
- Construction Industry Scheme;
- National Insurance;
- online services;
- tax credits; and
In the update in the latest stakeholder digest, HMRC said: ‘Expected call wait times are already given on the PAYE helpline. This has proved successful with a significant number of customers choosing to leave the queue and resolve their query elsewhere.
‘We’ve been able to take more calls from customers who still need to speak to us, and wait times reduced from 40 minutes at the start of the trial, to consistently below 20 minutes.
‘We want to be open and transparent about how long our customers can expect to wait and encourage the use of our digital services which are quicker and easier than calling us.’
Late last month HMRC announced plans to shut the self assessment helpline over the summer and transferred the 350 call handlers to other telephone services during the three-month closure. HMRC argued that the decision was taken to improve overall customer service levels which have come under fire as agents, accountants and the public have faced lengthy waits to access HMRC call centres.
HMRC is in the midst of a major back office IT upgrade, which involves moving more services to cloud-based platforms to improve response times.
HMRC service levels continue to decline as only 61% of callers managed to get through to an adviser by phone in the latest performance report
This marked a 10% decline in successful call connections from an average of 71% over the period April 2022 to March 2023. In the month HMRC received nearly four million calls with 2.9m wanting to speak to an adviser. The previous month HMRC said it had only received 3.23m calls.
On average it took nearly 21 minutes (20:59) to answer calls, while more than two thirds (69%) of callers waited more than 10 minutes to get through to an HMRC adviser.
In March 2023, the 61.3% of positive call connections marked a significant decline from 66.1% a year ago. In November last year, HMRC managed to answer 78.4% of calls, illustrating a worrying drop in service levels over the five month period.
Despite HMRC’s attempts to direct people to web services and webchat to answer queries, there is still very high demand for advice from HMRC staff.
There was also a fall in caller satisfaction with HMRC phone service declining by less than 4% to 75.7% although this figure includes all interaction with phone, webchat and digital services. However, this was the lowest score recorded in the last 12 months.
Recently HMRC said it was transferring call centre staff to handle the huge backlog of post as the performance report showed that 10% of post took more than 40 days to deal with.
ICAS chief executive Bruce Cartwright said: ‘Our members are increasingly telling us that they face severe delays and frustration when dealing with HMRC. Poor HMRC service levels are having a significant impact on taxpayers and businesses.
‘We and other professional bodies, continue to urge the government to invest more in HMRC to make sure they have enough resources to deliver at least an adequate service. Right now, this just isn’t the case.
‘Without an increase in funding and resources, HMRC seems unable to improve their service and support to taxpayers to acceptable levels.’
Tax credit claimants need to be on their guard against fraudsters, as HMRC warns of increasing use of text messages by scammers
According to the National Cyber Security Centre, HMRC was the third most spoofed government body in 2022, behind the NHS and TV Licensing.
HMRC has issued an alert providing details of a number of new scams that aim to trick people into handing over money or personal information, including claims that a taxpayer’s National Insurance number has been used in a fraud.
In the year to April 2023 HMRC responded to 170,234 referrals of suspicious contact from the public. Of these, 68,437 were related to bogus tax rebates.
HMRC worked with the telecoms industry and Ofcom to remove 212 phone numbers being used to commit HMRC-related phone scams in the last year and responded to 58,186 reports of phone scams in total.
The number of scams has gone up dramatically in the last three years from only 425 phone scams in April 2020.
The scale of the problem was highlighted by the tens of thousands of fake web pages containing malicious information about HMRC and ways to claim tax credits. In a single year, 26,922 malicious web pages were reported to HMRC for takedown.
Criminals use deadlines – like the tax credits renewal deadline on 31 July – to target their victims and the department is warning around 1.5 million tax credits claimants to be alert to scams that mimic government communications to make them appear genuine.
Scam messages can be convincing, and individuals may be pressured into make rushed decisions. HMRC will never ring anyone out of the blue making threats or asking them to transfer money.
Typical scam examples include:
- emails or texts claiming an individual’s details are not up to date and that they risk losing out on payments that are due to them;
- emails or texts claiming that a direct debit payment has not ‘gone through’;
- phone calls threatening arrest if people do not immediately pay fake tax owed;
- claims that the victim’s National Insurance number has been used in fraud; and
- emails or texts offering spurious tax rebates or bogus grants or support.
Myrtle Lloyd, HMRC’s director general for customer services, said: ‘Tax scams come in many forms and we’re urging customers to be alert to the tactics used by fraudsters and never to let yourselves be rushed.
‘If someone contacts you saying they’re from HMRC and asks you to give personal information or urgently transfer money, be on your guard. Search ‘HMRC scams’ advice on gov.uk to find out how to report scams and help us fight these crimes.’
HMRC is also urging tax credits customers to be alert to misleading websites or adverts asking them to pay for government services which are free, often by charging for a connection to HMRC helplines.
HMRC is currently sending out tax credits renewal packs to customers and is reminding anyone who has not received theirs to wait until after 15 June before contacting HMRC.
Taxpayers can renew their tax credits for free via gov.uk or the HMRC app.
HMRC has a video on YouTube explaining how tax credits claimants can use the HMRC app to view, manage and update their details.
By the end of 2024, tax credits will be replaced by Universal Credit. Customers who receive tax credits will receive a letter from the Department for Work and Pensions (DWP) telling them when to claim Universal Credit. It is important that people claim by the deadline shown in the letter to continue receiving financial support as their tax credits will end even if they decide not to claim Universal Credit.
HMRC is also warning people not to share their HMRC login details with anyone else. Someone using these could steal from the account owner or make a fraudulent claim in their name and leave the individuals having to pay back the full value of any fraudulent repayment claim made on their behalf.
- criminals are cunning – protect your information.
- take a moment to think before parting with your money or information.
- use strong and different passwords on all your accounts so criminals are less able to target you.
- do not trust caller ID on phones. Numbers can be spoofed.
- if you’re unsure about a text claiming to be from HMRC forward it to 60599, or an email to firstname.lastname@example.org. Report a tax scam phone call on gov.uk.
- contact your bank immediately if you’ve had money stolen, and report it to Action Fraud. In Scotland, contact the police on 101.
The government plans to move rapidly to a digital only approach to communications with HMRC to reduce admin costs and cut use of call centres
To achieve this the government intends to reform the rules about how taxpayers give consent to communicate digitally with HMRC by making it the default position.
The changes are in line with HMRC’s longer term strategy to increase the use of self-serve and digital channels and to provide services that are ‘easy to use, with increased support to remove barriers to digital services where appropriate’.
It also admits that HMRC guidance needs to be improved to make it more accessible and understandable for taxpayers.
In future, HMRC will provide less choice around the non-digital channels it offers to taxpayers such as telephone calls and post to reduce the use of these channels, where users are able to go digital.
HMRC’s aim is to improve the range and accessibility of its digital services and move as much taxpayer interaction to self-serve digital channels as possible. At the same time, HMRC will look to increase automation and the ability to self-serve in its non-digital channels wherever possible, while providing support for those who need it.
Many taxpayers already do some of their tax online, using their personal tax account, business tax account and the HMRC app. ‘As these services have been developed separately over the last few years, they have not always offered a unified and consistent experience to taxpayers,’ HMRC said.
As part of the overhaul, HMRC aims to introduce a new single customer account for all taxpayers.
HMRC aims to implement its first phase of transforming digital services through the single customer account by 2025. This will focus on transforming services for individual taxpayers and account functionality, with business needs addressed in later phases.
Part of the plan will focus on improving sign in, security and subscription to digital services. HMRC will also start rolling out features to enable taxpayers to change their details (phone numbers, emails, address, marital status) online in a single place and have those changes apply to all services to which they are subscribed.
The proposals also aim to reduce the volume of post sent out by HMRC, which currently sends around 70 million items by post annually, at a cost to the taxpayer of around £40m.
Over the next two years, HMRC will start to reduce the higher volume letters and forms it sends out on paper and will instead provide these through digital channels. It will also do this for some key inbound forms.
It has already confirmed that it will require the minority of digitally capable employers who still submit P11D and P11D(b) forms (reporting employee benefits and expenses) on paper to use online forms from April 2023. It will then move to providing digitally capable employers with P6 and P9 coding notices solely using digital methods.
HMRC is seeking views on whether all, but digitally excluded taxpayers should be required to register for income tax for self assessment (ITSA) online, through their digital tax account.
Using the digital by default approach, HMRC would assume consent from the taxpayer to receive future ITSA communications digitally, unless they opted out. HMRC would then deliver the taxpayer’s first notice to file digitally and require the first and subsequent annual ITSA returns to be delivered digitally.
Before implementing these changes HMRC said it would ensure there was a high level of taxpayer satisfaction with the digital registration service. It also said there would be sufficient advance notification of the move with advance communications with agents, accountants and taxpayers.
There are also plans to reform the repayment process with a push to digital only approach.
Recent research found that participants were keen to see fewer steps in the repayments process and some found the sign up and authentication process to be a barrier and were keen to see a simplified approach.
There was also low awareness of the process for claiming repayments digitally and taxpayers said that P800 notifications could often be missed or not acted upon.
On PAYE overpayments, HMRC plans to contact taxpayers to offer a choice between receiving a digital payment or requesting a payable order instead of sending a payable order after 21 days if the taxpayer takes no action.
This will help to prevent payable orders being sent to incorrect addresses and will allow taxpayers to self-serve and get their repayments more quickly, which will also reduce HMRC’s printing and paper costs.
HMRC is also looking at ways to improve the accuracy of tax codes and wants to better understand how it can try to get tax codes more reflective of an individual’s circumstances more quickly when circumstances change through job moves and additional of employee benefits such as company cars.
The majority of employers report errors with employee tax codes, while there can be long delays in resolving allocation of the wrong tax code at HMRC
As people start to receive notification of their tax codes for 2023/24, survey of mid-market businesses by BDO showed that 99% of employers have experienced issues with their employees’ tax codes.
More than half of employers (51%) said their staff did not understand what their tax codes mean.
The survey also found that almost the same proportion of respondents (49%) said that employees had complained about coding errors which in some cases had led to them receiving catch-up bills for unpaid tax in later years.
Almost a third (31%) pointed to problems relating to delays in the time it took to rectify incorrect tax codes with HMRC.
Each code is made up of a combination of numbers and letters, the numbers relating to the tax-free income to which the employee is entitled while the letters refer to a taxpayer’s personal situation and how it affects their personal allowance.
HMRC does provide some explanations for taxpayers but the system is complex.
Paul Falvey, tax partner at BDO said: ‘HMRC has to implement complex tax laws. The tax code system is a clever way to do that but it isn’t infallible. All it can do is impose its best estimate of tax deductions for the year. This leaves some people ending up underpaying tax and having to pay a catch-up bill: obviously, this can breed distrust in the system.
‘Tax codes aren’t simple to understand, and there is undoubtedly more that HMRC could do to help people understand why they have been assigned a particular code.’
Tax codes are complex and there are 20 letter combinations listed on the gov.uk website, with further codes (W1, M1 or X at the end) denoting emergency tax.
There is also a K code which denotes that tax due to be collected is worth more than the tax-free allowance. This can often happen when an employee has to pay tax owed from a previous year.
A common complaint cited by 38% of respondents was the erroneous or excessive use of emergency tax codes. These are applied if HMRC does not get an employee’s income details in time after a change in circumstances, such as a new job, or starting work for an employer after a period of self-employment. While these codes are temporary, they can cause cashflow problems for employees, and particularly for workers on lower incomes.
Falvey added: ‘There are things that taxpayers can do to make sure the right amount of tax is collected. We would always advise taxpayers to check their tax codes, by logging into their personal tax account. This is where you can check the estimates of how much income you’re expected to get from your jobs and pensions.
‘You can also inform HMRC about any changes that are likely to affect your tax code during the tax year. Helping HMRC to get it right means you shouldn’t have any nasty surprises later. For example, if you claim child benefit but you or your partner’s income goes over £50,000, telling HMRC straight away means that the high income child benefit charge can be collected through your tax code to avoid building up tax debts – although you will still have to report this on your tax return.
‘Common issues are around the emergency tax being applied when someone starts a new job or takes on an additional part-time job. Problems can also arise with the wrong income tax being taken from pension payments.
‘While it’s unlikely we’ll see any meaningful reform of tax codes in the near future, HMRC could probably do a better job of rectifying errors quickly so that people aren’t left out of pocket.’
HMRC has issued a reminder to millions of married couples to make sure they are claiming the £1,260 marriage allowance tax break
While more than 2.1 million couples claim marriage allowance, HMRC estimates that up to 2.4m couples are missing out because they do not realise they may be eligible, particularly couples where one partner has retired, has given up work to take on caring responsibilities, or is unable to work due to a long-term health condition.
All claims should be made on HMRC and do not use a third party provider as they will take a large cut of the allowance through commission fees.
Marriage allowance is worth up to £252 a year, equivalent to around 10% of an individual’s tax-free personal allowance. The maximum amount that can be transferred to their husband, wife or civil partner is dependent on the personal allowance for that tax year.
It is worth noting that claims can be backdated to April 2018.
Taxpayers earning less than £12,570 a year can transfer up to £1,260 of their personal allowance to their higher earning partner, to reduce the amount of tax they pay. They can backdate their claim to include any tax year up to 6 April 2018, which could be worth up to £1,242 in tax relief.
Trusha Shah, tax manager at HW Fisher said: ‘It might not be the most romantic reason to propose, but there are tax benefits to consider if you are getting married. Eligible married couples, or those in a civil partnership can reduce their tax by up to £252 via the marriage allowance.’
Couples can use the marriage allowance calculator on gov.uk to check if they are eligible for the tax break.
Angela MacDonald, HMRC’s deputy chief executive, said: ‘We want every eligible couple to benefit from marriage allowance tax relief. Couples whose circumstances have changed – perhaps one of them has stopped working or taken a lower paid job – may not realise they are entitled to claim.
‘It’s easy to find out what you may be due – search ‘marriage allowance calculator’ on gov.uk to get started. By applying on gov.uk, rather than through a third party, you get to keep 100% of the tax relief due.’
Couples could claim marriage allowance if the following criteria applies:
- married or in a civil partnership;
- do not pay income tax, or their income is below the personal allowance of £12,570;
- their partner pays income tax at the basic rate – which typically means their income is between £12,571 and £50,270.
|Tax year||Marriage allowance|
Married allowance can be cancelled on gov.uk if a couple’s circumstances change.
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?’
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.