The Bank of England’s Monetary Policy Committee (MPC) met on 1 August and in a very close 5-4 vote decided to reduce interest rates by 25 basis points to 5%. The 4 remaining members voted to keep the rate at 5.25%.

This was the first interest rate cut announced by the Bank of England since March 2020 and sees the interest rate fall from a 16 year high. The rolling twelve-month CPI inflation was at the MPC’s 2% target in both May and June, and this helped prompt the decision to reduce rates.

Whilst the figures demonstrated that inflationary pressure has eased there remains fears of higher inflation returning. The Governor of the Bank of England, Andrew Bailey was also keen to dampen expectations and point out that there is unlikely to be a succession of interest rate cuts in the near-term.

Delivering opening remarks at a press conference following the announcement, Bailey commented:

‘We need to make sure that inflation stays low. We need to put the period of high inflation firmly behind us. And we need to be careful not to cut rates too much or too quickly – all the while monitoring the evidence on how inflationary pressures are evolving.

The best and most sustainable contribution monetary policy can make to growth and prosperity is to ensure low and stable inflation – and an economy where people can plan for the future with confidence and in which money holds its value.

We have truly come a long way in returning inflation to target.’

The VAT Annual Accounting Scheme is available to most businesses with an annual turnover of up to £1.35 million. Key benefits of the scheme include the obligation to file just one VAT return per year, which can greatly reduce administrative time and costs compared to preparing and submitting quarterly VAT returns.

Designed for small businesses, the scheme can be used alongside the VAT Flat Rate Scheme or with standard VAT accounting. It also allows for regular interim payments throughout the year, which can assist businesses in managing their cash flow.

In order to qualify to join the scheme, the business must be up to date with VAT payments, solvent and new to the scheme. In addition, the business cannot be a division of a company or a part of a group of companies.

Under the scheme, businesses make interim VAT payments based on their last years VAT figures or on an estimated total annual liability for newly VAT registered businesses. These interim payments are followed by a final balancing payment submitted with the annual VAT return, which can be prepared at the same time as the annual accounts.

The final payment for the annual return is due within two months after the end of the 12-month VAT accounting period.

Businesses that are in the scheme can continue using it until their taxable supplies exceed £1.6m or they no longer meet the eligibility criteria.

If you have tenants in your home there can be Capital Gains Tax (CGT) consequences. Generally, there is no Capital Gains Tax (CGT) on a property used as the main family residence, thanks to a relief known as Private Residence Relief (PRR).

However, where part of the home has been let out the entitlement to relief may be affected. Homeowners that let out part of their house may not benefit from the full PRR but can benefit from letting relief. Letting relief is only available to homeowners who live in their property and rent out a portion of it.

The maximum amount of letting relief due is the lesser of:

• £40,000
• the amount of PRR due
• the same amount as the chargeable gain they made while letting out part of their home

Worked example:

• You rent out a large bedroom to a tenant that comprises 10% of your home.
• You sell the property, making a gain of £75,000.
• You're entitled to PRR of £67,500 on the part used as your home (90% of the total £75,000 gain).
• The remaining gain on the part of your home that's been let is £7,500.

The maximum letting relief due is £7,500 as this is the lower of:

• £40,000
• £67,500 (the PRR due)
• £7,500 (the gain on the part of the property that's been let)

There's no Capital Gains Tax to pay – the gain of £75,000 is covered by the £67,500 PRR and the £7,500 letting relief.

You are not considered to be letting out your home if you have a lodger who shares living space with you or your children or parents live with you and pay you rent or housekeeping.

You can access the Check Your State Pension forecast service on GOV.UK via this link: https://www.gov.uk/check-state-pension. This digital service is provided jointly by HM Revenue and Customs (HMRC) and the Department for Work and Pensions (DWP).

The service enables most individuals under State Pension age to view their pension forecast and identify any gaps in their National Insurance Contributions (NICs). This feature is particularly useful for those who want to make voluntary NIC contributions to boost their entitlement to benefits such as the State or New State Pension.

Typically, HMRC permits voluntary contributions for the past 6 tax years, with a deadline of 5 April each year. However, there is currently a special opportunity to address NIC gaps from April 2006 to April 2017 due to transitional arrangements related to the new State Pension. The deadline for making these contributions has been extended several times and is now set for 5 April 2025.

Regularly reviewing your State Pension status is important for optimising your benefits. Additionally, you should consider other savings or pensions you may need for a secure and comfortable retirement.

There are several types of reliefs from Inheritance Tax (IHT), one of which is IHT Business Relief. This can be a significant tax benefit for those with business interests, potentially offering either 50% or 100% relief from IHT on the value of business assets if certain criteria are met.

• 100% Business Relief can be claimed for a business, an interest in a business, or on shares in an unlisted company.

• 50% Business Relief is available for:

• Shares with more than 50% of the voting rights in a listed company.
• Land, buildings, or machinery owned by the deceased and used in a business they were involved with or controlled by.
• Land, buildings, or machinery used in a business and held in a trust benefiting from it.

This relief only applies if the deceased owned the business or asset for at least two years prior to their death.

However, there are limitations, for example, if the company primarily deals in securities, stocks, shares, land, buildings, or investments. In some situations, partial Business Relief might be possible.

Given its complexity, it is crucial to assess whether IHT Business Relief applies based on your specific circumstances.

A new digital VAT registration tool has been launched by HMRC that can be used to help businesses work out the effects of registering for VAT.

The launch of the tool known as the VAT Registration Estimator came about following feedback from small businesses suggested an online tool would be helpful to show when their turnover could require businesses to register for VAT and its effect on profits. HMRC has said that there are more than 300,000 new VAT registrations each year.

A business must register for VAT if:

• their total VAT taxable turnover for the previous 12 months is more than £90,000 (£85,000 prior to 1 April 2024) – known as the ‘VAT threshold’;
• they expect their turnover to go over the £90,000 VAT threshold in the next 30 days; or
• they are an overseas business not based in the UK and supply goods or services to the UK (or expect to in the next 30 days) – regardless of VAT taxable turnover.

HMRC’s Director General for Customer Strategy and Tax Design, said:

'We know that the majority of our customers want to get their tax right. We have listened to what businesses have said and the new tool is designed to help them understand VAT registration, including when they might be required to register.

The VAT Registration Estimator has been developed in partnership with small businesses and trade representatives who tested the online tool and gave feedback before its launch.

We hope it will support businesses’ understanding of VAT registration, especially when combined with our guidance and other services.'

The VAT registration tool is free to use, and it should take around 20 minutes to complete on first use. The estimator is accessed through GOV.UK guidance pages, rather than the Government Gateway. HMRC has said they will not record any details that you input.

The VAT Registration Estimator can be found at the foot of this webpage https://www.gov.uk/guidance/check-what-registering-for-vat-may-mean-for-your-business

The new Chancellor of the Exchequer, Rachel Reeves, delivered her widely anticipated House of Commons statement on 29 July 2024. The Chancellor asserted that the new government has inherited a £22bn hole in the public finances. The Chancellor said that she will take the “difficult decisions” necessary to find £5.5 billion of savings this year and £8.1 billion next year.

The main measures announced by the Chancellor included the following:

• The scrapping of the Winter Fuel Payment for those not in receipt of Pension Credit from this year onwards. The Government will continue to provide Winter Fuel Payments worth £200 to households receiving Pension Credit or £300 for households in receipt of Pension Credit with someone aged over 80. Winter Fuel Payments are devolved in Scotland and Northern Ireland.
• VAT will be charged at the standard rate of 20% on private school fees from 1 January 2025. This will apply to any fees for the term starting in January 2025 that are charged from 29 July 2024.
• The planned cap on care costs for adult social care due to be introduced in October 2025 has been scrapped.
• The scrapping of the Rwanda migration partnership and scrapping retrospection of the Illegal Migration Act.
• The cancelling of a number of large-scale road and railway schemes.

A date for the next Budget was also confirmed. The Chancellor announced that this will take place on Wednesday 30 October 2024. The Chancellor restated Labour’s manifesto commitment not to increase the basic, higher or additional rate of income tax, National Insurance or VAT.

However, we can expect additional tax and spending cuts in the upcoming Budget. The Chancellor still has scope to increase other taxes including Capital Gains Tax, Inheritance Tax, Stamp Duty and Fuel Duties at the upcoming Budget.

1 September 2024 – Due date for corporation tax due for the year ended 30 November 2022.

19 September 2024 – PAYE and NIC deductions due for month ended 5 September 2024. (If you pay your tax electronically the due date is 22 September 2024)

19 September 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2024.

19 September 2024 – CIS tax deducted for the month ended 5 September 2024 is payable by today.

1 October 2024 – Due date for Corporation Tax due for the year ended 31 December 2023.

19 October 2024 – PAYE and NIC deductions due for month ended 5 October 2024. (If you pay your tax electronically the due date is 22 October 2024.)

19 October 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2024.

19 October 2024 – CIS tax deducted for the month ended 5 October 2024 is payable by today.

31 October 2024 – Latest date you can file a paper version of your 2023-24 self-assessment tax return.

The number of people classed as economically inactive has spiraled to 9.4 million.

Data published by the Office for National Statistics (ONS) shows the percentage of people employed has fallen to 74.4%, while a near record 2.8 million people are now out of work due to long-term sickness.

The figures come a week after the Secretary of State set out how the Government’s plan to get Britain working will tackle economic inactivity and drive growth in every corner of the country.

 Alongside action to make work pay, overhaul skills and address the root causes of worklessness, including poor physical and mental health, the plan will deliver:

• 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.

Work and Pensions Secretary, Liz Kendall MP said:

“Spiralling economic inactivity, rising unemployment and the UK standing alone as the only G7 country where the employment rate is still not back to pre-pandemic levels. This is a truly dire inheritance which the Government is determined to tackle.

Behind these statistics are real people, who have for too long been ignored and denied the support they need to get into work and get on at work.

It’s time for change – in every corner of the country. That is why we are taking immediate actions to deliver on our growth mission, and spread jobs, prosperity, and opportunity to everyone, wherever they live.

Our Plan to Get Britain Working again will overhaul jobcentres, deliver a youth guarantee, and give local areas the power they need to tackle economic inactivity and break down barriers to a brighter future.”

New UK Science Secretary, Peter Kyle, has put Artificial Intelligence or AI at the heart of the government’s agenda to deliver change, sustained economic growth and improved public services.

The Secretary of State has appointed Tech entrepreneur and Chair of Advanced Research And Invention Agency (ARIA), Matt Clifford, to kick-start this work. He will deliver a new AI Opportunities Action Plan to identify ways to accelerate the use of AI to improve people’s lives by making services better and developing new products.

As well as exploring how to build a UK AI sector that can scale and compete on the global stage, the plan will also set out how to boost take-up of the technology across all parts of the economy, and consider the necessary infrastructure, talent, and data access required to drive adoption by the public and private sectors.
 
The Action Plan will play a vital role in driving up productivity and kick-starting economic growth. Estimates from the International Monetary Fund (IMF) show that while the exact economic impact hinges on the wider development and adoption of AI, and realisation could be gradual, the UK could ultimately see productivity gains of up to 1.5% annually.

Matt Clifford will deliver a set of recommendations to the Science Secretary in September. Alongside this, Department for Science, Innovation and Technology (DSIT) – acting as the digital centre of government – will also establish an AI Opportunities Unit to bring together the knowledge and expertise to take full advantage of AI and implement recommendations from the Action Plan.

The VAT Import One Stop Shop (IOSS) Scheme applies to goods imported in consignments with a value of £135 or less (known as low value goods) from countries outside the EU and Northern Ireland, to consumers in the EU, Northern Ireland, or both.

The IOSS Scheme can be used to report and pay VAT due on imports of low value goods to consumers (B2C sales) in the EU, Northern Ireland, or both.

To use the scheme your goods must:

• be located in a country outside the EU and Northern Ireland at the point of sale;
• have a consignment value of £135 or less; and
• be sold to a consumer in the EU or Northern Ireland.

If you only sell through an online marketplace, they should have already registered in their name for the IOSS. This means that the online marketplace is responsible for reporting and paying any VAT due.

The IOSS scheme is available to:

• businesses in Northern Ireland; and
• businesses in countries that the EU has concluded and recognises an agreement with, on the mutual assistance for the recovery of VAT — currently only Norway.

You must follow the normal VAT rules if you sell goods imported in consignments with a value of more than £135.

The Let Property Campaign provides landlords who have undeclared income from residential property lettings in the UK or abroad with an opportunity to regularise their affairs by disclosing any outstanding liabilities whether due to misunderstanding the tax rules or because of deliberate tax evasion. Participation in the campaign is open to all residential property landlords with undisclosed taxes. The campaign is not suitable for those letting out non-residential properties.

Landlords who do not avail of the opportunity and are targeted by HMRC can face penalties of up to 100% of the tax due together with possible criminal prosecution. Taxpayers that come forward will benefit from better terms and lower penalties for making a disclosure. Landlords that make an accurate voluntary disclosure are likely to face a maximum penalty of 0%, 10% or 20% depending on the circumstance on top of the tax and interest due. There are higher penalties for offshore liabilities.

There are three main stages to taking part in the campaign, notifying HMRC that you wish to take part, preparing an actual disclosure and making a formal offer together with payment. The campaign is open to all individual landlords renting out residential property. This includes, amongst others, landlords with multiple properties and specialist landlords with student or workforce rentals. Once HMRC have been notified of the wish to take part in the campaign, landlords usually have 90 days to calculate and pay any tax owed.