15th November 2024 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Base rate drops to 4.75%
As had been widely expected, the Bank of England reduced the interest base rate to 4.75% last week. This was due to inflationary pressures easing in recent weeks.

The Bank expects inflation to increase slightly again over the next year to around 2.75% and then fall back to the 2% target after that.
In their quarterly report, the Bank outlined that they will be taking a cautious approach and so will not be cutting rates too quickly or too much. It seems unlikely there will be a further cut when the Bank next meet on December 19^th.

However, the Bank have said that “if things evolve as expected, it’s likely that interest rates will continue to fall gradually.”
Obviously, a rate cut can be a mixed blessing depending on whether your business is investing or borrowing. However, if inflation is stabilising this may mean a more stable economy and more certainty for businesses in the year ahead.

See: https://www.bankofengland.co.uk/monetary-policy-report/2024/november-2024
 
Agricultural and business property relief: What happened in the Budget?
Changes to inheritance tax were announced in the Budget that have caused consternation to farmers and business owners across the UK. What exactly is changing and what could this mean for you?

What are agricultural and business property relief?
Agricultural property relief (APR) is a type of inheritance tax relief that helps reduce the amount of tax that is paid when farmland is being passed down to the next generation. Currently, the relief has no financial limit, meaning regardless of the value of the farmland, it could be passed on with no inheritance tax payable.

Business property relief (BPR) is similar but relates to business assets included in a person’s estate. Again, this relief currently applies without any financial limit to the relief.

Clearly, both reliefs have played an important role in families being able to pass on agricultural and business assets without having to worry about inheritance tax.

What changed in the budget?
Based on the Autumn Budget announcement, there will be a new £1 million limit where 100% relief will be given. The relief will then reduce to 50% on the value that exceeds £1 million.

It is important to note that the £1 million allowance is a combined one for APR and BPR purposes. An estate that has both qualifying business and agricultural assets will only have a single £1 million allowance to use.

In addition, (quoted) shares that are designated as “not listed” on the markets of recognised stock exchanges, such as AIM, will only ever get 50% relief regardless of whether they would otherwise qualify as agricultural or business assets.

When will the change take effect?
The intention is that this change will take effect from 6 April 2026. So, these changes do not take immediate effect and mean that there could be some scope for planning or transferring of assets that will minimise your exposure to inheritance tax when the new limits come into force.

If I have agricultural assets valued at more than £1 million, will I have to pay inheritance tax?
Not necessarily. Inheritance tax is calculated by first deducting any reliefs (such as APR and BPR) and then deducting any allowances that apply. Each individual has a nil rate allowance, currently £325,000, and there is a residence nil-rate band limit of £175,000.

What should I do now?
If your estate is likely to be subject to inheritance tax, then it can pay to consider using some estate planning strategies to reduce your exposure to inheritance tax. As a starting place, it is a good idea to assess the current value and makeup of your estate.

Please get in touch with us if you would like any help with doing this, or if you would like to discuss whether there are any estate planning strategies that are open to you. We would be happy to help you!
 
Self-assessment tax returns: Counting down to 31 January
HM Revenue and Customs (HMRC) have begun reminding taxpayers that time is ticking for getting self-assessment tax returns filed in time for the 31 January 2025 deadline.

More than 3.5 million tax returns have already been submitted, however HMRC are anticipating more than 12 million in total needing to be filed by the end of January. So, HMRC are encouraging people to submit their return as early as possible.

Filing earlier does have some advantages, such as avoiding a last-minute panic, and knowing how much any tax payment will be in time to be able to budget for it.

If you need to complete a self-assessment tax return this year but haven’t completed one before, then you will need to register first before you can sent your tax return. The registration process can take a few days so it is best to start this in good time before the end of January.

If you would like any help with completing your tax return, please feel free to contact us at any time and we would be happy to help you.

See: https://www.gov.uk/government/news/on-your-marks-100-days-to-file-self-assessment
 
UK export opportunities in the Caribbean
Marking the second event of its kind, the UK-Caribbean Trade and Investment Summit was held in London last week. Organised by UK Export Finance (UKEF), the UK’s export credit agency, the summit brought together UK and Caribbean government officials, as well as senior investors, to discuss business partnerships and financing for projects across the Caribbean.

In the year leading up to April 2024, UK exports to the Caribbean countries involved in CARIFORUM reached £2.7 billion, a substantial 36% increase compared to the previous year.

The forum highlighted the huge potential represented by trade and investment between the UK and rapidly growing Caribbean economies. UKEF is helping UK businesses access billions of pounds in financial support to win and deliver projects in the region. With expanded financing now available in countries like Jamaica, Guyana, Trinidad & Tobago, and more recently Grenada, St Lucia, and St Kitts & Nevis, UK firms have significant opportunities to enter or grow in these markets.

Several UK companies are already benefiting from UKEF’s support. For instance, Severfield Steel won a £4.5 million contract to supply materials for a hospital project in Georgetown, Guyana. In Jamaica, Lagan Construction completed a $7 million resurfacing project at Norman Manley International Airport and is now set to undertake further work in Bermuda.

See: https://www.gov.uk/government/news/uk-caribbean-trade-and-investment-summit-brings-uk-export-opportunities
 
New “failure to prevent fraud” offence for large organisations
A new corporate criminal offence of "failure to prevent fraud" is set to take effect from 1 September 2025, following its introduction in the Economic Crime and Corporate Transparency Act.

This law holds large organisations criminally liable if they benefit from fraudulent acts carried out by an employee, agent, subsidiary, or other associated person on their behalf.

A “large organisation” is defined in the legislation as meeting two out of three of the following criteria:

• More than 250 employees
• More than £36 million turnover
• More than £18 million in total assets

These criteria, and the obligations to prevent fraud, apply to the whole organisation, including subsidiaries. This is regardless of where the organisation is headquartered or where its subsidiaries are located.

The aim is to make it harder for businesses and other large organisations to turn a blind eye to fraud within their ranks, encouraging proactive fraud prevention in a similar way to the UK’s “failure to prevent bribery” law introduced in 2010.

The offence means that, if an organisation is prosecuted for fraud committed by someone associated with it, the organisation must show it had reasonable fraud prevention measures in place when the fraud occurred. Examples of fraud could include dishonest sales practices, the hiding of important information from consumers or investors, or dishonest practices in financial markets.

Newly issued guidance, developed with input from agencies including the Serious Fraud Office, Financial Conduct Authority, HMRC, and the Crown Prosecution Service, offers advice for organisations preparing for the change.

Nick Ephgrave of the Serious Fraud Office stressed the urgency for companies to implement robust fraud prevention strategies before the offence becomes enforceable, warning that failure to do so could lead to criminal investigations.

With fraud now accounting for roughly 40% of crime in England and Wales, it is hoped these measures will help protect businesses and the public from the damaging effects of fraud.

To review the guidance, see: https://www.gov.uk/government/publications/offence-of-failure-to-prevent-fraud-introduced-by-eccta
 
Financial markets approve of Trump winning the presidency
Immediately following the US election results and Donald Trump’s win, the dollar made gains against other currencies. The FTSE 100 index also went up on Wednesday afternoon by 1%.

The positive moves appear to be based on Trump’s plan to cut taxes and raise tariffs, as these will cause inflation to increase and reduce the speed at which interest rates are cut.

US interest rates staying higher for longer will mean that investors get a better rate of return on savings and investments they hold in dollars.
However, there are concerns that the UK economy could be detrimentally affected by Trump’s proposals around trade, and lead to a slow-down in growth.

Financial markets are of course fickle, so by the time you read this article things could have changed again. However, it is useful to maintain a broad awareness of what is happening in the financial markets.

Financial markets influence the price of commodities, currency exchange rates and interest rates. So being aware of trends may help you to manage cash flow for increasing costs, or it may help you to time when you borrow so as to get a lower interest rate.

Consumer spending power and confidence are also affected by the same factors that influence the financial markets. So, trends in the financial markets, particularly when you can identify the reasons for them, can give you an idea of how your customers are thinking. These insights can help you to prepare and adjust as needed.

See: https://www.bbc.co.uk/news/articles/c6246e3w935o
 
Funding granted to small businesses on rural transport projects
The UK government has awarded £1.2 million in funding to small businesses for projects to boost transport links in rural areas.

Through the Rural Transport Accelerator Fund, eight small businesses have received £150,000 each to develop digital tools and other innovations that will improve connectivity for rural communities. By partnering with local authorities, these projects will support rural jobs, community wellbeing, and local economies, with trials beginning in areas from Norfolk to Scotland.

Among the winning projects are digital solutions to address the specific needs of rural residents. For instance, You.Smart.Thing will trial a demand-responsive tool in Warwickshire to help residents without access to a car find shared or community transport options. Another project by UrbanTide will map patient journeys to NHS hospitals in Fife, helping healthcare providers address gaps in transport for those needing hospital services. Additional projects will focus on predictive tools for rural transport needs and creating safer cycling routes using recycled car tyres.

Future of Roads Minister Lilian Greenwood highlighted the unique transport challenges faced by rural residents, emphasising that these projects will allow easier access to essential services, from grocery shopping to hospital appointments.

See: https://www.gov.uk/government/news/12-million-to-boost-rural-transport-in-the-uk
 
CMA provisionally approves Vodafone and Three merger
The Competition and Markets Authority (CMA) have provisionally concluded that with certain commitments the proposed merger of Vodafone and Three would not be a competition concern.

Vodafone and Three first proposed merging in June last year, however the CMA have been investigating the proposed deal because of concerns that the merger would lead to higher prices for customers as well as harming mobile virtual network operators.

The CMA have identified remedies including a commitment to upgrading the merged company’s network across the UK, including 5G rollout, and short-term customer protections that would solve competition concerns and allow the merger to go ahead.

Currently, O2 and EE are the largest operators in the mobile market. While merging Vodafone and Three would reduce the main operators from four to three, by applying the remedies, it is thought that the merger would result in three more equal networks that could aid competition in the long run.

Responses are due to the CMA this week and then it will make its final decision by December 7^th.

See: https://www.bbc.co.uk/news/articles/ckgznpx44q3o
ICO guidance on using AI for recruitment
As use of artificial intelligence (AI) tools to help with employee recruitment increases, the Information Commissioner’s Office (ICO) has published guidance on key data protection considerations.

While AI tools can help you improve efficiency in the hiring, there is need for caution. AI tools can unfairly exclude jobseekers from roles or compromise their privacy. ICO recently audited a number of providers and uncovered several areas where improvement is required leading to almost 300 recommendations being made. ICO plans to continue working with these businesses over coming months.

The ICO is also encouraging any organisation that is planning to use an AI tool for recruitment to make sure that their provider is complying with data protection law.

The key questions provided by the ICO are as follows:

1. Have you completed a Data Protection Impact Assessment (DPIA)?
2. What is your lawful basis for processing personal information?
3. Have you documented responsibilities and set clear processing instructions?
4. Have you checked the provider has unmitigated bias?
5. Is the AI tool being used transparently?
6. How will you limit unnecessary processing?

To review the questions in more detail, please see the ICO’s guidance at: https://ico.org.uk/about-the-ico/media-centre/news-and-blogs/2024/11/thinking-of-using-ai-to-assist-recruitment-our-key-data-protection-considerations/
 
Stress awareness week reminders from HSE
Last week was Stress Awareness Week 2024. The Health and Safety Executive (HSE) used the occasion to remind employers of their need to carry out their legal duty to prevent work-related stress and support good mental health at work.

According to HSE figures, 17.1 million working days were lost to work-related stress in 2022/23. An average employee suffering from work-related stress, depression or anxiety takes an average of 19.6 days off work a year, almost the equivalent of a working month.

Clearly, it is in an employer’s interest to do what it can to reduce and minimise stress in the workplace.

Employers have a legal duty to:

• Carry out risk assessments for stress and then act on them.
• Take steps to prevent work-related stress.
• Write down the risk assessment if there are five or more employees. (It is still recommended to write it down if you have less employees.)

The HSE provides free online learning, a risk assessment template and a ‘talking toolkit’ that can help structure your conversations with staff.

See: https://press.hse.gov.uk/2024/11/03/stress-awareness-week-employers-have-to-fulfil-legal-duty

8th November 2024 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Autumn 2024 Budget speech: History in the making?
On 30 October 2024, Rachel Reeves delivered her first Budget speech. As the first Budget speech ever delivered by a female Chancellor of the Exchequer, the occasion was bound to be one for the history books regardless of what was said.

The Chancellor’s speech lasted 76 minutes and right from the start she claimed that difficult decisions were having to be made because of the £22bn ‘black hole’ left in the public finances by the previous government.

Once the speech had concluded there was a feeling that the Budget may not have been as bad as we might have expected. This is likely the effect the Chancellor was hoping for and may have had something to do with the fact that the main way of increasing taxes – from a rise in Employers National Insurance (NI) – had already been strongly indicated before the Budget took place.

For working people, the Budget maintained the status quo with no increases to income tax, national insurance or VAT. The personal allowances and tax rate bands were frozen by the previous government as a way of raising taxes known as ‘fiscal drag’. This is because as pay increases, more earnings are likely to be taxed at higher rates. The Chancellor did promise that from 2028/29, personal tax thresholds would be uprated in line with inflation once again.

However, businesses were one of the big losers in the Budget, largely through the aforementioned Employers NI increases as well as increases to the minimum wage rates, which are both explored in the two articles below.

Retail, hospitality and leisure (RHL) businesses received some support through continued business rates relief. For the 2025/26 tax year, RHL businesses will be given a 40% relief on their business rates, subject to a cap of £110,000 per business. The small business multiplier will also be frozen in 2025/26.

These are interim measures as the government intends to introduce permanently lower tax rates for RHL properties with rateable values under £500,000 from 2026/27.

The Chancellor also announced investments in public services and home building. These may mean contracts and work for businesses across various sectors.

If you are concerned about how any of the Budget measures will affect you and your business, please get in touch at any time and we will be happy to provide you with personalised advice.
 
Businesses count the cost of increases to Employers National Insurance
As has been widely expected in the last few weeks, the Chancellor, Rachel Reeves, made some significant changes to the Employers National Insurance (NI) rate and threshold in the Autumn Budget.

From 1 April 2025, the rate for Employers National Insurance (NI) will increase from 13.8% to 15%. At the same time, the level at which employers start paying national insurance on each employee’s salary will be reduced from £9,100 per year to £5,000. The combination of these two changes means a potentially significant increase in payroll costs for businesses.

To counteract this, the employment allowance will be increased from its current £5,000 to £10,500. The Chancellor claimed that this would mean that “865,000 employers won’t pay any National Insurance at all next year and over 1 million will pay the same or less than they did previously.”

An employer who employs 4 full time (35 hours per week) employees at the National Living Wage rate will not have to pay NI on their wages.
However, there is some encouraging news for larger businesses. Previously the Employment Allowance could only be claimed by an employer if their Employers NI liability was less than £100,000 in the tax year. This restriction will be removed and mean that all employers that otherwise qualify will be able to reduce their national insurance liability by £10,500.

Businesses planning their headcount and budgeting payroll costs for next year will want to factor in the increased national insurance costs. If you need any help with doing this, please do not hesitate to give us a call.

See: https://www.bbc.co.uk/news/articles/c4g7x6p865zo

Bus fare cap to increase to £3
Two days before the Budget, the Prime Minister announced that the cap for single bus fares would be increased to £3 from its current £2.

The current fare cap is due to expire at the end of 2024. Without intervention, prices for some routes looked set to rise significantly. The new £3 cap will run until the end of 2025.

The cap means that no single bus fare on routes that are included in the scheme can exceed £3. Routes where the fare is less than £3 can only increase in line with inflation.

For workers that are reliant on bus fares, the new cap means an increase in their costs but at least continues to provide some relief.
See: https://www.gov.uk/government/news/over-1-billion-to-boost-bus-services-across-the-country-as-bus-fares-capped-at-3
 
Employers now required to take “reasonable steps” to prevent sexual harassment
From 26 October 2024, employers were given a new legal duty to take “reasonable steps” to prevent sexual harassment of employees.

This duty requires employers to anticipate when sexual harassment may occur and take reasonable steps to prevent it. If sexual harassment has already taken place, then an employer would need to take action to stop it from happening again.

It is not possible for an individual to make a claim against their employer for failing to take preventative action. However, if they successfully bring a sexual harassment claim, the employment tribunal will automatically consider whether the employer failed in its duty to prevent the harassment from happening. If they find that the employer was negligent then they can order an uplift in the compensation paid to the employee.

ACAS have provided guidance to employers on what to do, including advising on things that should be included in a sexual harassment policy.
To review the guidance, see: https://www.acas.org.uk/sexual-harassment
 
Why staying up-to-date with your accounts is essential: Lessons from a recent insolvency case
In a recent court case, a company director from Bury was sentenced to prison for failing to comply with basic accounting and legal responsibilities. Vezubuhle Ndlovu, the former director of VN Electrics Limited, was jailed for 10 months after he failed to provide the required records when his company went into liquidation, leaving over £200,000 in unpaid taxes.

This case serves as a stark reminder of the consequences for businesses that do not prioritise accurate accounting, particularly when dealing with financial and tax obligations. Let’s examine why keeping up-to-date records is so important for businesses of all sizes and sectors.

What happened?
Ndlovu's company, VN Electrics, which operated as a wholesale trade business, was petitioned for liquidation by HM Revenue and Customs (HMRC) in 2019 due to an outstanding tax bill of £221,600.

After the company entered liquidation, Ndlovu was required by law to provide the company’s financial records to the Insolvency Service. His failure to do so prevented the Official Receiver from assessing the company’s assets, income, and financial position.

Ndlovu repeatedly refused to cooperate. Even after being disqualified as a director for seven years, he still failed to respond or attend interviews requested by the Insolvency Service. Manchester Crown Court have subsequently sentenced him to 10 months in prison.

The legal responsibilities of directors
Company directors have a legal duty to keep accurate financial records and to be transparent with stakeholders, especially in times of financial distress.

This case highlights the severe consequences for not complying. Under the Companies Act and Insolvency Act, it is a criminal offence to fail to keep proper accounting records, and persistent failure to cooperate with authorities can result in prison sentences.

The impact on the stability of your business
Maintaining up-to-date accounts is more than just an administrative task; it is a core responsibility that can safeguard the future of a business.
Businesses that regularly review their accounts are better positioned to make informed decisions, identify potential financial issues early on, and avoid the kinds of tax and debt problems that led to VN Electrics’ liquidation. Without clear records, even the day-to-day management of cash flow, payroll, and expenses can become difficult to handle, potentially leading to further financial instability.

Protecting relationships with stakeholders
For any business, building trust with creditors, suppliers, and partners is essential. Reliable accounting practices demonstrate that a company is well-managed, financially sound, and transparent in its dealings.

In the case of VN Electrics, the lack of financial transparency not only damaged the company’s reputation but also strained relationships with stakeholders who were left uncertain about the company’s financial position.

Key takeaways
The case of VN Electrics serves as an important reminder for all business owners and directors:

• Legal accountability: Directors are legally accountable for maintaining accurate records, which must be available to stakeholders and regulators as needed. 
• Financial health and oversight: Up-to-date accounts provide a clear picture of a company’s financial health, helping to avoid situations where debt builds up unaddressed. 
• Stakeholder confidence: Reliable records enhance trust with creditors, suppliers, and partners, making it easier to do business and manage financial obligations. 
• Early problem detection: Regular reviews of financial records help identify issues early, allowing businesses to take corrective action before problems become unmanageable.

In a time when economic challenges and tax obligations continue to impact businesses, staying on top of financial records is one of the best ways to protect a company’s future, meet legal responsibilities, and ensure transparency with all stakeholders.

If you need advice about or help with your accounts please feel free to get in touch and we would be happy to help you!

See: https://www.gov.uk/government/news/bury-director-jailed-after-failing-to-produce-accounts-for-company-which-owed-more-than-200000-in-tax

Protecting young people online: The ICO taking action on data privacy for children
In today’s digitally connected world, social inclusion has extended into virtual spaces, and young people are increasingly exchanging personal information to stay connected with friends and access social media platforms. This trend has raised significant privacy concerns, especially as recent research by the Information Commissioner’s Office (ICO) reveals how critical data handling is for safeguarding children online.

The ICO’s Children’s Data Lives research has highlighted the importance of enforcing stronger privacy practices to protect young users who may not fully understand the implications of sharing their data.

Data as a form of currency
For many children, personal data has become a form of currency. According to the ICO’s findings, young people often feel they must exchange personal details to access apps and social media platforms, which are central to their social lives.

The research emphasises that, while children seek acceptance in digital spaces, they are largely unaware of how their data is being collected or used by companies. Many young users place their trust in well-known platforms, assuming they are safe, but these platforms’ designs can obscure data-sharing practices, making it difficult for children to make informed decisions about their privacy.

The ICO’s strategy for child privacy protections
In response, the ICO has taken several steps to promote safer digital environments for children. Through its Children’s Code strategy, the ICO aims to ensure that online services prioritise the needs and privacy of young users. This initiative holds businesses accountable for implementing privacy practices that protect children’s rights and enable them to interact safely online.

The ICO has reviewed the privacy practices of 34 social media and video-sharing platforms as part of the Children’s Code strategy. This review assessed issues related to:

1. Default privacy settings: Since many children rely on default settings, the ICO is pushing for these defaults to be set to privacy-friendly options, minimising exposure to unnecessary data sharing from the outset. 
2. Geolocation: The ICO is addressing the risks associated with geolocation data, which can reveal a user’s location. They advocate for stricter control over location settings to reduce the risk of exposing children’s whereabouts unknowingly. 
3. Age assurance: Verifying the age of users helps ensure that privacy features are appropriately tailored for children, preventing them from inadvertently sharing personal data in adult-oriented environments.

Holding businesses accountable
As part of their commitment to enforcing the Children’s Code, the ICO requested further information from 11 companies to understand how their privacy practices align with child-friendly standards.

While most companies have engaged voluntarily, the ICO had to issue formal information notices to three companies—Fruitlab, Frog, and Imgur—to compel them to provide detailed responses on critical matters such as geolocation, default privacy settings, and age verification. Frog and Imgur have now responded, and the ICO is carefully reviewing their submissions.

A safer online future for children
As digital spaces play an ever-growing role in children’s social lives, the ICO remains committed to its Children’s Code strategy, and will continue to encourage businesses to adopt stronger, more transparent privacy practices.

See: https://ico.org.uk/about-the-ico/media-centre/news-and-blogs/2024/10/statement-on-ico-s-work-to-protect-children-online/

Hillmans Autumn Budget 2024 Review

Welcome to our summary of the key tax and business updates from the Autumn Budget 2024.

If you’d like to discuss how these changes may impact you or your business, please don’t hesitate to get in touch. We’re here to help you navigate these updates.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

On 30 October 2024, Chancellor Rachel Reeves presented her first budget to parliament. This was a budget intended to restore stability to our economy and to begin a decade of national renewal. Investment will be funded by revised debt rules to facilitate additional borrowing and a hefty £40 billion of tax rises.

Headlines included:

• Immediate increases to capital gains tax rates with further uplifts in relation to some business disposals from both April 2025 and April 2026.
• Immediate increases to Stamp Duty Land Tax, including for those buying residential property when they already own at least one dwelling.
• Confirmation that 20% VAT will apply to private school fees for the school term beginning in January 2025.
• Increased costs for many employers from April 2025 through both increases to the national minimum wage and significant reforms to employers’ national insurance contributions.
• Another change in approach for businesses utilising double-cab pick up vehicles, coming into effect in April 2025.
• Plans to restrict inheritance tax agricultural and business property reliefs from April 2026.
• Plans to include an individual’s undrawn pension fund in their inheritance tax estate from April 2027.

Below, we talk more about the Budget and what it means for you.

INCOME TAX

Please note that ‘tax years’ run to 5 April each year and that, for example, 2025/26 signifies the year to 5 April 2026.

Your personal allowance
Your tax-free personal allowance will remain at £12,570 in 2025/26. The personal allowance is partially withdrawn if your income is over £100,000 and then fully withdrawn if your income is over £125,140.

Income tax rates and allowances
For 2025/26, income tax rates and thresholds remain frozen at their 2024/25 levels.

After your tax-free ‘personal allowance’ has been deducted, your remaining income will be taxed in bands in 2025/26 as follows:
 
       •           Basic Rate
       •           Income range: £1 – £37,700
       •           ‘Other income’ tax rate: 20%
       •           Savings income tax rate: 20%
       •           Dividend income tax rate: 8.75%
       •           Higher Rate
       •           Income range: £37,701 – £125,140
       •           ‘Other income’ tax rate: 40%
       •           Savings income tax rate: 40%
       •           Dividend income tax rate: 33.75%
       •           Additional Rate
       •           Income range: Over £125,140
       •           ‘Other income’ tax rate: 45%
       •           Savings income tax rate: 45%
       •           Dividend income tax rate: 39.35%

‘Other income’ means income other than from savings or dividends. This includes salaries, bonuses, profits made by a sole trader or a partner in a business, rental income, pension income and anything else that is not exempt.

Scottish taxpayers
If your main residence is in Scotland or you are otherwise classed as a ‘Scottish taxpayer’, the application of income tax rates and bands applies differently where ‘other income’ is concerned. After the ‘personal allowance’ has been deducted, your ‘other income’ is taxed in bands as follows:

       •           Starter Rate
       •           Income range: £1 – £2,306
       •           Tax rate: 19%
       •           Basic Rate
       •           Income range: £2,307 – £13,991
       •           Tax rate: 20%
       •           Intermediate Rate
       •           Income range: £13,992 – £31,092
       •           Tax rate: 21%
       •           Higher Rate
       •           Income range: £31,093 – £62,430
       •           Tax rate: 42%
       •           Advanced Rate
       •           Income range: £62,431 – £125,140
       •           Tax rate: 45%
       •           Top Rate
       •           Income range: Over £125,140
       •           Tax rate: 48%

The rates for 2025/26 are expected to be announced at the Scottish Budget, on 4 December 2024.

Welsh taxpayers
Similarly, you pay Welsh income tax if you live in Wales. The rates set by the Welsh government usually shadow the main UK income tax rates and allowances and this was the case for 2024/25. We expect the 2025/26 rates to be confirmed when the Welsh Budget is published on 10 December 2024.

Tax on savings income
A savings allowance determines how much savings income you can receive at 0% taxation, instead of the usual tax rates for savings income as shown above. This will remain at the 2024/25 level of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.

Interest income from an Individual Savings Account (ISA) continues to be exempt from tax.

Tax on dividend income
A dividend allowance determines how much dividend income you can receive at 0% taxation, instead of the usual tax rates for dividend income as shown above. This will remain at the 2024/25 level of £500.

Dividend income from a ‘stocks and shares’ ISA continues to be exempt from tax.

Individual Savings Accounts (ISAs)
The limit on how much you can save into ISAs (including cash and stocks and shares ISAs) in 2025/26 remains at £20,000 overall. This includes up to £4,000 that can be saved into a Lifetime ISA. The Junior ISA and the Child Trust Fund limit both remain at £9,000. These ISA limits are now fixed until 2030.

Previous plans to introduce an additional ‘British ISA’ allowance will not be taken forward by the new government.

The High-Income Child Benefit charge (HICBC)
You may have to pay the HICBC if you are considered to have ‘high income’ and child benefit is being paid in relation to a child that lives with you, regardless of whether you are a parent of that child.  If you are living with another person in a marriage, civil-partnership or long-term relationship, you will only be liable to HICBC if you have the higher income of the two of you.

Since 2024/25 the child benefit ‘high-income’ threshold is £60,000. The HICBC is calculated at 1% of the child benefit received for every £200 of income above the threshold. This means that child benefit is only fully clawed back where income exceeds £80,000.

The HICBC does not apply if the child benefit claimant opts out from receiving the payments.

The new government will not proceed with previous plans to explore a household income basis of calculating the HICBC.

CAPITAL GAINS TAX

As expected, and with immediate effect from the budget date of 30 October 2024, the rates of capital gains tax (CGT) have been increased on some asset types as follows:

            Annual Exempt Amount
            •           2024/25: £3,000
            •           2025/26: £3,000
            •           Rate of CGT on Assets Other Than Residential Property and Qualifying Business Disposals:
            •           2024/25 (Prior to 30 October 2024):
            •           Within the basic rate band: 10%
            •           Outside the basic rate band: 20%
            •           2024/25 (From 30 October 2024 onwards):
            •           Within the basic rate band: 18%
            •           Outside the basic rate band: 24%
            •           2025/26:
            •           Within the basic rate band: 18%
            •           Outside the basic rate band: 24%
            •           Rate of CGT on Residential Property Disposals:
            •           2024/25:
            •           Within the basic rate band: 18%
            •           Outside the basic rate band: 24%
            •           2025/26:
            •           Within the basic rate band: 18%
            •           Outside the basic rate band: 24%
            •           Rate of CGT on Qualifying Business Disposals:
            •           Business Asset Disposal Relief (BADR) Lifetime Limit:
            •           2024/25: £1 million
            •           2025/26: £1 million
            •           Rate of CGT on Gains Qualifying for BADR:
            •           2024/25 (Both prior to and after 30 October 2024): 10%
            •           2025/26: 14%

Entrepreneurs will be pleased to learn that Business Asset Disposal Relief (BADR) will continue to apply when they dispose of their business. However, the rate of CGT on BADR qualifying disposals is increasing from 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026.  These rates apply to the first £1 million of qualifying disposals.

NATIONAL LIVING WAGE (NLW) AND NATIONAL MINIMUM WAGE (NMW)

Employers must pay their employees at least the NLW, for workers aged 21 and over, or the NMW otherwise. The minimum hourly rates change on 1 April each year and depend on the worker’s age and if they are an apprentice.

            •           From 1 April 2024 to 31 March 2025:
            •           National Living Wage (NLW) for age 21 and over: £11.44
            •           National Minimum Wage (NMW) for 18–20-year-olds: £8.60
            •           NMW for 16–17-year-olds and apprentices: £6.40
            •           From 1 April 2025 to 31 March 2026:
            •           NLW for age 21 and over: £12.21
            •           NMW for 18–20-year-olds: £10.00
            •           NMW for 16–17-year-olds and apprentices: £7.55

The percentage increases for the 18-20 year old rate (16.3%) and the 16-17 year old and apprentice rate (18.0%) are significant. This is a step towards Labour’s ambitions for all adults to receive the same minimum wage. While this is good news for workers, employers will need to carefully consider affordability when planning their headcount for the year ahead.
 

EMPLOYMENT TAXES

For employees
The national insurance contributions (NICs) rates and annual thresholds for employees for 2025/26 are as follows:

       •           Lower Earnings Limit (LEL):
       •           2024/25: £6,396
       •           2025/26: £6,500
       •           Primary Threshold (PT):
       •           2024/25: £12,570
       •           2025/26: £12,570
       •           Upper Earnings Limit (UEL):
       •           2024/25: £50,270
       •           2025/26: £50,270
       •           NIC Rates:
       •           Earnings between the LEL and PT: 0%
       •           Earnings between the PT and UEL: 8%
       •           Earnings above the UEL: 2%

Earnings below the LEL are not subject to primary Class 1 NICs and do not accrue entitlement to state benefits. Earnings between the LEL and the PT do accrue entitlement to state benefits and are subject to primary Class 1 NICs, albeit at the 0% rate.

For employers
The Chancellor announced a package of changes to employers’ Class 1 NICs that will apply from 6 April 2025:

• An increase in the employers’ NICs rate, from 13.8% to 15%;
• A decrease to the threshold at which an employer starts to pay NICs on each employee’s salary (the ‘secondary threshold’) from £9,100 to £5,000*; and
• A widening of availability and an increase in the amount of the ‘employment allowance’, which eligible employers can offset against their employers’ Class 1 NICs liability, from £5,000 to £10,500. In particular, the employment allowance has only been available to businesses who have incurred an employers’ Class 1 NICs liability of less than £100,000 in the previous tax year but that restriction will be removed for 2025/26.

* A higher secondary threshold of £50,270 applies for employees who are under 21 and apprentices under 25. Other variations can also apply.

This increase in employers’ NICs is undoubtedly a blow to some businesses and, indirectly, employees. Combined with the increases in the NMW and potential costs associated with reforms in employment law, these measures will stretch employer wage budgets and potentially lead to slower growth in some employee wages or higher costs for consumers.

Benefits in kind
Employees are required to pay income tax on certain non-cash benefits. For example, the provision of a company car constitutes a taxable ‘benefit in kind’. In 2025/26, employers will also pay Class 1A NIC at 15% on the value of benefits (13.8% in 2024/25).

The benefit value of a company car is calculated as a percentage of its list price when it was first registered. The percentage used is determined by the car's carbon dioxide emissions or, if it is electric, its electric range. The percentages used are set to increase steadily until 5 April 2028, meaning employees with company cars can expect their percentage to increase by 1% in 2025/26 and consequently will pay more tax on their company car. More substantial increases will affect the percentages used from 2028/29 onwards.

The figures used to calculate benefits-in-kind on employer-provided vans, van fuel (for private journeys in company vans), and car fuel (for private journeys in company cars) increase in line with inflation for 2025/26:

       •           Van Benefit:
       •           2024/25: £3,960
       •           2025/26: £4,020
       •           Van Fuel Benefit:
       •           2024/25: £757
       •           2025/26: £769
       •           Car Fuel Benefit Multiplier:
       •           2024/25: £27,800
       •           2025/26: £28,200

Uncertainty surrounding the tax treatment of double cab pick-up vehicles with a payload of 1 tonne or more has been addressed: such vehicles that are not predominantly suitable for carrying goods are to be treated as cars for benefit in kind purposes. However, vehicles that were acquired or ordered before 6 April 2025 can be treated as vans until the earlier of disposal, lease expiry, or 5 April 2029.

Tip – If you are considering buying a double cab pick-up vehicle with a payload of 1 tonne or more, acquiring or ordering it before 6 April 2025 could ensure it attracts the more beneficial tax treatment for vans.

The official rate of interest (currently 2.25%) used to calculate the benefit value of employment-related loans and living accommodation will, from April 2025, be allowed to change on a quarterly basis. Previously the rate has been set for a full tax year.

From 6 April 2026, the use of payroll software to report and pay tax on benefits in kind will become mandatory, except in relation to employer-provided loans and living accommodation. These two benefits can be ‘payrolled’ on a voluntary basis.

BUSINESS TAX

Motor vehicles
Continuing the topic seen above on double cab pick-up vehicles, a similar change in approach applies in relation to plant and machinery capital allowances claims. From April 2025, most double cab pick-up vehicles with a payload of 1 tonne or more will need to be treated as cars for capital allowances purposes. This is less favourable than the current common classification as a goods vehicle. While the change applies from April 2025, if the expenditure was incurred as a result of a contract entered into before 1 April 2025 for companies, or 6 April 2025 for non-corporate businesses, and the expenditure is incurred before 1 October 2025, it can continue to be treated as a goods vehicle.

Also on motor vehicles, it was confirmed in the budget that the 100% first-year allowance for zero-emission cars will be extended until 31 March 2026 for corporation tax and 5 April 2026 for income tax.

Making Tax Digital (MTD) for Income Tax
Under the government’s MTD for income tax initiative, businesses will be required to keep digital records and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. These requirements will be phased in from April 2026, starting with income tax-paying sole traders and property landlords with combined trade and rental income of more than £50,000.

This threshold will be reduced to £30,000 from April 2027 and to £20,000 by the end of this parliament.

Eligible businesses are currently able to opt-in to HMRC’s beta testing programme. Please talk to us if you’d like to know more.

Electronic invoicing
In Spring 2025, the government will launch a consultation about electronic invoicing (e-invoicing) to gather input from businesses on how HMRC can support investment in e-invoicing and encourage uptake within the business community. As part of the government’s digitisation strategy, e-invoicing is likely to be mandatory in future.

Business rates
For 2025/26, retail, hospitality and leisure (RHL) businesses will be given a 40% relief on their business rates. The small business tax multiplier, which applies to properties with a rateable value of less than £51,000, will also be frozen next year.

The government is looking at longer-term measures to support RHL businesses and intends to permanently lower tax rates from 2026/27 for RHL properties with a rateable value below £500,000.

NATIONAL INSURANCE FOR THE SELF-EMPLOYED

Self-employed individuals pay Class 2 and Class 4 National Insurance Contributions (NICs). The relevant rates and thresholds are:

            •           Class 2 NICs Per Year:
            •           Mandatory: £nil (both 2024/25 and 2025/26)
            •           Voluntary:
            •           2024/25: £179.40
            •           2025/26: £182.00
            •           Small Profits Threshold (SPT):
            •           2024/25: £6,725
            •           2025/26: £6,845
            •           Lower Profits Limit (LPL):
            •           2024/25: £12,570
            •           2025/26: £12,570
            •           Upper Profits Limit (UPL):
            •           2024/25: £50,270
            •           2025/26: £50,270
            •           Class 4 NIC Rates:
            •           On profits below the LPL: 0%
            •           On profits between the LPL and UPL: 6%
            •           On profits above the UPL: 2%

* From 2024/25 onwards, Class 2 NICs are effectively abolished. If trade profits exceed the SPT, the individual will accrue entitlement to state benefits such as the state pension. However, if trade profits fall below the SPT, the individual will need to pay Class 2 NICs voluntarily if they need the tax year to qualify for state benefit purposes.  

TAX REGIME FOR FURNISHED HOLIDAY LETS

If you let out residential or commercial property, the profits are taxed as part of your ‘other income’. If you sell property that has been rented out, capital gains tax is likely to apply. Generally, rental business activity attracts fewer tax reliefs than trading ventures. However, if a residential property meets the strict definition of a ‘furnished holiday let’ (FHL), enhanced tax relief rules are currently available.

It has been confirmed that, from 6 April 2025, the special tax rules for FHLs will be abolished. Going forward, profits from FHLs will be taxed in the same way as any other rental business.

Please get in touch for a more detailed analysis of how the withdrawal of the FHL status will affect you.

VAT

From 1 April 2025, the VAT registration and deregistration thresholds will remain at £90,000 and £88,000 respectively. There have been no changes to the rates of VAT and the standard rate continues to be set at 20%.

In a key change to VAT, private school fees, which have been exempt from VAT, will be made subject to VAT at 20%. This will start from the school term beginning in January 2025.

CORPORATE TAXES

Rates from 1 April 2025
Corporation tax rates and thresholds for the financial year to 31 March 2026 remain unchanged as follows:

       •           Main Rate: 25%
       •           Small Profits Rate: 19%
       •           Small Profit Threshold: £50,000
       •           Main Rate Threshold: £250,000
       •           Marginal Relief Fraction: 3/200
       •           Effective Marginal Relief Rate: 26.5%

The thresholds must be equally shared between companies in a group and those controlled by the same person or persons. If an associated company is dormant, then it is not included in this calculation. However, an associated company with only limited activity would be included, which could lead to higher than necessary effective rates of corporation tax. If you are in this situation speak to us about how you might be able to mitigate this.

Companies with profits between the small profit and main rate thresholds will qualify for marginal relief, which effectively means they pay tax at 19% up to the lower threshold and at 26.5% on the balance of their profits.

Roadmap
A corporate tax roadmap has been published by the government, with the view of creating a stable and predictable tax environment. This includes the following commitments:

• The corporation tax rates will not increase beyond the rates shown above. This includes retaining the small profits rate and marginal relief.
• Maintaining the annual investment allowance, giving 100% tax relief on the acquisition of up to £1 million worth of new or second-hand qualifying plant and machinery each year.
• Maintaining the ‘full-expensing’ regime, giving 50% or 100% tax relief on the acquisition of new and unused qualifying plant and machinery, without limit.
• Maintaining the rates of the current Research and Development (R&D) tax reliefs (see below).

Research & Development (R&D) reliefs
The R&D tax relief regime has seen a lot of change in recent years, and the Labour government is committing to the current rates of relief. Since 1 April 2024, this equates to a 20% taxable contribution from HMRC on qualifying R&D expenditure in the “merged scheme” (used by most claimant companies) and, for ‘loss-making R&D intensive SME companies’, an 86% uplift in deductible qualifying expenditure with a 14.5% payable tax credit.

An R&D intensive company is one that qualifies as an SME and at least 30% of its total expenditure is invested in R&D.

HMRC continue to take measures to tackle non-compliance in this area, which has led to a reduction in the number of claims made. They carried out compliance checks on 17% of claims received in 2023/24, compared with 10% for 2022/23. Please talk to us if you are considering making a claim so that we can help you to navigate HMRC’s compliance checks.

Annual Tax on Enveloped Dwellings (ATED)
Companies and some other entities may need to file ATED returns or pay ATED if they hold a UK residential property with a market value over £500,000. The rates of ATED will increase from 1 April 2025 so please contact us if you require any support with this.

PENSIONS

Despite numerous rumours of possible changes to the taxation of pensions in the run up to the budget, the Chancellor decided not to make significant changes after all. The ability to receive a 25% tax-free lump sum of up to £268,275 (or higher in some cases) remains.

Individual contributions continue to attract income tax relief at the individual’s marginal tax rate and can be particularly effective where net income is between £100,000 and £125,140, where the personal allowance is tapered.

Employer pension contributions continue to qualify for a deduction against business profits and the rumour that employers’ national insurance would be imposed on pension contributions did not materialise. Note that the £60,000 annual allowance limit continues for 2025/26 and applies to the combined individual and employer contributions.

One change that was however announced was to make an individual’s undrawn pension fund subject to inheritance tax. From 6 April 2027, it is proposed that most undrawn pension funds and death benefits be included within the value of a person’s estate for inheritance tax purposes and for pension scheme administrators to become liable for reporting and paying any inheritance tax due on pensions to HMRC.

INHERITANCE TAX
The main rate of IHT remains at 40%, reduced to 36% for estates where 10% or more is left to charity.

The IHT nil rate band will continue to be frozen at £325,000 until 2030. The additional nil rate band for passing on the family home to direct descendants (residence nil rate band) will also remain at £175,000 until 2030. This means that married couples and civil partners will generally not pay inheritance tax where their combined estate is valued below £1 million. Note however that the residence nil rate band continues to be tapered where the value of the estate exceeds £2 million.

Gifts made by an individual in the 7 years prior to their death are classed as ‘potentially exempt transfers’ and can give rise to an IHT liability on death. Despite speculation in the run up to the budget, there will be no changes to this regime. Furthermore, taper relief continues to apply, reducing IHT payable where there are more than 3 years between the date of the gift and the date of death.

As mentioned above, it is proposed that, from April 2027, most undrawn pension funds and death benefits will be included within the value of a person’s estate for IHT purposes.

Farmers and business owners
The government is proposing to reform IHT agricultural property relief (APR) and business property relief (BPR) from 6 April 2026. Relief of up to 100% is currently available on qualifying business and agricultural assets with no financial limit.

From 6 April 2026, it is proposed that 100% relief will only apply to the first £1 million of combined agricultural and business property, with the relief reducing to 50% on the value that exceeds £1 million. This means the relief will be focused on small family farms and businesses.

In a further proposed change, the rate of BPR available for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM, will be reduced from 100% to 50%.

As an anti-forestalling measure, the new rules will apply to lifetime transfers made on or after 30 October 2024 if the donor dies on or after 6 April 2026.

UK RESIDENCY AND DOMICILE
Significant tax changes have been announced for UK resident non-domiciled individuals; namely those individuals spending most of their time in the UK but without permanently settling here. The concept of ‘domicile’ will be removed from the UK tax system and replaced by a regime based on years of tax residence.

Income and capital gains taxes
At present, individuals who are both resident and domiciled in the UK must pay UK taxes on their worldwide income and capital gains. However, for UK resident non-domiciled individuals, they are able to claim a ‘remittance basis’ of taxation for their overseas income and capital gains and only pay UK taxes to the extent they remit (bring) the associated funds to the UK. To access this favourable tax treatment, non-domiciled individuals may be required to pay an annual ‘remittance basis charge’ of up to £60,000.

The concept of domicile and the remittance basis of taxation will be abolished from 6 April 2025, meaning all UK residents will default to being taxed in the UK on their worldwide income and gains. However, a 100% relief from tax on foreign income and/or capital gains will be available to individuals in their first 4 years of UK tax residence. It should be noted that if a ‘newly arrived’ individual claims this relief, they will sacrifice their UK personal allowance and CGT annual exemption, along with their ability to claim relief for some foreign losses.

From April 2025, for employed individuals eligible for the 100% relief from UK taxation on their foreign income and/or capital gains, an ‘overseas workday relief’ will remain available in relation to their duties performed overseas. Reforms to the regime will however take place, bringing increased flexibility for some but also a new maximum cap on the relief equal to the lower of £300,000 and 30% of total employment income.

Inheritance tax
Currently inheritance tax applies to the worldwide assets of a UK-domiciled individual but, broadly, just to the UK-situated assets of a non-domiciled individual.

From 6 April 2025, individuals resident in the UK for at least 10 out of the last 20 tax years, will be subject to inheritance tax on both their UK and non-UK assets. They will then remain within the full scope of UK inheritance tax for between 3 and 10 years after leaving the UK.

If you have not always lived in the UK, please talk to us about how the new rules will affect you. There may be some exemptions or transitional reliefs that we are able to claim to support your position, including a ‘temporary repatriation facility’ for any overseas funds you may have and ‘re-basing’ any overseas assets you hold to their April 2017 values to reduce any UK capital gains tax arising in 2025/26 and onwards.

STAMP DUTY

England and Northern Ireland - thresholds
It has been confirmed that the 0% thresholds for Stamp Duty Land Tax (SDLT) will be reduced from 1 April 2025 as follows:

       •           From 1 April 2024 to 31 March 2025:
       •           Main threshold: £250,000
       •           First-time buyers’ threshold: £425,000
       •           From 1 April 2025 onwards:
       •           Main threshold: £125,000
       •           First-time buyers’ threshold: £300,000

SDLT on additional dwellings such as second homes
For transactions with an effective date (generally the date of completion) on or after 31 October 2024, the higher rates of SDLT payable by purchasers of ‘additional dwellings’ (i.e. when they already own one dwelling), and by companies, increases from 3% to 5% above the standard residential rates. This measure is clearly targeted at buy-to-let landlords and those acquiring second homes.

The rate of SDLT payable by companies and non-natural persons (e.g. trusts) acquiring dwellings for more than £500,000 increases from 15% to 17% also from 31 October 2024.

Scotland and Wales
Property purchasers in Scotland and Wales do not pay SDLT. Rather, if you buy a property in Scotland you pay Land and Buildings Transaction Tax, and in Wales you pay Land Transaction Tax. No amendments to these transaction taxes have yet been announced.

DEALING WITH HMRC

Interest on unpaid tax liabilities
From 6 April 2025, the late payment interest rate charged by HMRC on unpaid tax liabilities will increase by 1.5 percentage points. For most taxes, this will set late payment interest at the Bank of England base rate plus 4%.

IN CONCLUSION

As we approach 2025/26, we know a number of our clients and contacts will be assessing the impact of the budget on their affairs. While some of our readers will benefit from the increases in public spending, for others, especially if you are an employer or business owner, it may be necessary to re-group and update your business plans for 2025 and onwards. Remember, we are here to work alongside you to ensure your business and personal success.

Please do get in touch if there is anything that you would like to discuss.

25th October 2024 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

What will the Budget bring?
With the Budget coming on 30^th October, speculation is increasing on what changes will be announced. The Chancellor and the Prime Minister have made comments to indicate that the Budget will bring “difficult decisions”.

The Chancellor reported shortly after taking office that there was a £22bn “black hole” in public spending inherited from the previous government. The BBC reported last week that their sources indicated that actually £40bn is needed to avoid real-terms cuts to departments.

There has also been much talk about driving growth in the UK economy, with the International Investment Summit recently aiming to attract investment to the UK.

Will Employers NI increase?
While Labour’s manifesto promised no increases in taxes to workers, the same promise wasn’t made to employers. Employers National Insurance (NI) is the element of national insurance paid by employers based on an employee’s gross pay. It is therefore a tax on employers that isn’t directly felt by employees.

The Prime Minister neatly sidestepped questions in an interview last week about whether the manifesto promise included employers NI. Chancellor Rachel Reeves also confirmed last week that the election pledge not to increase NI for working people related to the employee element rather than the employer element.

Therefore, it looks as though the government are considering this as an option to raise taxes.

What else could change?
By providing this information early, the government look to be preparing the road so that we all expect an increase. However, the actual increase may be less than we fear so that it doesn’t seem like such bad news when it comes to it.

Also, by having an easy headline tax increase to focus on, other welfare cuts and tax rises may not be as easily noticed.

Other areas that seem likely to receive attention in the Budget could include capital gains tax, inheritance tax, fuel duty, and pension taxation. non-domiciled tax status and possibly a gambling tax.
 
Once the Budget is announced we will keep you updated on the changes. If you have any concerns about how the Budget might affect you, please feel free to get in touch at any time and we will be happy to help you.

See: https://www.bbc.co.uk/news/articles/cj9jdgprv7ko
 
Surprising drop in inflation for September
The Office for National Statistics (ONS) have reported that their measure for inflation (Consumer Prices Index) fell to 1.7% for September. This is an unexpected reduction and is the lowest inflation has been in more than three years.

Drops in airfares and petrol were the main reasons for the reduction. The Bank of England targets 2% inflation, so this reduction may allow them to cut interest rates further when they meet in November. There is also some expectation that there could now be a second rate cut in December.

The September inflation figure is an important one since it’s normally used to set how much many benefits increase next April. These include Universal Credit, disability benefits, and carer’s allowance. Lower inflation may lead to lower increases in these allowances.

The drop in inflation may be temporary though, as energy prices increased in October, which may swing the picture once again.

See: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest
 
£63 billion in new UK investments set to create 38,000 jobs
At the International Investment Summit, the UK government announced nearly £63 billion in new investments, which are expected to create 38,000 jobs.
These investments, which span various sectors, are projected to fuel growth across the country. While these investments tend to focus on large businesses and large-scale projects, there could be significant implications for small and medium-sized businesses (SMEs) as these investments roll out.

Renewable energy opportunities
Octopus Energy has committed to investing £2 billion in renewable energy projects, including four new solar farms across the UK.

These solar farms will power up to 80,000 homes and generate business for smaller suppliers and contractors in the construction, maintenance, and energy sectors.

SMEs in renewable energy services, installation, and related fields could benefit from the need for equipment, local expertise, and operational support as these projects roll out.

Additionally, BW Group is proceeding with a £500 million investment in battery energy storage projects, which are expected to help the UK’s shift towards cleaner energy.

These projects, set in Hampshire and Birmingham, may create new supply chain opportunities for small businesses involved in the production or installation of renewable energy components.

Data Centres: A growing sector for small business support
The growing focus on data centres offers further potential. For example, Amazon Web Services has committed £8 billion to expand its UK data centre operations, a move expected to support around 14,000 jobs annually at local businesses.

Businesses involved in construction, facility maintenance, engineering and telecommunications could find new contracts in the data centre market.

For more information on the project investments announced, see: https://www.gov.uk/government/news/record-breaking-international-investment-summit-secures-63-billion-and-nearly-38000-jobs-for-the-uk
 
Chancellor reveals new investment bodies to boost UK growth
In her final speech at the International Investment Summit last week, Chancellor Rachel Reeves announced two major initiatives aimed at driving long-term investment in the UK. These moves are designed to create more high-skilled jobs and support growing industries across the country.

New National Wealth Fund
Reeves revealed that the UK Infrastructure Bank will now operate as the National Wealth Fund (NWF).

With a budget of £27.8 billion, the NWF will focus on attracting private investment into key sectors like clean energy, green hydrogen, and carbon capture.

The goal is to accelerate the UK's transition to a greener economy while creating jobs and growth opportunities.

British Growth Partnership
The Chancellor also introduced the British Growth Partnership as part of the British Business Bank (BBB).

This initiative aims to create a new way for BBB and institutional investors to invest together in innovative companies. The BBB plans to start investing through this programme by the end of 2025.

What it means for businesses
These new bodies could bring fresh funding opportunities for businesses. However, with timelines stretching into 2025, it might take a little time before investments start flowing. Businesses should stay informed as these initiatives develop.

See: https://www.gov.uk/government/news/chancellor-announces-new-plans-to-secure-uk-investment
 
CMA issues warning to unregulated legal service providers amid consumer protection concerns
The Competition and Markets Authority (CMA) is stepping up its efforts to protect consumers opting for unregulated legal services, such as will writing and divorce arrangements, which are becoming increasingly popular alternatives to traditional high street solicitors.

As the use of these services grows, the CMA is acting to ensure that businesses offering them comply with consumer protection laws, safeguarding people from unfair practices.

In its latest move, the CMA has issued letters to seven providers of unregulated legal services, warning them against problematic business practices such as aggressive upselling, refusal of refunds, and failure to address complaints. These companies have been urged to review and revise their contract terms and operational practices, or face the risk of formal investigation, with the CMA set to gain enhanced enforcement powers next year.

If concerns are not addressed, the providers could be subject to further action, including fines and penalties.

Rising demand, growing risks
While alternative legal services can offer cost-effective solutions, especially when budgets are tight, the CMA is concerned that people may not always be fully informed about what they are paying for or the options available.

This is particularly important in situations like writing a will or getting divorced, where services are not frequently purchased, and consumers might be unfamiliar with the process.

The CMA is therefore releasing new guidance for businesses providing these services, outlining their obligations to ensure that they:

• Provide fair contract terms and transparent pricing. 
• Deliver services with reasonable care and skill. 
• Avoid misleading or aggressive sales tactics.

To boost compliance, the CMA has issued an open letter to all providers of unregulated legal services, urging them to adopt best practices. The authority plans to monitor the sector and conduct a formal compliance review in the near future.
 
Empowering consumers
In tandem with its guidance to businesses, the CMA has also published consumer guides to help people make more informed decisions when selecting will writing or divorce services. These guides are designed to encourage consumers to ask the right questions and be aware of their rights.

A particular area of concern highlighted by the CMA is pre-paid probate services, which come with significant risks, including the potential for companies to go out of business before the person’s death, leaving their estate unprotected. Consumers are advised to carefully consider these services before purchasing, with additional warnings issued by the Financial Conduct Authority.

Stronger powers on the horizon
The CMA’s intervention follows the introduction of the Digital Markets, Competition and Consumer Act 2024, which will grant the authority stronger enforcement powers. From next year, the CMA will be able to directly determine whether businesses have breached consumer law and impose fines, as well as require firms to compensate consumers who have been harmed by unfair practices.

Hayley Fletcher, the CMA’s Interim Senior Director for Consumer Protection, stressed the importance of compliance, stating: "Unregulated legal services can offer convenient and affordable alternatives to traditional solicitors, but it is essential that businesses treat consumers fairly. Our new guidance empowers both consumers and businesses, helping to ensure that people are not misled or taken advantage of during difficult life events."

Ongoing monitoring and compliance
The CMA will continue to monitor the unregulated legal services market closely and is prepared to take further action if necessary. Issuing guidance and warnings now, appears to be an initial effort to improve standards, but it seems clear that the authority will take increasingly severe action if this becomes necessary.

For more information on the new guidance for businesses and consumers, see: https://www.gov.uk/cma-cases/will-writing-and-other-unregulated-legal-services

New government grants to boost research on AI risks
Researchers in the UK are being offered new funding opportunities to explore ways of making society more resilient to the risks posed by Artificial Intelligence (AI). These risks include emerging threats such as deepfakes, misinformation, and cyber-attacks, and the funding is intended to support work aimed at ensuring AI’s safe and responsible use.

This initiative, launched last week, is a collaboration between the government, the Engineering and Physical Sciences Research Council (EPSRC), and Innovate UK, which is part of UK Research and Innovation (UKRI). The initiative is focused on exploring how AI systems can be made safer, and will also support research to tackle the threat of AI systems failing unexpectedly, for example in the finance sector.

Why this research matters
AI is considered to hold significant potential to drive long-term economic growth and improve public services. However, there are risks that come with AI, including system failures and misuse.

The government is keen to promote and maximise the benefits of AI across the UK economy and therefore it is looking at ways to ensure that as AI is adopted across different industries, it remains safe, reliable, and trustworthy.

Grant opportunities
The Systemic Safety Grants Programme, overseen by the UK’s AI Safety Institute, has opened applications for its first phase, which is set to distribute up to £4 million in funding.

This programme is part of a broader £8.5 million fund that was first announced at the AI Seoul Summit in May, so further phases of grant funding will become available in the future.

Here are the key details:

• Who can apply: UK-based organisations can apply, but projects may include international partners. 
• Funding: Up to £200,000 per project for around 20 selected projects in the first phase. 
• Focus areas: The opening phase aims to deepen understandings over what challenges AI is likely to pose to society in the near future. 
• Application deadline: Proposals must be submitted by 26th November 2024. 
• Timeline: Successful applicants will be notified by the end of January 2025, and grants will be awarded in February 2025.

Final thoughts
For researchers interested in contributing to the future of AI safety, this funding could present a significant opportunity.

If your business is involved in AI development or research, it could be worth considering if you could benefit from this opportunity to apply for grant funding and play a part in the ongoing development of AI and safety in its use.

For more information and guidance on how to apply for the grant scheme, see: https://www.aisi.gov.uk/grants.