HMRC interest rates for late payments will increase again this month to their highest level since 2001.

Late payment interest is payable on tax bills covering income tax, National Insurance contributions, capital gains tax, corporation tax pay and file, stamp duty land tax, stamp duty and stamp duty reserve tax.

The latest rise was triggered by the increase in the Bank of England base rate to 5.25 per cent and set in legislation.

What are the increases?

The interest rates will increase as follows:

• The rate of interest for the overdue payment of tax bills is calculated as base rate plus 2.5, so will increase to 7.75 per cent.
• The rate of interest on unpaid instalments of corporation tax liabilities is calculated as base rate plus one. It will increase to 6.25 per cent.
• The rate of interest paid by HMRC on the overpayment of tax is calculated as base rate minus one. It will increase to 4.25 per cent.

What does the Government say about late payment and repayment interest?

The Government said the rate of late payment interest “encourages prompt payment” and ensures fairness for those who pay their tax on time.

Meanwhile, the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay. It also said the differential between overdue payment interest and repayment interest is “in line” with the policy of other tax authorities worldwide. And it compares “favourably” with commercial practice for interest charged on loans or overdrafts and interest paid on deposits,

The Bank of England Monetary Policy Committee announced an increase to the Bank of England base rate from 5.00 per cent to 5.25 per cent on August 3.

The UK’s central bank continues to respond to persistent high inflation, bringing interest rates to their highest level since prior to the 2008 financial crisis.

Taxpayers can find more detailed information on the current interest rates for payments on the official Government website.

Need support or advice with tax repayments? We can help.

The UK’s financial watchdog has warned it will crack down on lenders that fail to justify low savings rates.

The Financial Conduct Authority (FCA) said providers who fail to show how their rates represent fair value to customers could face “robust action by the end of 2023”. This could include fines.

It is part of a 14-point plan by the FCA following a month-long review into the savings market. It found many banks are not passing on interest rate rises to savers.

Smaller firms offering higher rates

The UK’s largest financial establishments, including Lloyds, NatWest, HSBC, Santander UK and Nationwide Building Society, had passed on just over a quarter of rising interest rates to the most popular easy access accounts. As for fixed savings accounts, banks passed on about 51 per cent of rate increases.

There has also been significant variance between firms, with smaller firms offering higher interest rates on average than their larger competitors.

Given soaring interest rates on mortgages, credit cards and loans, low savings rates are seen by many as unfair, given booming bank profits. The regulator has said it will “conduct further analysis” into how cash savings are contributing to these profits.

Named and shamed

The FCA has already met with some of the country’s biggest lenders telling them to speed up. The regulator expects lenders to pass benefits to savers within “weeks” of a central bank interest rate rise.

Its 14-point plan will monitor how quickly banks pass on savings rates to customers and name and shame those which fail.

‘Better deals for savers’

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said: “We want a competitive cash savings market that delivers better deals for savers, where interest rates are reviewed quickly following base rate changes and firms prompt savers to switch to accounts paying higher rates.

“We welcome the progress that has been made so far but this needs to speed up. We will be using the Consumer Duty to ensure this is the case – with firms required to prove to us that they are offering their customers fair value.

“We continue to urge savers to shop around to take advantage of the increasing number of better saving deals available.”

The pandemic triggered a seismic shift in working practices with remote and hybrid working become the norm at many UK businesses.

Even when a return to the traditional workplace became possible, it was evident many workers preferred a more flexible arrangement. Well-reported difficulties in recruitment and talent acquisition led many employers to accept flexible working requests.

It also became more commonplace for employers to allow workers to live and work overseas.

Whether these arrangements are temporary or long term, there are tax and legal implications for the employer and the employee working away from HQ.

The rules are extensive and it would be wise to seek advice before making the move.

Income tax

As well as paying UK tax, earnings can also be subject to income tax in the country where the employee physically works. Employers may therefore have obligations to report and collect tax for the overseas country.

Typically speaking:

• If the employee works for six months or less, income duties may not be taxable overseas. However, the employer may have reporting obligations in the country overseas
• Medium-term working abroad would see the income taxed in the UK – usually with a foreign tax credit – as well as being taxed by the overseas country
• In the case of long-term working overseas – usually at least one UK tax year – the income would only be taxable in the overseas country

In some countries, a double taxation treaty exists that can override the local rules.

Social security

Social security contributions may also have local reporting requirements with employee and employer required to pay rates that can be much higher than in the UK.

There are some reciprocal social security agreements in place so advice should be taken to prevent issues in this area.

Corporation tax

Employers will also have to be wary of whether having an employee working abroad will create a “permanent establishment” in that country.

This would make a taxable presence that could render the employer subject to corporation tax in that country.

However, if the work location is not a fixed place of business, working from a home for example, and the overseas working arrangement is temporary, the risk of creating a “permanent establishment” would be low.

Need support or advice on this issue? We can help.

Voluntary and community organisations will benefit from a £5.5m pot awarded by HM Revenue and Customs (HMRC) to support customers who may need extra help with their tax affairs.

HMRC is inviting eligible organisations to bid for the funding, worth £1.8 million a year from 2024 until 2027, through HMRC’s Voluntary and Community Sector Grant Funding programme. Bids can be submitted until 21 August 2023 with successful organisations being announced in October ready for the new funding to start from 1 April 2024.

This is the 12th round of funding HMRC is awarding as part of its commitment to help everyone get their tax right. The programme builds on more than a decade of partnership funding, worth in excess of £20 million.

HMRC’s commitment

Angela MacDonald, HMRC’s Deputy Chief Executive and Second Permanent Secretary, said: “We know that customers really value the trusted tax advice they receive from our voluntary and community sector partners. The funding programme is an important part in our commitment to support our hardest to reach customers and builds on the current support HMRC offers to those who may need extra help with their tax affairs.”

David Newbold, director of Sight Loss Advice Service, from RNIB, one of 12 organisations previously awarded under the grant programme said: “RNIB is extremely grateful to HMRC for its generous support, ensuring blind and partially sighted people can access the advice, information and practical help they need to deal with their tax affairs and HMRC.

“We’re proud to have HMRC as a partner, its contribution is vital to continue our important work in supporting vulnerable individuals.”

39,000 customers helped

In the past year alone, funded organisations have supported 39,000 customers over the phone, with face-to-face meetings and via email.

Successful organisations will receive funding to provide free advice and support to customers who:

• may face barriers in understanding their tax obligations and claiming their entitlements.
• are digitally excluded from accessing HMRC services.
• have any other difficulty in interacting directly with HMRC.

As well as providing support to customers who may need extra help, organisations will provide valuable insight to improve HMRC’s understanding of customers in vulnerable circumstances. This will allow HMRC to reduce barriers and improve the customer experience when dealing with the department.

HMRC’s Voluntary and Community Sector Grant Funding programme complements the work of HMRC’s Extra Support Team, who are on hand to help customers whose health conditions or personal circumstances make contacting HMRC difficult.

More information on eligibility and how to apply can be found online at GOV.UK.

1 August 2023 – Due date for corporation tax due for the year ended 31 October 2022.

19 August 2023 – PAYE and NIC deductions due for month ended 5 August 2023. (If you pay your tax electronically the due date is 22 August 2023)

19 August 2023 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2023.

19 August 2023 – CIS tax deducted for the month ended 5 August 2023 is payable by today.

1 September 2023 – Due date for corporation tax due for the year ended 30 November 2022.

19 September 2023 – PAYE and NIC deductions due for month ended 5 September 2023. (If you pay your tax electronically the due date is 22 September 2023)

19 September 2023 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2023.

19 September 2023 – CIS tax deducted for the month ended 5 September 2023 is payable by today.

It was announced as part of the Spring Budget 2023 measures that the government would establish twelve Investment Zones across the UK, subject to successful proposals. South Yorkshire has now been named as the first of the UK Investment Zones.

These Investment Zones are designed to encourage investment and new economic activity, supporting growth and jobs. The Investment Zones will benefit from lower taxes and more relaxed planning frameworks to encourage rapid development and business investment.

The new Investment Zone in South Yorkshire will specifically focus on Advanced Manufacturing. Sheffield, Rotherham, Doncaster and Barnsley all stand to benefit from an estimated 8,000 new jobs and £1.2 billion of private funding by 2030, which this Investment Zone will help to deliver. Boeing, Spirit AeroSystems, Loop Technology and the University of Sheffield Advanced Manufacturing Research Centre (AMRC) have partnered to support the first investment worth over £80 million.

The government is also working with the devolved administrations and local partners to deliver this opportunity to drive local growth in Scotland, Wales and Northern Ireland. There will be two Investment Zones in Scotland, with Glasgow City Region and North East of Scotland the most likely areas to host Investment Zones. Further information on Investment Zones in Wales and Northern Ireland is pending.

Changes in the way alcohol is taxed will come into effect from 1 August 2023. The new system of calculating alcohol duty for all alcoholic drinks will be made using standardised tax bands based on alcohol by volume (ABV). This will replace the current alcohol duty system, which consists of four separate taxes covering beer, cider, spirits and wine.

These changes are expected to make the system fairer and encourage more new products to enter the market. The new system will create six standardised alcohol duty bands across all types of alcoholic products and apply to all individuals and businesses involved in the manufacture, distribution, holding and sale of alcoholic products across the UK.

There will also be more help for the hospitality industry with an increase in the draught relief duty differential. This will reduce alcohol duty on qualifying beer and cider by 9.2%, and by 23% on qualifying wine-based, spirits-based and other fermented products, sold in on-trade premises such as pubs and restaurants. These changes will also take effect from 1 August 2023 and mean that individuals who drink draught products in on-trade venues (such as pubs) will pay less tax than on the equivalent non-draught product in off-trade venues (such as supermarkets).

To support wine producers and importers in moving to the new method of calculating duty on their products, temporary arrangements will be in place for eighteen months from 1 August 2023 until 1 February 2025.

If you have taxable income of less than £17,570 in 2023-24 you will have no tax to pay on interest received. This figure is calculated by adding the £5,000 starting rate limit for savings (where 0% of the interest is taxable) to the current £12,570 personal allowance. However, it is important to note that if your total non-savings income exceeds £17,570 then the starting rate limit for savings is unavailable.

There is a tapered relief available if your non-savings income is between £12,570 and £17,570 whereby every £1 of non-savings income above a taxpayer's personal allowance reduces their starting rate for savings by £1.

There is also a Personal Savings Allowance (PSA) that can be beneficial to many savers. This allowance ensures that for basic-rate taxpayers the first £1,000 interest on savings income is tax-free. For higher-rate taxpayers the tax-free personal savings allowance is £500. Taxpayers paying the additional rate of tax on taxable income over £125,140 do not benefit from the PSA.

Interest from savings products such as ISA's and premium bond wins do not count towards the limit. So, taxpayers with tax-free accounts and higher savings can still continue to benefit from the relevant PSA limits.

Banks and building societies no longer deduct tax from bank account interest as a matter of course. Taxpayers who need to pay tax on savings income are required to declare this as part of their annual Self-Assessment tax return.

Taxpayers that have overpaid tax on savings interest can submit a claim to have the tax repaid. Claims can be backdated for up to four years from the end of the current tax year. This means that claims can still be made for overpaid interest dating back as far as the 2019-20 tax year. The deadline for making claims for the 2019-20 tax year is 5 April 2024.

The Construction Industry Scheme (CIS) is a set of special tax and national insurance rules for those working in the construction industry. Businesses in the construction industry are known as 'contractors' and 'subcontractors' and should be aware of the tax implications of the scheme.

Under the scheme, contractors are required to deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance liabilities.

Contractors are defined as those who pay subcontractors for construction work or who spent more than £3m on construction a year in the 12 months since they made their first payment. Subcontractors do not have to register for the CIS, but contractors must deduct 30% from their payments to unregistered subcontractors. The alternative is to register as a CIS subcontractor where a 20% deduction is taken or to apply for gross payment status.

Monthly returns must be submitted online. The monthly return relates to each tax month (i.e., running from the 6th of one month to the 5th of the next). The deadline for submission is 14 days after the end of the tax month. Contractors who have not paid subcontractors in a particular month are required to submit a 'CIS nil return' or notify HMRC that no return is due.

Additionally, new VAT rules for building contractors and sub-contractors came into effect on 1 March 2021. This means that for certain specified supplies, sub-contractors no longer add VAT to their supplies to most building customers, instead, the contractors are obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers. This is known as the Domestic Reverse Charge. The contractors can then claim back the output tax paid as input VAT, subject to the usual rules.

The January Self Assessment deadline seems like a long way off, but you don’t have to wait until the last minute to file your return.

Self Assessment customers can take advantage of four key benefits when filing early, HM Revenue and Customs (HMRC) has revealed.

Filing ahead of time will give customers more control over their financial affairs and beat the January rush.

The four benefits to filing early are:

• Planning: find out what you owe for the 2022 to 2023 tax year as soon as you have filed, which allows for more accurate financial planning.
• Budgeting: spread the cost of your tax bill with weekly or monthly payments using HMRC’s Budget Payment Plan.
• Refund: Check if you’re due a refund in the HMRC app once you’ve filed.
• Help: you can access a range of online guidance and information to help you file your return and get help if you are unable to pay your bill in full by the 31 January deadline. You may be able to set up a Time to Pay plan.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “Customers who file their tax return early get to see exactly what they owe and have more time to budget, reducing the stress around Self Assessment.

“Given that January is the busiest month for HMRC’s phone lines, I urge customers to check out the tips on filing your tax return early on GOV.UK and to consider doing so themselves.”

There is lots of help and support available online:

• customers can access the new online tool to check whether they need to do a Self Assessment tax return.
• HMRC’s top tips for filing tax returns early can be found on GOV.UK.
• ask HMRC’s digital assistant to find information about Self Assessment. If they cannot help, chat live with an HMRC webchat adviser.
• access webinars and videos about Self Assessment

Customers need to be aware of the risk of falling victim to phishing scams and should never share their HMRC login details with anyone, including a tax agent, if they have one. HMRC scams advice is also available on GOV.UK.

Need support or advice Self Assessment? We can help.