The Bank of England’s Monetary Policy Committee (MPC) met on 2 February 2023 and voted 6-3 in favour of raising interest rates by 50 basis points to 4% in a move to try and continue to tackle upward pressures on inflation. This is the tenth time in a row that the MPC has increased interest rates with rates now the highest they have been since November 2008.

This means that the late payment interest rate applied to the main taxes and duties that HMRC charges interest on increases by 0.5% to 6.50%.

These changes will come into effect on:

• 13 February 2023 for quarterly instalment payments
• 21 February 2023 for non-quarterly instalments payments

The repayment interest rates applied to the main taxes and duties that HMRC pays interest on will increase by 0.5% to 3% from 21 February 2023. The repayment rate is set at the Bank Rate minus 1%, with a 0.5% lower limit.

The Scottish Child Payment increased to £25 per week from 14 November 2022. The payment is available to qualifying applicants living in Scotland for children under the age of 16. The Scottish Child Payment was launched in February 2021, initially for children under the age of 6. It is estimated that some 400,000 children in Scotland are now eligible for the payment.

In order to qualify, the applicant or their partner must meet the necessary conditions.

The Scottish government website states the following:

You can apply whether you're in work or not, and if you or your partner are getting one or more of the following benefits:

• Universal Credit
• Child Tax Credit
• Working Tax Credit
• Income-based Jobseeker's Allowance (JSA)

Social Security Scotland also accept claims if you alone are named on one of these benefits:

• Pension Credit
• Income Support
• Income-related Employment and Support Allowance (ESA)

If your partner is named on any of the above three benefits and you are not, your partner should apply.

An application can be made online, by post or by calling Social Security Scotland free on 0800 182 2222. Payments are made every 4-weeks. There are currently delays in processing applications, but payments will be backdated to the date of application. Being in receipt of the Scottish Child Payment does not affect any other UK or Scottish Government benefits that you, or any person in your household, currently receive.

Working people across the UK will be protected from disruptive strikes thanks to new laws introduced recently. They will allow employers in critical public sectors to maintain minimum levels of service during strikes.

The government is introducing this legislation to ensure that striking workers don’t put the public’s lives at risk and prevent people getting to work, accessing healthcare, and safely going about their daily lives.

The government will first consult on minimum service levels for fire, ambulance, and rail services, recognising the severe disruption that the public faces when these services are impacted by strikes, especially the immediate risk to public safety when blue light services are disrupted.

The government hopes it will not have to use these powers for other sectors included in the Bill, such as education, other transport services, border security, other health services and nuclear decommissioning.

The government expects parties in these sectors to reach a sensible and voluntary agreement between each other on delivering a reasonable level of service when there is strike action. This will, however, be kept under review and the Bill gives the government the power to step in and set minimum service levels should that become necessary.

The Bank of England’s Monetary Policy Committee (MPC) met on 15 December 2022 and voted 6-3 in favour of raising interest rates by 50 basis points to 3.5% in a move to try and continue to tackle upward pressures on inflation. This is the ninth time in a row that the MPC has increased interest rates with rates now the highest they have been since November 2008.

Consequently, the late payment interest rate applied to the main taxes and duties that HMRC charges increases by 0.5% to 6.00%.

These changes will come into effect on:

• 26 December 2022 for quarterly instalment payments; and
• 6 January 2023 for non-quarterly instalments payments.

The repayment interest rates applied to the main taxes and duties that HMRC pays interest will increase by 0.5% to 2.5% from 26 December 2022. The repayment rate is set at the Bank Rate minus 1%, with a 0.5% lower limit.

The Chancellor of the Exchequer, Jeremy Hunt has confirmed, in a written statement, that the next UK Budget will take place on Wednesday, 15 March 2023. This will technically be the Chancellor’s first Budget although his Autumn Statement to the House of Commons on 17 November 2022 included many announcements more typically seen in a traditional Budget.

This means there have already been a raft of changes announced for 2023-24, so it will be interesting to see what further changes are announced as part of the Budget next Spring.

Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech next March.

The Budget will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR). This forecast will be in addition to that published for the Autumn Statement and fulfil the obligation for the OBR to produce at least two forecasts in a financial year, as is required by legislation.

The OBR has executive responsibility for producing the official UK economic and fiscal forecasts, evaluating the government’s performance against its fiscal targets, assessing the sustainability of and risks to the public finances and scrutinising government tax and welfare spending.

The Chancellor, Jeremy Hunt, recently hosted a meeting at 11 Downing Street to discuss what help may be available to support homeowners who encounter problems paying their mortgage. The meeting was attended by leaders of the UK’s major mortgage lenders, the Chair of the Financial Conduct Authority (FCA), and Martin Lewis of Money Saving Expert. The meeting was convened in light of the increase in interest rates over the last year coupled with rising inflation. 

At the meeting, mortgage lenders committed to help all their customers by:

• enabling customers who are up to date with payments to switch to a new competitive, mortgage deal without another affordability test;
• providing well-timed information to help customers plan ahead should their current rate be due to end;
• offering tailored support to those who start to struggle with payments, which may vary by lender, but may include extending the term of the mortgage to make monthly payments lower, a short-term reduction in monthly payments or accepting interest-only payments for a period where appropriate; and 
• ensuring highly trained and experienced staff are on hand to help where needed.

The government also confirmed that they would take action to make Support for Mortgage Interest easier to access and increased funding for the Money and Pensions Service to provide debt advice in England. 

The FCA in turn published a consultation on draft guidance clarifying how lenders can support borrowers impacted by the rising cost of living and will also publish more information for borrowers struggling to make their monthly mortgage payment.

A free HMRC tax app is available and offers some useful functionality. In fact, in the 12 months up to October 2022, HMRC received almost 3 million calls from people asking for information that is now readily available on the app.

This included:

• 354,499 calls from people who forgot/lost their National Insurance number;
• 444,301 calls from people who wanted their employment history and tax details; and
• 323,381 calls from people who wanted their tax codes.

The information can also be downloaded and printed – so there is no need to call HMRC to ask for it to be sent in the post.

The APP can be used to see:

• your tax code and National Insurance number;
• an estimate of the tax you need to pay;
• your income and benefits;
• how much you will receive in tax credits and when they will be paid;
• your Unique Taxpayer Reference (UTR) for self-assessment; and
• how much self-assessment tax you owe.

The app can also be used to complete a number of tasks that usually require the user to be logged on to a computer. This includes:

• make a self-assessment payment;
• renew and report changes to your tax credits;
• access your Help to Save account;
• using HMRC’s tax calculator to work out your take home pay after Income Tax and National Insurance deductions;
• track forms and letters you’ve sent to us;
• claim a refund if you’ve paid too much tax; and
• update your postal address.

The app is available to download from the App Store for iOS and from the Google Play Store for Android.

The Department for Digital, Culture, Media & Sport (DCMS) has published a new press release to confirm that they have been working together with internet service providers to deliver low-cost broadband and phone packages called social tariffs.

These new social tariffs offer discounted broadband and mobile deals for people on Universal Credit and other benefits. The new tariffs are being offered by a range of suppliers and the deals currently range from £10 – £25 per month. This can offer savings of up to 50% compared to the average cost of similar broadband packages. 

If you or someone in your household claims Universal Credit, you could switch to any of the tariffs available. Some providers also include people on other benefits such as Pension Credit, Employment and Support Allowance, Jobseeker’s Allowance, and Income Support. The person receiving the benefit will need to be the main person on the contract.

If your current provider offers a social tariff, you can switch at any time free of charge. If your provider does not offer one of these tariffs you can switch to one that does. Your provider might let you leave your current contract without paying a penalty fee if you explain the reasons for the change.

The government published the Autumn Finance Bill 2022 on 22 November 2022. The Bill is officially known as Finance Bill 2022-23. The Bill contains the legislation for many of the tax measures announced in the recent Autumn Statement.

The Autumn Finance Bill will be followed by the main Spring Finance Bill 2023 which will be published after the spring Budget and will cover any remaining tax measures needed ahead of April 2023.

Some of the many measures included within the Bill are:

• The Energy Profits Levy (EPL) will increase to 35% (from 25%), effective 1 January 2023. The investment allowance will be reduced from 80% to 29% for qualifying investment expenditure thereby maintaining its existing cash value.
• The Income Tax additional rate threshold will be reduced from £150,000 to £125,140 with effect from 6 April 2023
• The current £2,000 dividend tax-free allowance is to be reduced to £1,000 from April 2023 and to £500 from April 2024.
• Vehicle Excise Duty (VED) will become payable on new electric cars, vans and motorcycles from April 2025 in the same way as it currently applies to petrol and diesel vehicles. This change will apply to new and existing zero emission cars.
• The Income Tax thresholds will be maintained at their current levels for a further two years until April 2028. The higher rate threshold will remain frozen at £37,700 and the personal tax allowance will remain at £12,570 through to April 2028.
• The Research and Development Expenditure Credit (RDEC) rate will increase to 20% (from 13%) with effect from 1 April 2023. From the same date, the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.

You may have encountered this phrase, fiscal drag, in recent weeks, particularly if following the Autumn Statement announcements last week.

A large part of Chancellor Hunt’s announcements confirmed that rates and allowances for Income Tax are to be frozen at current levels until April 2028.

Your immediate response to this news may have been one of ‘underwhelm’. No changes so no worse-off.

But in many cases, this would be an incorrect assumption.

As we are frequently reminded, with inflation currently running at over 11%, you would need to secure a pay increase of 11% to maintain the purchasing power of your take-home pay.

Unfortunately, if you are already a taxpayer, you would need a pay increase in excess of 11% to maintain your spending power.

For example, freezing your annual tax-free personal at the current £12,570 means any additional income you earn will by taxed (on the assumption that you are already paying tax) and it will be payable at your top rate.

In certain circumstances, this may mean paying tax at higher rates for the first time.

This double hit on your earnings, from inflation and tax on pay increases, will likely result in falling disposable income in the coming years.

May be time to dust off ideas for additional income streams?