UK inflation rose to 9.1% in May from 9% in April as the cost-of-living crisis continues, according to data from the Office of National Statistics (ONS).

It was a slight increase on the 9% figure of the previous month, which was driven upwards by April’s unprecedented rise in the energy price cap and is estimated to be the highest since 1982.

The ONS said rising prices for food and non-alcoholic drinks, compared with falls a year ago, pushed up the inflation rate. In monthly terms, consumer prices were up 0.7% in May.

Economists expect the rate to lurk within the 9%-10% range in the coming months before leaping again in October when the next adjustment to the energy price cap is implemented.

Chancellor Rishi Sunak said:

‘I know that people are worried about the rising cost of living, which is why we have taken targeted action to help families, getting £1,200 to the eight million most vulnerable households.

‘We are using all the tools at our disposal to bring inflation down and combat rising prices – we can build a stronger economy through independent monetary policy, responsible fiscal policy which doesn’t add to inflationary pressures, and by boosting our long-term productivity and growth.’

Internet link: ONS website

HMRC is extending the pilot for Making Tax Digital for Income Tax Self Assessment (MTD ITSA) to more self-employed workers and landlords.

From July, those taking part will be able to test MTD ITSA before April 2024, including their own internal processes for managing MTD.

Agents and customers are already taking part, and HMRC wants more agents to start signing up a small number of their clients to trial the system. It is noted that clients will need to have an accounting period that aligns with the tax year in order to take part in the pilot.

From April 2024, all businesses with annual income from self employment or property above £10,000 will have to follow MTD rules.

Under MTD, the quarterly reporting is a summary, providing a total of the incomes and outcomes going through the business per quarter. As a result, there is not necessarily a need to report under each property address as it is an accumulation of all the data that is required, HMRC said.

It commented:

‘We want to ensure this is well tested before mandation, and that agents and customers have opportunities to feedback on how it will work in practice. That’s why we’re running a pilot, inviting agents to recommend clients who can help us test and learn.

‘The pilot is still a test environment. Those taking part have the benefit of testing the MTD ITSA before April 2024, including their own internal processes for managing MTD. Continue reading...

HMRC issued 580 penalties totalling over £14 million for minimum wage offences during 2020/21, according to a report released by the Department for Business, Energy and Industrial Strategy (BEIS).

The penalties given out for national minimum wage (NMW) and national living wage (NLW) offences have dropped by £4.5 million from the year before, which saw 992 penalties worth £18.5 million.

BEIS’s report says that HMRC has adapted its communications to make it clear to workers that they have the option to remain anonymous if they make a complaint, and that they can report a previous employer for minimum wage breaches.

It also says it will be more transparent about the most common minimum wage breaches it finds, which include deductions from workers’ pay and unpaid working time, to help organisations remain compliant.

The report said:

‘BEIS, therefore, publishes an educational bulletin with each naming round to help raise awareness of minimum wage rules and improve compliance. Bulletins include analysis of the most common breaches in each naming round, examples to ensure understanding of how such breaches can be avoided, and links to the government’s Calculating Minimum Wage guidance for further details.’

Internet link: GOV.UK

Nearly 66,500 taxpayers filed their 2021/22 self assessment return on the first day of the new tax year, according to figures from HMRC.

In recent years, there has been an increasing number of ‘early-bird’ customers filing their completed self assessment tax returns at the start of the new tax year – almost 30,000 more customers filed their returns on 6 April this year, compared to 2018.

HMRC is encouraging others to change their filing habits and do it as soon as they can. Although many wait until nearer the annual filing deadline on 31 January, for some it is an opportunity to beat the last-minute rush and get it done as soon as they can, while they have the relevant information to hand.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said:

‘You don’t need to wait for the January rush to send us your tax return. More and more people are getting theirs out of the way early – search ‘self assessment’ on GOV.UK to get started.’

Internet link: HMRC press release

Inflation has hit its highest level in 40 years amid the deteriorating cost-of-living crisis, according to the latest figures from the Office for National Statistics (ONS).

The rate shot up to 9% last month – its highest level since comparable readings in 1982.

Data released by the ONS showed a broad-based hike in prices for everyday goods and services during April, with a significant cause of the increase accounted for by the unprecedented 54% increase in the energy price cap, which kicked in at the start of the month.

The highest prices on record for both petrol and diesel were other major factors.

Commenting on the data, Rain Newton-Smith, Chief Economist at the Confederation of British Industry (CBI), said:

‘Inflation was always likely to hit hard in April given the energy price cap increase.

‘Looking ahead, inflation is likely to stay high, with a resulting historic squeeze in households’ incomes and a tough trading environment for businesses.

‘It is critical the government explores options to help people facing real hardship now, and support cashflow for vulnerable firms. Stimulating business investment is also crucial, to both plug the near-term gap in growth and to shore up the economy’s potential to withstand future shocks.’

Internet link: ONS website CBI press release Continue reading...

New laws to protect access to cash and help victims of financial scams were announced in the Queen’s Speech at the state opening of parliament on 10 May.

The new Financial Services and Markets Bill will ensure the continued availability of withdrawal and deposit facilities across the UK.

The Bill will also enable the Payment Systems Regulator to require banks to reimburse authorised push payment (APP) scam losses, totalling hundreds of millions of pounds each year. This will ensure victims are not left paying for fraud through no fault of their own.

These measures form part of wider plans that the government says will maintain and enhance the UK’s position as a global leader in financial services.

Economic Secretary to the Treasury, John Glen, said:

‘We are reforming our financial services sector now we have left the EU to ensure it acts in the interests of communities and citizens, creating jobs, supporting businesses and powering growth across all of the UK.

‘We know that access to cash is still vital for many people, especially those in vulnerable groups. We promised we would protect it, and through this Bill we are delivering on that promise.

‘We are also sticking up for victims of financial scams that can have a devastating impact by ensuring the regulator can act to make banks reimburse people who have lost money through no fault of their own.’ Continue reading...

The energy price cap is now expected to rise to around £2,800 in October, according to the UK’s energy regulator.

Jonathan Brearley, Chief Executive of Ofgem, warned MPs on the Commons business committee about the increase. Mr Brearley told the committee that the price cap, which is currently £1,971, will increase due to continued volatility in the gas market.

He said the price rises were a once in a generation event not seen since the oil crisis in the 1970s. The Ofgem Chief Executive also warned that the number of people in fuel poverty could double.

The energy price cap is the maximum price per unit that suppliers can charge customers. It rose in April, meaning that homes using a typical amount of gas and electricity are now paying an extra £700 per year on average.

Mr Brearley said:

‘I am afraid to say conditions have worsened in the global gas market since Russia’s invasion of Ukraine. Gas prices are higher and highly volatile. At times they have now reached over ten times their normal level.

‘I know this is a very distressing time for customers, but I do need to be clear with this committee, with customers and with the government about the likely price implications for October.

‘Therefore, later today I will be writing to the Chancellor to give him our latest estimates of the price cap uplift.’ Continue reading...

Chancellor Rishi Sunak will impose a windfall tax on energy firms alongside a package to help households with the cost-of-living crisis.

Mr Sunak said a ‘temporary, timely, and targeted’ 25% Energy Profits Levy would be introduced for oil and gas companies, reflecting their extraordinary profits.

The levy is expected to raise £5 billion for the Exchequer and the legislation will include a sunset clause to ensure it is temporary.

As an incentive for energy companies to invest, the new levy will include a new 80% investment allowance.

The Chancellor also announced a £15 billion package of support for households.

Eight million of most vulnerable households across the UK will receive a new one-off £650 cost of living payment. There will also be separate one-off payments of £300 to pensioner households and £150 to individuals receiving disability benefits

The October discount on energy bills will be doubled to £400 and the requirement to repay it over five years has been scrapped.

Mr Sunak said:

‘We know that people are facing challenges with the cost of living and that is why today I’m stepping in with further support to help with rising energy bills.  

‘We have a collective responsibility to help those who are paying the highest price for the high inflation we face. That is why I’m targeting this significant support to millions of the most vulnerable people in our society. I said we would stand by people and that is what this support does today. Continue reading...

There are now more than a million workers missing from the workforce compared to pre-pandemic figures, according to a report published by the IPPR think tank.

About 400,000 of these are no longer working because of health factors relating to the pandemic, including long Covid, according to the IPPR.

The report suggests that unresolved, this ‘will drag down economic activity this year by an estimated £8 billion’.

The nation’s health affects the economy in more ways than keeping workers away from their jobs.  Poor health can affect productivity and promote chronic stress. Inhabitants of economically deprived areas of the country show poorer health, have fewer job opportunities and tend to be paid less.

Dame Sally Davies, co-chair of the Commission on Health and Prosperity, said:

‘A fairer country is a healthier one, and a healthier country is a more prosperous one. While the restrictions have eased, the scars of the pandemic still remain deep on the nation’s health and our economy.

‘Not only are we facing a severe cost of living crisis, driven in part by pandemic induced inflation, we’re also experiencing a workforce shortage driven by poor health that’s holding back the economy. It has never been more important to put good health at the heart of our society and economy – and our commission will bring forward a plan to do just that.’ Continue reading...

Data published by the British Chambers of Commerce (BCC) shows that UK export growth has been effectively stagnant for the past year.

The BCC’s quarterly Trade Confidence Outlook revealed that the proportion of exporters reporting increased overseas sales was 29%, whilst 25% reported a decrease.

Manufacturers were more likely to report increased export sales than business-to-business firms or business-to-consumer firms (such as online stores), the data showed.

William Bain, Head of Trade Policy at the BCC, said:

‘UK exporters are facing the headwinds of higher red tape costs from trading with the EU, raised raw material pressures and ongoing issues in global shipping markets.

‘If we are to realise the aspirations of the UK government’s Export Strategy then 2022 has to be the year where these structural factors holding back our exporters are addressed.

‘Sustained export growth should be powering our economic recovery from the pandemic.’

Internet link: BCC website