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This year was the 50th anniversary of the introduction of Value Added Tax (VAT) in the UK, but despite being around for so long, many businesses still find managing this tax too complicated. Unsurprisingly, more registered businesses than ever are now receiving penalties from HMRC for inaccuracies in their VAT returns.

A new VAT penalty system for submitting returns or paying tax bills late came into force on 1st January 2023, replacing the old regime and also applying to nil or repayment returns. HMRC is now issuing correspondence to businesses that have incurred VAT penalties under the new system – some of which may not be aware of their errors.

Since its introduction over 20 years ago, Research and Development (R&D) tax relief has helped to stimulate economic growth and boost employment by encouraging companies in the UK to pursue innovative investments.

However, there has been some concern that the level of exaggerated or fraudulent R&D relief claims is increasing. It’s believed that almost 20% of all claims are fraudulent, with non-compliance being a particular issue for small-value claims of £10,000 or less.

To counter dishonest applications, HMRC has introduced changes in the way companies must apply for R&D tax relief. To submit a claim, companies must complete another form in advance and provide extra information.

On 3rd August 2023, the Bank of England increased the base interest rate from 5% to 5.25%, which also triggered an increase in HMRC interest rates for late tax payments and repayments. This rate will apply until the next review in November.

Increased bank interest rates mean increased tax revenue for the government, as more taxpayers will end up paying Income Tax on their savings because of the higher interest. Similarly, increased mortgage rates are driving up Capital Gains Tax takings.

Taxpayers who submitted 2021–2022 tax returns with provisional figures need to resolve these and provide the final figures by the end of November.
HMRC has been sending nudge letters to tax agents representing taxpayers whose provisional tax returns are still unresolved, and may also send them directly to unrepresented taxpayers who do not have an agent to manage their tax files.
While using provisional figures is sometimes necessary, submitting a high number of provisional tax returns can draw unwanted attention from HMRC, and leaving them unresolved could result in fines for failing to meet your tax obligations.
That’s why HMRC is also encouraging taxpayers and tax agents to get ahead by submitting 2022–2023 tax returns early – preferably with finalised figures.

Recently, HMRC released new Income Tax liability statistics covering the tax years 2020 to 2021 and 2023 to 2024 – but what do the latest figures mean?

The Lifetime Allowance (LTA) was introduced over fifteen years ago, setting the maximum amount of pension savings that an individual could contribute to registered pension schemes before their savings would be subject to a tax charge.

As part of efforts to incentivise those who have retired or are planning to retire to return to work and boost the economy, the government has abolished this allowance – meaning workers can save more into their pensions without triggering the tax charge.

Though the LTA was scrapped in April this year, further changes were needed to support its removal and facilitate the taxing of lump sums and death benefits without it.

To this end, draft legislation and an accompanying policy paper have been published to set out the changes due to take effect from 6th April 2024. These include the introduction of a new lump sum allowance and death benefit allowance.

If the legislation is enacted, these will be the same as the previous LTA – which was frozen at £1,073,100 in 2020. There will also be significant changes to the taxing of death benefits when a pension saver passes away before they turn 75 years old.

Here is what we can learn from the policy document and how abolishing the LTA could affect the future of pension planning for many savers.