With the tax return madness of January out of the way, February has been a quiet month, but there have been some important developments so here's a breakdown of the top tax and business stories:
HMRC to Write to Taxpayers about Making Tax Digital for Income Tax
- HMRC launches a campaign to directly communicate with taxpayers about upcoming Making Tax Digital (MTD) requirements.
- Letters will be sent to sole traders and landlords with a turnover or property income around or over £50,000.
- Two versions of letters are planned: one targeting those already mandated and another for those nearing the threshold.
- The communication will begin in April 2025 based on 2023/24 self-assessment data, with follow-up information for the 2024/25 tax period.
- Preparation events and early agent notifications are part of the overall strategy to ease the transition to digital tax reporting.
Employment Concerns Rise for Young People
- The UK Budget introduces a rise in the national living wage for 18–20 year olds from £8.60 to £10 per hour.
- Employer National Insurance Contributions (NIC) will increase from 13.8% to 15%, with the threshold dropping from £9,100 to £5,000 per year.
- These changes could discourage employers from hiring young, inexperienced workers.
- Community feedback highlights fears that increased employment costs might almost triple the burden on part-time staff.
- There could be potential long-term impacts on youth employment in the competitive job market.
Changes to Income Tax Reporting Requirements Ahead
- New self-assessment reporting requirements are coming for individuals and trustees with the introduction of updated SA100 and SA900 forms.
- Late changes to Capital Gains Tax (CGT) rates—rising from 10% to 18% for basic and from 20% to 24% for higher rates—necessitated an adjustment box on the forms.
- Taxpayers disposing of assets, including cryptoassets, will need to report detailed adjustment figures.
- There are additional new disclosure requirements for directors receiving dividends from close companies starting in 2025/26.
- These reforms add more complexity to the tax return process.
Starmer Fails to Rule Out Tax Rises Next Month
- Political uncertainty remains as Sir Keir Starmer leaves open the possibility of tax increases before the Spring Statement.
- Despite decisions made in the October Budget, fresh tax measures may be revisited amid evolving economic forecasts.
- The update comes as the government prepares for the Office for Budget Responsibility’s revised outlook.
- Potential measures such as increased National Insurance to address fiscal challenges are mooted.
- Such moves could have wide-ranging effects on both public services and business confidence.
HMRC Income Tax Personal Allowance Could Rise from £12,570
- A petition with over 130,000 signatures calls for increasing the personal tax allowance from £12,570 to £20,000. View the petition at https://petition.parliament.uk/petitions/702844.
- A higher tax-free threshold would benefit low earners and pensioners.
- The petition is set to be debated by Parliament, spotlighting the debate over the stagnant allowance since 2021.
- The proposal is positioned as a remedy to help lift low-income individuals off benefits.
- The broader impact of freezing the personal allowance on UK tax brackets should be discussed.
People Over State Pension Age Could See Income Tax Threshold Increase to £20,000
- An online petition gathering over 52,900 signatures urges the government to raise the income tax threshold for pensioners to £20,000.
- The current threshold, frozen until 2028/29, is heavily affected by inflation and adding to the financial pressures on retirees.
- Raising the allowance would ease the tax burden on pensioners with additional income from pensions or part-time work.
- Parliament should debate the effects of the broader fiscal policy and the automatic PAYE system with potential benefits and political implications of easing tax pressures on the elderly.