Difficult choices ahead for the chancellor

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CHANCELLOR Rachel Reeves has warned the government is facing difficult choices as the clock counts down to her Autumn Budget.

In her keynote speech at Labour’s annual party conference in Liverpool she pledged to keep “taxes, inflation and interest rates as low as possible”.

However, there was also a hint that further tax rises may be ahead when she delivers her Budget in November.

The chancellor told the conference the government’s choices had been made “harder” by international events and the “long-term damage” done to the economy.

Economists believe she faces a choice of hiking taxes or cutting spending – if she is to meet her self-imposed fiscal rules. If she chooses the first option, the question remains where she will target the increases.

The rise in employers’ National Insurance Contributions (NICs) she announced in her 2024 autumn budged has had the biggest impact on small businesses.

The boss of Tesco has also warned the government against adding extra costs to UK retailers in the upcoming Budget, saying “enough is enough”.

Ken Murphy said he did not want to see a repeat of the last Budget, when “the industry incurred substantial additional operating costs”.

In her speech Ms Reeves told her audience that she would not take risks with public finances and stressed her commitment to “economic responsibility”.

The chancellor said: “We will face further tests, with choices to come made all the harder by harsh global headwinds and long-term damage to the economy, which is becoming ever clearer.”

In a wide-ranging speech Ms Reeves also vowed to abolish long-term youth unemployment and to invest in British industry. She also urged people to “have faith” in Labour’s agenda.

The chancellor confirmed that every eligible young person who has been on Universal Credit for 18 months without earning or learning will be offered guaranteed paid work through a new ‘Youth Guarantee’.

The new initiative aims to build upon existing employment support and sector-based work academies currently being delivered by the Department for Work and Pensions. The scheme forms part of the government’s aim to provide targeted support for young people at risk of long-term unemployment. 

Responding to the jobs guarantee announcement, policy chair of the Federation of Small Businesses (FSB), Tina McKenzie, said: “This is a hugely important announcement – offering thousands of young people a crucial chance in life.

“Reprioritising spending from employment programmes which aren’t working to this type of scheme is exactly the way to get much-needed bang for taxpayer cash.

“It is a welcome commitment that – done right – will help small businesses do what they do best, provide jobs in our local communities, and help those who need it most get into work.

“Key to getting the details right is making sure there is a backstop offer to those who are now over-25, particularly those with health challenges; that young people out of work for health reasons are not excluded through misguided double funding rules; and that small businesses are enabled to play a full role in the delivery of the scheme.

“We look forward to working with the Treasury to get the important details of this announcement right, and we hope it heralds a pro-jobs, pro-self-employment, pro-business, pro-growth Budget in two months’ time.”

Changes spark steep fall in SME R&D tax credit claims

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The number of SMEs claiming research and development (R&D) tax credits fell by nearly a third in 2023-24, according to newly published figures.

A report from HM Revenue & Customs (HMRC) reveals that the overall number of claims by businesses fell by 26 per cent to the lowest figure in nearly a decade – with a 31 per cent drop when it came to SMEs.

These are the first statistics affected by the change in relief rates for the SME and R&D expenditure credit (RDEC) schemes.

The period is also the first full tax year where all claims had to be supported by an additional information form, one of the administrative changes the HMRC says were introduced “in order to improve levels of compliance”.

The figures reveal a bigger drop in the number of claims for up to £15,000 of tax relief compared to larger ones of above £250,000. First-time claims from SMEs also plunged by 45 per cent.

The RDEC scheme was introduced in April 2013 for large companies. The SME scheme was introduced in 2000 allowing smaller companies to claim a deduction from corporation tax liability based on their enhanced R&D expenditure or to claim a payable tax credit if the company is loss making.

In the 2022 Autumn Statement the government announced cuts in both rates. The enhancement rate was lowered to 86 per cent and the credit rate to 10 per cent.

The HMRC report shows that the amount of tax relief claimed through the SME scheme fell by 29 per cent compared with the previous year, to £3.15billion, while the amount of relief claimed through RDEC rose by 36 per cent to £4.41bn.

All the downward trends highlight the impact the reduced relief rates and the increased administrative effort needed to apply for them has had on SMEs.

They also raise questions about how the changes may be negatively affecting innovation and growth plans in small businesses.

However, our message is clear. While there has been a sharp drop in the number of claims and the process may be more complex, smaller businesses should not be put off taking full advantage of R&D tax credits.

They can still be a powerful tool for ambitious SMEs working hard to drive growth through innovation.

We are here to help eligible businesses, whatever their size or sector, take full advantage of the scheme.

We will work with you to assess if your business qualifies and deliver full support and guidance in navigating the claims process.

• To discuss how we can support you in making a claim for R&D tax credits please contact me on 01772 430000

Amnesty scheme launched for Covid loan debtors

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Businesses and individuals who still owe Covid scheme money to the Treasury have been given a time-limited opportunity to pay it back before tougher sanctions apply.

The voluntary repayment scheme gives them until December this year to return pandemic scheme cash – no questions asked.

The move comes as the government continues to do everything in its power to recoup money lost to Covid fraud.

It is aimed at businesses and directors that were not entitled to or did not need money given to them after applying for it during the pandemic.

Announcing the move, The Treasury said: “Individuals who don’t take this last chance to come forward and repay any outstanding money could face prosecution when the government receives additional investigatory powers next year.”

A Covid fraud reporting website is also being launched to allow members of the public to report suspected fraud.

Covid Counter-Fraud Commissioner Tom Hayhoe said: “Our message to those who still owe Covid era money is simple – pay now, clear your conscience, or face the consequences.

“This money belongs in communities, the NHS, police and Armed Forces. Those who don’t take up this straightforward offer and have knowingly, wrongly claimed tax-payer-funded help could face prosecution, disqualification, or prison.

“The digital trail is forever, so the time to settle is now – before new investigatory powers and tougher rules come into force.”

All Covid schemes, including loans, grants, social security and tax benefits fall under the voluntary repayment scheme.

More than £10billion was lost to pandemic fraud, flawed contracts and waste under the previous government’s mismanagement of pandemic era procurement and schemes. £1.54bn has already been recovered through existing efforts.

• To discuss any issues raised by this article please contact me on 01772 430000

Taxman steps up pension tax relief scrutiny

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HM Revenue and Customs is cracking down on pension tax relief as part of a broader drive to maximise revenue collection, according to reports.

The tax authority is said to be stepping up its scrutiny of claims from higher earners and “lowering the threshold” for requiring evidence to support requests.

Additionally, HMRC will no longer accept claims by telephone. Instead, taxpayers are being instructed to submit claims online or by mail.

And the media reports say that individuals will also be “asked to provide evidence where it would not previously have been required”.

Under the present system, taxpayers can save a maximum of £60,000 a year into their pension and benefit from tax relief.

Basic-rate taxpayers automatically get 20 per cent relief added to their pot, while higher earners paying 40 per cent or 45 per cent tax may need to claim the extra tax relief through their self-assessment tax return.

HMRC said the changes were being made to “protect taxpayers’ money” after an internal review found some workers were making incorrect claims for pension tax relief.

It has been reported that a review of claims for up to £10,000 in relief discovered that almost a third were for incorrect amounts.

The most common mistakes were claiming without higher-rate taxpayer status, seeking relief under a “net pay” arrangement where it had already been granted and providing estimated rather than precise contribution figures.

About 80,000 claims for Personal Pension Relief are submitted to HMRC every year.

A spokesperson for HMRC told the Daily Telegraph newspaper: “We’re lowering the threshold to ensure that people claim the right amount of relief and protect taxpayers’ money.

“This comes after we conducted a review which revealed that many claims below the current evidence threshold were incorrect.”

Chancellor Rachel Reeves is reportedly considering reducing the amount of money pensioners can withdraw from their savings pot without paying tax to as little as £40,000 in her Budget in November.

If it happens, it is a move that would be expected to raise more than £2billion for the Treasury.

• To discuss any issued raised by this article or any tax issues please contact me on 01772 430000

Commission to act on ‘retirement crisis’

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The government has revived the landmark Pensions Commission to confront what it has labelled a ‘retirement crisis’.

It says that without action tomorrow’s retirees are on track to be poorer than today’s.

Almost half of working-age adults are still saving nothing with low earners, some ethnic minorities and the self-employed least likely to be pension saving.

The revived Pension Commission will consider the long-term future of the pensions system.

The Commission of 2006 was declared a huge success at the time, building a consensus for the roll-out of Automatic Enrolment into pension saving that means 88 per cent of eligible employees are now saving, up from 55 per cent in 2012.

However, new analysis shows that there is more to do with the incomes of retirees set to fall over the next few decades if nothing changes:

The government says retirees in 2050 are on course for £800 or eight per cent less private pension income than those retiring today.

And it points to the fact that four-in-ten or nearly 15 million people are under saving for retirement.

This partly reflects too many working age adults (45 per cent) saving nothing at all into a pension, with lower earners, the self-employed and some ethnic minorities particularly at risk.

More than three million self-employed people are not saving into a pension.

The new analysis also reveals a 48 per cent gender pensions gap in private pension wealth between women and men.

A typical woman currently approaching retirement can expect a private pension income worth over £5,000 less than that of a typical man.

While the introduction of Automatic Enrolment increased the numbers saving, saving levels have often remained low. Around one-in-two workers in the private sector only save around the minimum contribution level.

The relaunched commission will explore the complex barriers stopping people from saving enough for retirement, with its final report due in 2027.

The government says: “It will examine the pension system as a whole and look at what is required to build a future-proof system that is strong, fair and sustainable.”

Work and Pensions Secretary Liz Kendall says: “People deserve to know that they will have a decent income in retirement – with all the security, dignity and freedom that brings. But the truth is, that is not the reality facing many people, especially if you’re low paid, or self-employed.

“The Pensions Commission laid the groundwork, and now, two decades later, we are reviving it to tackle the barriers that stop too many saving in the first place.”

• To discuss any issues raised by this article please contact me on 01772 430000

NI hike ‘hitting small firms’

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The rise in employers’ national insurance contributions has had the biggest impact on small businesses, according to new analysis of official statistics.

It has revealed that the number of job vacancies at small businesses fell by a fifth in the three months to July, compared to the three months to October.

The examination of the Office for National Statistics (ONS) figures was carried out by the Liberal Democrats, The Independent newspaper has reported.

It followed the Chartered Institute of Personnel and Development’s latest Labour Market Outlook, which found cost pressures and the NICs hike had led to a record low in private sector hiring plans.

Chancellor Rachel Reeves announced the increase in employer contributions to national insurance in her 2024 Autumn Budget.

Tina McKenzie, policy chair of the Federation of Small Businesses (FSB), told The Independent: “Small businesses don’t feel the government has their backs when it comes to creating jobs.

“It’s not just hiked costs: if you threaten small businesses with court the second they hire somebody, this is the predictable result.

“Anyone working in the real economy can feel the jobs market has turned, so we’re calling on ministers to take urgent action and fix their utter mess of an employment bill before more and more people are left out of work.”

Meanwhile, there have been reports that the Treasury is considering increasing taxes on landlords by adding national insurance on rental income.

National Insurance is currently taxed at eight per cent for employed people and six per cent for the self-employed. For income and profits over £50,270, the rate falls to two per cent.

Landlords currently pay income tax on profits from rent, although there is 20 per cent relief on mortgage interest, and property investors can subtract allowable expenses, including maintenance and letting fees.

• To discuss any issues raised by this article, please contact me on 01772 430000

Crypto owners under the microscope

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HM Revenue and Customs (HMRC) has got crypto owners that aren’t paying their fair share of tax in its sights.

From January 2026, people who own crypto – like Bitcoin, Ethereum or Dogecoin – must give personal details to every crypto service provider they use to make sure they are paying the right tax.

And those people who don’t comply have been warned that they risk a £300 fine from HMRC.

Once data is received from service providers, HMRC says it will be able to identify those who haven’t been correctly paying tax on their crypto profits.

It has estimated that the move will raise up to £315m by April 2030 in tax revenue,

It’s part of a major drive by HMRC to tackle non-compliance including the small minority who are deliberately evading tax due on their profits from crypto.

Service providers will begin collecting data on users’ activities from January 2026. Any service provider that fails to report this information, or submits inaccurate or incomplete reports, could also be charged a penalty of up to £300 per user by HMRC.

The new rules mean crypto service providers must collect and report:

• Your name, address, and date of birth
• Your tax residence
• Your National Insurance number or tax reference
• A summary of your crypto transactions

James Murray MP, Exchequer Secretary to the Treasury, said: “By ensuring everyone pays their fair share, the new crypto reporting rules will make sure tax dodgers have nowhere to hide, helping raise the revenue needed to fund our nurses, police and other vital public services.”

And Jonathan Athow, HMRC’s Director General for Customer Strategy and Tax Design, added: “Importantly, this isn’t a new tax – if you make a profit when you sell, swap or transfer your crypto, tax may already be due.

“These new reporting requirements will give us the information to help people get their tax affairs right.

“I urge all cryptoasset users to check the details you will need to give your provider. Taking action now and having this information to hand will help you avoid penalties in the future.”

Crypto users should already include any crypto gains or income in their Self Assessment tax returns. HMRC has introduced new dedicated sections to the capital gain pages to be completed from the 2024 to 2025 tax year.

Capital Gains Tax may be due when selling or exchanging crypto, while Income Tax and National Insurance could apply to crypto received from employment, mining, staking or lending activities.

• To discuss any issues raised in this article or any tax matters please contact me on 01772 430000

Changes to filing rules set to be scrapped

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New rules that would require small and micro companies to disclose their profit and loss statements for the first time are set to be scrapped, according to media reports.

The new Companies House rules were set to come into effect in April 2027, removing current exemptions when it comes to filing accounts.

The changes would give employees and customers will have clearer detail as to the profits that companies make and the dividends declared to shareholders.

Many small business owners were facing the fact that their own personal ‘earnings’ from a limited company would become public knowledge,

However, according to reports, business secretary Jonathan Reynolds is looking to step in to keep the current rules in place, after startups and investors warned of the difficulties the new rules would have created.

An ally of the minister was quoted in the Financial Times newspaper saying: “It doesn’t fit with our plans to cut regulation.”

If carried through, the new rules would mean much information which would not have been on the public record would no longer be private.

Micro-entities would be required to file a copy of their balance sheet and profit and loss account at Companies House.

Small companies would be required to file a copy of balance sheet, directors’ report, auditor’s report – unless exempt – and profit and loss account.

There would be also be a requirement for more information when claiming an audit exemption. Any company claiming an audit exemption would need to give an enhanced statement from their directors on the balance sheet.

The rules also aim to clamp down on abuse of dormant company status. Directors of dormant companies would need to specify which exemption is being claimed and confirm that the company qualified for the exemption.

However, opponents of the changes say that legislation that was designed to help tackle fraud and tax evasion would have the effect of forcing many taxpayers to put their private earnings on the public record.

Business leaders also raised alarms that the new requirements would ‘opens the door wide’ to competitors snooping on margins and for large companies in supply chains to scrutinise smaller suppliers’ finances – giving them an unfair advantage and damage small firms’ negotiating power.

• To discuss any issues raised by this article please contact me on 01772 430000

Action at last on late payments

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The government has unveiled its Small Business Plan to support small and medium sized firms (SMEs) across the country.

Its measures include tackling the scourge of late payments with what it describes as “the most significant legislative reforms in 25 years”.

Late payments are costing the UK economy £11billion a year and lead to the shutting down of 38 businesses every day.

The new laws are set to give stronger powers to the Small Business Commissioner to empower them to wield fines, worth potentially millions of pounds, against the biggest firms who persistently choose to pay their suppliers late.

The commissioner will be given powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes.

The upcoming legislation will also introduce maximum payment terms of 60 days, reducing to 45 days, giving firms certainty they’ll be paid on time.

Audit committees, under the proposals, will also be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show they’re treating small suppliers fairly backed by mandatory interest charges for those who pay late.

Prime Minister Keir Starmer said: “From builders and electricians to freelance designers and manufacturers – too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses.

“It’s unfair, it’s exhausting, and it’s holding Britain back. So, our message is clear: it’s time to pay up.

“Through our Small Business Plan, we’re not only tackling the scourge of late payments once and for all, but we’re giving small business owners the backing and stability they need for their business to thrive, driving growth across the country through our Plan for Change.”

As part of the plan, the government is also tackling another major barrier for small businesses – access to finance.

It is launching a new £4bn wave of financial support aimed at boosting growth and supporting more small businesses to start up and grow.

This includes a £1bn boost for new businesses, with 69,000 Start-Up Loans and mentoring support to inspire the next generation of entrepreneurs and small business owners.

Accelerating SME growth by just one percentage point per year, could deliver £320bn to the UK economy by 2030.

• To discuss any issues raised in this article please contact me on 01772 430000

Rosebud offers growth support

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Rosebud, part of Lancashire County Council’s Business Growth Service, has announced a £1.5million funding pot available to lend to ambitious businesses in the 2025/26 financial year.

Administered by Lancashire County Developments Limited (LCDL), the fund is designed to support high-potential businesses based in the county looking to scale, innovate and create high-quality jobs.

Rosebud has played a pivotal role in Lancashire’s economic growth for more than 35 years. Currently, it holds 41 active debt investments, backing 38 companies operating across all 12 Lancashire County Council districts.

The impact it delivers is significant. In the last five years alone, it has helped to create 1,164 new jobs across the county.

Rosebud-backed businesses have also achieved a 61 per cent increase in Gross Value Added (GVA), a key indicator of economic contribution and productivity.

Rosebud provides loans for growing businesses of between £25,000 and £100,000 to enable them to fulfil their full potential.

It also offers guidance and support to businesses from a diverse range of sectors and industries, counting some of Lancashire’s standout business success stories in its portfolio.

Martin Emmott, fund manager at Rosebud, said: “We’re proud to be backing ambition in every corner of Lancashire. Put simply, our mission is to help Lancashire’s entrepreneurs and companies fulfil their potential.

“Through our tailored loans and growth support, we enable businesses to scale, innovate and contribute to a thriving regional economy.”

Rosebud funding is open to growing and scaling businesses across all key sectors, including advanced manufacturing, digital and low carbon industries. The fund offers access to specialist advice and wider business support via Lancashire County Council’s Growth Service and other networks.

Andy Walker, head of service, business growth and external funding at County Hall, added: “Rosebud is a standout service that plays a vital role in Lancashire’s economic growth.

“As we work to build a stronger, more resilient economy for our county, Rosebud continues to be a driving force, helping businesses grow, diversify and succeed. Its long-standing support has created skilled, sustainable jobs, boosted local productivity and delivered real, measurable benefits to communities across Lancashire.”

Businesses interested in Rosebud Loans can learn more and get in touch with its team via rosebudfinance.co.uk