In this edition of eNews, we look at HMRC’s research into the economic benefits of Making Tax Digital (MTD), and a change in the threshold for reporting trading income on side hustles. There is also news on the Employment Rights Bill, the latest data on private sector activity, news on the Spring Statement and the Stamp Duty deadline to update you on.
- Financial benefit of MTD could be as high as £915 million
- Side hustle trading threshold raised to £3,000 per year
- Employment Rights amendments do little to address employer concerns
- Private sector activity expected to fall
- Chancellor has set herself a fiscal trap ahead of Spring Statement, warns IFS
- 25,000 first-time buyers set to miss stamp duty deadline
Financial benefit of MTD could be as high as £915 million
The financial benefits of MTD for VAT could be as high as £915 million, according to analysis carried out by HMRC.
Since April 2022 all VAT-registered businesses should be using MTD compatible software to keep digital records and submit returns.
HMRC used responses from a survey with businesses in MTD for VAT using fully functional software to estimate the average time savings businesses have made.
The results showed that, on average, businesses have saved time on their ‘business’ finances and record keeping’ compared to time spent before MTD. Across all VAT businesses using fully compatible software, the time saved is estimated to be between 26 hours and 40 hours per business per year.
HMRC said that if this was extrapolated to the population, it estimated a time saving of between 32 million hours and 49 million hours in the 2022/23 tax year across all businesses in MTD for VAT.
The financial value of this time is estimated to be between £603 million and £915 million.
HMRC said:
‘The results of our analysis provide strong evidence that Making Tax Digital is having a positive impact for businesses. The findings complement other published estimates of the administrative burden of Making Tax Digital and demonstrate a wider economic benefit, beyond any requirement to meet tax obligations.’
Internet link: GOV.UK
Side hustle trading threshold raised to £3,000 per year
The reporting threshold for trading income for self assessment is being lifted from £1,000 to £3,000 gross within this parliament, according to the Treasury.
This includes people trading clothes online, dog-walking or gardening on the side, driving a taxi, or creating content online.
The Treasury says this will benefit around 300,000 taxpayers who will no longer need to file a self assessment tax return.
An estimated 90,000 of them will have no tax to pay and no reason to report their trading income to HMRC in the future at all. Others will be able to pay any tax they owe through a new simple online service.
The changes are part of the government’s Plan for Change, which it says will drive forward efficiency reform.
James Murray, Exchequer Secretary to the Treasury, said:
‘From trading old games to creating content on social media, we are changing the way HMRC works to make it easier for Brits to make the very most of their entrepreneurial spirit.
‘Taking hundreds of thousands of people out of filing tax returns means less time filling out forms and more time for them to grow their side-hustle.
‘We are going further and faster to overhaul the way HMRC works to make sure it delivers the Plan for Change that will help put more money in people’s pockets.’
Internet link: GOV.UK
Employment Rights amendments do little to address employer concerns
The government’s proposed amendments to the Employment Rights Bill will do little to alleviate employer concerns, warns the Institute of Directors (IoD).
Changes to a number of proposals, including application of zero-hours contracts to agency workers and Statutory Sick Pay, have been announced.
In February, the IoD set out four key changes to the Employment Rights Bill which would significantly soften the negative impact of the reforms on hiring.
This included delaying protection against unfair dismissal so that they only come into effect after six months rather than on day one and increasing the planned reference period for the entitlement to guaranteed hours to 52 weeks.
Alexandra Hall-Chen, Principal Policy Advisor for Employment at the IoD, said:
‘While any steps to mitigate the impact of the government’s employment reforms on businesses are welcome, the changes announced today do not address the key areas of the reforms which are of particular concern to employers.
‘Substantial further amendments to the Bill will be required if it is to avoid undermining the government’s growth mission. Our own data shows that directors’ headcount expectations have dropped to lows last seen in the depths of the Covid-19 pandemic. Urgent and substantive action from government is needed to restore business confidence in hiring.’
Internet link: IoD website GOV.UK
Private sector activity expected to fall
Activity in the private sector is expected to fall for the fourth consecutive quarter, according to a Growth Indicator from the Confederation of British Industry (CBI).
Business volumes in the services sector are expected to decline to -23%, and distribution sales are anticipated to fall significantly in the three months to May.
Private sector activity fell again in the three months to February at a faster pace than the quarter to January.
However, manufacturers expect output to return to growth.
Alpesh Paleja, Deputy Chief Economist at the CBI, said:
‘There are some glimmers of hope in our latest surveys. Growth expectations have become marginally less negative, driven by a predicted return to growth in the manufacturing sector. But overall, the data still paints a picture of a tough operating environment for businesses, with consumer-facing sectors faring particularly badly.
‘We do expect some tailwinds to growth over the year ahead. Rising real incomes will hopefully give households more confidence to spend, giving some relief to the sectors suffering the most.’
Internet link: CBI website
Chancellor has set herself a fiscal trap ahead of Spring Statement, warns IFS
Chancellor Rachel Reeves has set herself a trap with self-imposed fiscal rules that could force her into tax hikes and deeper spending cuts as the economy deteriorates, the Institute for Fiscal Studies (IFS) has warned.
The Chancellor’s rules around borrowing have left Britain’s economic policy ‘entirely exposed’ to global changes and could force her into major tax and spending decisions at this month’s Spring Statement, previously billed as a non-event, the IFS said.
The Treasury has committed to delivering only one major fiscal event a year but the prospect of missing her own targets at the first hurdle could see Ms Reeves intervene earlier, it added.
Matthew Oulton, Research Economist at IFS, said:
‘Rachel Reeves has engineered a trap for herself, albeit in difficult circumstances. Aiming to meet inflexible, pass–fail fiscal targets by the slimmest of margins was a risky strategy from the outset.
‘It was always possible that economic conditions would deteriorate, put her on track to miss those rules, and push her into making tax and spending changes at what isn’t supposed to be a fiscal event later this month.
‘This scenario is far from guaranteed and she could still get lucky. But if not, she will have to choose between her fiscal rules and her commitment to holding only one fiscal event per year.’
Internet link: IFS website
25,000 first-time buyers set to miss stamp duty deadline
25,000 first-time buyers are predicted to miss the 31 March stamp duty deadline, according to property website Rightmove.
This is based on homes priced up to £625,000, which is the current maximum stamp duty threshold to be considered a first-time buyer.
In total, an estimated nearly 74,000 home-movers in England are currently going through the legal completion process and will just miss the deadline and complete in April.
The net effect for this group, who are set to complete just one month later, is a collective £142 million in additional stamp duty tax, compared with what they would have paid if they’d been able to complete in March. For first-time buyers, it is a total of £34 million extra in costs.
Rightmove’s Property Market Expert Colleen Babcock said:
‘We expect a rush to complete close to 31 March as first-time buyers and home-movers try to avoid paying extra in tax. Our numbers show how there is a relatively small, but disproportionately impacted group of first-time buyers who will be caught out by the changing thresholds, highlighting some disparities in the way the current system works.
‘We think it would make sense to grant a short extension to the deadline and help these movers, rather than have them face higher charges when they complete later in April.’
Internet link: Rightmove website
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