Anna’s Accountancy Alerts – Week 21 (21st – 27th August 2023)

Tax

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HMRC increases late payment interest rate

Following the Bank of England’s latest increase in the base rate, HMRC has increased both late paid tax and the rate paid on repayments of tax.

The Bank increased the base rate to 4.5% from 4.25% on 11 May.

The late payment interest rate will increase by 0.25% to 7% from 31 May.

Late payment interest is payable on late tax bills covering income tax, National Insurance contributions, capital gains tax, corporation tax pay and file, stamp duty land tax, stamp duty and stamp duty reserve tax. The corporation tax pay and file rate also increases to 7%.

Repayment interest will also be increased from the current 3.25% rate to 3.5%.

Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments rose to 5.25% from 5% a week earlier on 22 May.

Making Tax digital for Income tax (MTD for ITSA)

The Institute of Chartered Accountants in England and Wales (ICAEW) has written to HMRC regarding how Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) can be better shaped to suit the needs of small property businesses and the self-employed.

The ICAEW has written to HMRC to outline key points that it believes should be considered before the implementation of MTD for ITSA. These include rethinking the ‘disproportionate’ administrative burden associated with quarterly updates; decoupling the requirements to maintain digital records and to submit details of income from self-employment and property directly from software; and refocusing the MTD for ITSA initiative on digital record keeping and filing from software.

Internet link: ICAEW

One in five workers will be higher rate taxpayers by 2027

The number of people paying income tax at 40% or above will reach 7.8 million by 2027/28, according to research published by the Institute for Fiscal Studies (IFS).

This represents one in five taxpayers and one in seven of the adult population – a near-quadrupling of the share of adults paying higher rates since the early 1990s, the IFS said.

It stated that the six-year freeze to income tax allowances and thresholds which started in April last year will significantly raise taxes.

Internet link: IFS

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