Author: Glenn

HMRC has been busy promoting the benefits of using its app. A new advertising campaign launched by HMRC is targeted at 18 to 34 year olds and showcases how the app can help them with their tax affairs and finances.

HMRC’s free tax app is available to download from the App Store for iOS and from the Google Play Store for Android. The latest version of the app includes updated functionality.

HMRC has recently reported that more than 1.7 million people are already using the HMRC app every month. Users of the app can access services such as making a Child Benefit claim, finding their National Insurance number and a tax calculator to estimate their take-home pay.

Between July and September 2024, 711,382 new users downloaded the app, and there was a 39% increase in app activity compared to the same period last year – up from 20.93 million sessions to 29.22 million. And nearly £300 million has been paid to HMRC via the app so far this financial year.

HMRC’s Director General for Customer Services, said:

‘One of the main priorities for HMRC is improving its customer services and this incredibly useful and user-friendly app is a great example of how tax can be made much easier for people.

Whether you’re a student looking for your National Insurance number or a new parent wanting to claim Child Benefit, the HMRC app has a range of tools for you, at your fingertips. I urge everyone to download it today.’

A salary sacrifice arrangement involves an agreement by an employee to lower their cash salary in exchange for non-cash benefits. Importantly, this reduction must not bring their earnings below the National Minimum Wage (NMW).

If an employee wishes to join or leave a salary sacrifice arrangement, the employer is required to update their contract, thus ensuring clarity on cash and non-cash entitlements.

Additionally, significant lifestyle changes—such as marriage, divorce, a partner's redundancy or pregnancy—may necessitate adjustments to the arrangement, allowing employees to opt in or out.

The following benefits are currently exempt from Income Tax or National Insurance contributions and do not need to be reported to HMRC:

• payments into pension schemes;
• employer provided pensions advice;
• workplace nurseries;
• childcare vouchers and directly contracted employer provided childcare that started on or before 4 October 2018; and
• bicycles and cycling safety equipment (including cycle to work schemes).

In some circumstances when a salary sacrifice is tax-free, for example, swapping salary for an employer contribution to a pension scheme, the reduction in salary will reduce an employers’ NIC charge.

When evaluating the annual running costs of electric vehicles (EVs) compared to diesel cars, several key factors come into play: fuel (or electricity) expenses, maintenance, insurance, taxation, and depreciation. Here's a detailed comparison:

Fuel/Electricity Costs

• Diesel Cars: Assuming an average fuel efficiency of 50 miles per gallon (mpg) and a diesel price of £1.49 per litre, driving 10,000 miles annually would cost approximately £1,361.
• Electric Cars: With an average consumption of 17.5 kilowatt-hours (kWh) per 100 miles, the cost varies based on charging methods:
  • Home Charging: At a standard rate of 29p per kWh, the annual cost is about £508.
  • Public Charging: Using public chargers at an average of 59p per kWh, the cost rises to approximately £1,033.

Therefore, EVs can offer significant savings on energy costs, especially when primarily charged at home.

Maintenance Costs

• Diesel Cars: These vehicles have complex engines with numerous moving parts, leading to higher maintenance needs and costs over time.
• Electric Cars: EVs have fewer moving components, resulting in lower maintenance expenses. Estimates suggest servicing electric cars is about 23% cheaper than servicing diesel or petrol cars over a three-year/60,000-mile period.

Insurance Costs

• Diesel Cars: Insurance premiums are generally based on factors like vehicle value, performance, and repair costs.
• Electric Cars: Insurance for EVs can be higher due to their higher purchase price and specialised repair requirements. Some studies indicate that electric car insurance premiums are 14% higher than their petrol or diesel equivalents.

Taxation

• Diesel Cars: Subject to Vehicle Excise Duty (VED) based on CO₂ emissions, leading to higher annual tax charges.
• Electric Cars: Currently exempt from VED, offering annual savings. However, starting in April 2025, EVs will no longer be exempt from road tax.

Depreciation

• Diesel Cars: Tend to depreciate steadily over time.
• Electric Cars: Initially faced higher depreciation rates, but recent trends show EVs retaining value better, especially as the market grows and technology improves.

Overall Comparison

While EVs often have higher upfront costs, their lower fuel and maintenance expenses can lead to reduced annual running costs compared to diesel cars. However, factors like insurance premiums and future tax changes should be considered. Individual driving habits, charging options, and specific vehicle models will influence the total cost of ownership.

The Bank of England's recent decision to reduce the base rate to 4.75% brings several potential benefits to various sectors of the UK economy. Let's explore these advantages in detail.

Reduced Borrowing Costs

Lowering the base rate directly influences the interest rates offered by banks and financial institutions. This reduction can lead to decreased borrowing costs for individuals and businesses.

Mortgages: Homeowners with variable-rate mortgages may see a reduction in their monthly payments. For instance, a 0.25% decrease on a £200,000 mortgage could save approximately £28 per month. This reduction can ease financial pressures on households.

Stimulated Economic Growth

Lower interest rates can encourage spending and investment, which are vital components of economic growth.

• Consumer Spending: With reduced borrowing costs, consumers may be more inclined to make significant purchases, such as homes or cars, boosting demand in these markets.
• Business Investment: Affordable financing can lead businesses to invest in new projects, technology, or workforce expansion, contributing to economic development.

Enhanced Business Confidence

Lower borrowing costs can improve business sentiment.

• Investment in Growth: Companies may feel more confident in investing in growth opportunities, leading to innovation and expansion.
• Job Creation: Business expansion can result in job creation, reducing unemployment rates and stimulating economic activity.

Impact on Savings

While lower interest rates can benefit borrowers, they may affect savers.

• Reduced Savings Returns: Interest earned on savings accounts may decrease, potentially discouraging saving.
• Shift to Investments: Savers might seek higher returns through investments in stocks or bonds, influencing financial markets.

Broader Economic Implications

The rate cut can have wider economic effects.

• Stock Market Reaction: Lower rates can lead to higher stock prices as investors seek better returns than those offered by savings accounts.
• Bond Yields: Government and corporate bond yields may decrease, affecting investment strategies.

In summary, the Bank of England's decision to cut the base rate to 4.75% is designed to stimulate economic activity by reducing borrowing costs, encouraging spending and investment, and supporting various sectors of the economy. While there are potential downsides, such as reduced returns for savers, the overall aim is to foster a stable and growing economic environment.

Will there be further rate cuts?

The recent elections in the United States may have an impact on the speed of further rate cuts as the markets anticipate protectionist tariffs and other factors that may dampen economic growth. Business owners and households would be advised to budget for rates between 4% and 5% for some time.

1 December 2024 – Due date for Corporation Tax payable for the year ended 28 February 2024.

19 December 2024 – PAYE and NIC deductions due for month ended 5 December 2024. (If you pay your tax electronically the due date is 22 December 2024).

19 December 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2024. 

19 December 2024 – CIS tax deducted for the month ended 5 December 2024 is payable by today.

30 December 2024 – Deadline for filing 2023-24 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2025-26.

1 January 2025 – Due date for Corporation Tax due for the year ended 31 March 2024.

19 January 2025 – PAYE and NIC deductions due for month ended 5 January 2025. (If you pay your tax electronically the due date is 22 January 2025).

19 January 2025 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2025. 

19 January 2025 – CIS tax deducted for the month ended 5 January 2025 is payable by today.

31 January 2025 – Last day to file 2022-23 self-assessment tax returns online.

31 January 2024 – Balance of self-assessment tax owing for 2023-24 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2024-25.