Fuel margins of retailers – the difference between what a retailer pays for its fuel and what it sells at – remain around the high levels seen during the CMA’s road fuel market study. 

Supermarket fuel margins increased over the May to August 2024 period, up from 7.0% in April to 8.1% in August. Non-supermarket fuel margins also increased from 7.8% in April to 10.2% in August. 

The sustained increase in the level of fuel margins is concerning and suggests that overall levels of competition in the road fuel retail market remain weakened. 

Fuel prices 

Fuel prices decreased for both petrol and diesel from June to October 2024. These movements reflect in part changing crude oil prices and refining spreads, both of which are driven by global factors. 

The average petrol and diesel prices at the end of October were 134.4 and 139.7 pence per litre (ppl) respectively. This represents a decrease of 10.0 ppl and 10.4 ppl in petrol and diesel prices than the previous four months. 

Retail spreads 

The CMA also looked at the retail spread – the average price that drivers pay at the pump compared to the benchmarked price that retailers buy fuel at – over July to October 2024. 

Retail spreads were above the long-term average of 5-10 ppl, with petrol averaging 14.9 ppl and diesel averaging around 16.3 ppl. Retail spreads have been above long-term averages since 2020, indicating an ongoing lack of retail competition in the sector. 

While spread analysis can give a quick overview of trends in the sector, it is a less reliable indicator of competitive intensity than individual retailers’ fuel margins. Retail spreads increase and decrease in response to the volatility of wholesale prices but should return to a normal range over time.

The upcoming increase in Employers’ National Insurance Contributions (NICs) is set to have significant repercussions for UK businesses. Employers’ NICs are essentially a tax on wages, paid by businesses as a percentage of their employees’ earnings above a certain threshold. Any increase to this rate affects the cost of employment, which in turn has a ripple effect on the broader economy. Below, we explore the potential implications of this policy change.

Increased Costs for Businesses

The most immediate impact of higher Employers’ NICs will be the increase in employment costs for businesses. With wage inflation already a concern, particularly in sectors like healthcare, technology, and construction, many businesses are likely to see these additional costs as a further squeeze on their operating budgets.

Small and medium-sized enterprises (SMEs) are expected to feel the pressure most acutely. Unlike larger corporations, SMEs often operate on tighter profit margins and lack the financial resilience to absorb additional taxes without adjusting elsewhere. Many will face tough decisions about whether to reduce hiring, cut back on other expenses, or pass the cost increases on to customers.

Pressure on Wages

Another likely consequence is the impact on wage growth. While employees will not pay directly for Employers’ NICs, the tax does influence how businesses allocate resources. Employers may choose to offset rising NICs by slowing down wage increases or freezing salaries altogether.

In industries that rely heavily on skilled labour, such as technology and finance, this could lead to a talent drain if employees perceive UK companies as less competitive in terms of remuneration. This is particularly concerning at a time when retaining talent is crucial for business growth and innovation.

Potential Reduction in Job Creation

Higher employment costs could deter businesses from creating new jobs. This effect is particularly concerning given ongoing challenges in the UK labour market, including skills shortages in key sectors. While the government often argues that NIC increases help fund essential services like healthcare and pensions, businesses may interpret this move as a disincentive to invest in growth.

The hardest-hit sectors are likely to include those with high labour costs, such as retail, hospitality, and care services. These industries may either cut back on hours, delay new hires, or rely more heavily on temporary or contract workers to avoid incurring higher NIC obligations.

Knock-On Effects on Inflation

If businesses decide to pass on the increased costs to consumers, this could exacerbate inflationary pressures. For example, a restaurant chain facing higher payroll taxes might increase menu prices, adding to the cost-of-living burden already felt by many households. Similarly, in sectors like manufacturing and logistics, increased costs could ripple through supply chains, driving up the price of goods and services.

Encouraging Automation and Outsourcing

Another long-term consequence may be the acceleration of automation and outsourcing. Faced with rising employment costs, businesses could invest more heavily in technology to reduce their reliance on human labour. For instance, retailers might expand the use of self-checkout systems, while manufacturers could adopt advanced robotics to streamline production.

Outsourcing jobs to countries with lower employment taxes may also become more appealing, particularly for roles in IT, customer service, and other remote-friendly professions. While such strategies may help businesses remain competitive, they could reduce the availability of jobs in the UK.

Impact on Public Finances

From the government’s perspective, increasing Employers’ NICs is a way to generate additional revenue, which may be earmarked for public spending on areas like healthcare, pensions, or infrastructure. However, there is a risk that higher NICs could dampen economic activity, potentially reducing the overall tax base. If businesses cut jobs or wages, the government may collect less income tax and employees’ NICs, undermining the intended fiscal benefits of the policy.

Mitigating the Impact

To counter the negative effects of this tax rise, businesses may consider several strategies. For example, improving operational efficiency, investing in staff training to enhance productivity, or restructuring employment contracts to include more part-time roles could help offset costs.

The government, too, may need to introduce relief measures to help businesses adapt. Options could include raising the Employment Allowance, which offsets NICs for smaller employers, or introducing targeted tax incentives for businesses that invest in innovation or training.

Conclusion

The planned increase in Employers’ NICs for 2024 will undoubtedly pose challenges for UK businesses, especially smaller enterprises and labour-intensive sectors. While it may generate much-needed revenue for public services, the policy risks curbing job creation, dampening wage growth, and fuelling inflation. Businesses and policymakers alike will need to work creatively to manage these challenges and ensure that the long-term impacts do not outweigh the short-term fiscal benefits.

As the UK economy grapples with a range of pressures, including global economic uncertainty, rising interest rates, and inflation, the effects of this NIC increase will be closely watched by employers, employees, and the government alike.

When approaching the VAT registration threshold there are important matters to consider. The VAT registration threshold is the point at which businesses must register for VAT with HMRC.

A business must register for VAT if:

• their total VAT taxable turnover for the previous 12 months is more than £90,000 – known as the ‘VAT threshold’;
• they expect their turnover to go over the £90,000 VAT threshold in the next 30 days; or
• they are an overseas business not based in the UK and supply goods or services to the UK (or expect to in the next 30 days) – regardless of VAT taxable turnover.

With traditional VAT registration, businesses are required to collect VAT on their sales and pay it to HMRC even if customers have not paid their invoices. This can create cash flow issues, as the business must remit the VAT before receiving full payment from customers. This means that small businesses may struggle with cash flow due to VAT liabilities, especially if they do not have enough working capital to cover tax obligations while waiting for customer payments.

We would be happy to help businesses approaching the VAT registration threshold understand their options. There are a number of VAT registration options available. Making the wrong choice could have significant cash flow consequences. It may be possible to alleviate these difficulties by adopting the VAT Cash Accounting Scheme or VAT Flat Rate Scheme but take advice before making a decision as registration criteria apply; not all businesses would qualify.

The Let Property Campaign provides landlords who have undeclared income from residential property lettings in the UK or abroad with an opportunity to regularise their affairs by disclosing any outstanding liabilities whether due to misunderstanding the tax rules or because of deliberate tax evasion. Participation in the campaign is open to all residential property landlords with undisclosed taxes. The campaign is not suitable for those letting out non-residential properties.

Landlords who do not avail of the opportunity and are targeted by HMRC can face penalties of up to 100% of the tax due together with possible criminal prosecution. Taxpayers that come forward will benefit from better terms and lower penalties for making a disclosure. Landlords that make an accurate voluntary disclosure are likely to face a maximum penalty of 0%, 10% or 20% depending on the circumstance, and these costs would be in addition to the tax and interest due. There are higher penalties for offshore liabilities. 

There are three main stages to taking part in the campaign are notifying HMRC that you wish to take part, preparing an actual disclosure and making a formal offer together with payment. The campaign is open to all individual landlords renting out residential property. This includes, amongst others, landlords with multiple properties as well as specialist landlords with student or workforce rentals. Once HMRC have been notified of the wish to take part in the campaign, landlords usually have 90 days to calculate and pay any tax owed.

HMRC’s guidance for landlords wishing to make a disclosure has recently been updated to provide further information about who is affected by the Let Property campaign and how to notify HMRC.

There are specific rules regarding the liability to Inheritance Tax (IHT) on gifts made during a person's lifetime. In most cases, gifts made during a person’s life are not taxed at the time they are given.

These lifetime gifts are referred to as "potentially exempt transfers" (PETs). The gift becomes exempt from IHT if the giver survives for more than seven years after making the transfer, commonly referred to as the seven year rule. There were expectations that this rule might have been changed as part of the Budget measures, but no changes were made.

If the giver dies within three years of making the gift, the IHT treatment is as if the gift was made upon death. If death occurs between three and seven years after the gift, a tapered relief applies.

The IHT rates on the amount exceeding the IHT nil-rate band are as follows:

• 0 to 3 years before death: 40%
• 3 to 4 years before death: 32%
• 4 to 5 years before death: 24%
• 5 to 6 years before death: 16%
• 6 to 7 years before death: 8%

If you give away an asset but continue to benefit from it, this is considered a “gift with reservation,” and the value of the asset will still count towards your estate. Examples of gifts with reservation include:

• Giving your home to a relative but continuing to live in the gifted property.
• Giving away a caravan but still using it for holidays without charge.
• Donating a valuable painting but still displaying it in your home.