Following a Bank Rate cut to 4.25%, HMRC late payment and repayment interest rates will drop from 19 and 28 May 2025. Check which taxes this affects.

The Bank of England’s Monetary Policy Committee (MPC) met on 8 May and, in a narrow 5–4 vote, decided to reduce the interest rate by 25 basis points, bringing it down to 4.25%. Of the four dissenting members, two supported a larger cut to 4%, while the other two preferred to keep the rate at 4.5%. This marks the fourth interest rate reduction since August 2024.

This means that the late payment interest rate applied to the main taxes and duties on which HMRC charges interest will decrease from 8.5% to 8.25%. This change takes effect on 19 May 2025 for quarterly instalment payments, and on 28 May 2025 for non-quarterly instalment payments.

Additionally, the repayment interest rate HMRC pays on main taxes and duties will also drop by 0.25%, from 3.5% to 3.25%, from 28 May 2025. The repayment rate is calculated as the Bank Rate minus 1%, subject to a minimum of 0.5%.

Employers must pay Class 1A NICs on 2024–25 benefits by 19 July (22 July if paying electronically). Avoid penalties by meeting deadlines and using correct references.

Employers are reminded of the upcoming Class 1A National Insurance contributions (NICs) deadline, which applies to most benefits in kind provided to employees during the 2024–25 tax year. These contributions must be paid by 19 July 2025 (or 22 July 2025 if paying electronically) to avoid penalties.

Class 1A NICs are payable by employers on the value of most taxable benefits provided to employees and directors, such as company cars and private medical insurance. They are also due on the portion of termination payments exceeding £30,000, where Class 1 NICs haven’t already been applied.

To ensure payment is correctly allocated, employers must use their Accounts Office reference number as the payment reference and indicate clearly which tax year and month the payment relates to. Note that Class 1A NICs paid in July will always relate to the previous tax year.

There are three key dates to keep in mind for 2024–25 Class 1A NICs:

• 6 July 2025 – Submission deadline for forms P11D and P11D(b) (‘Return of Class 1A National Insurance contributions due’)
• 19 July 2025 – Deadline for postal cheque payments to be received by HMRC
• 22 July 2025 – Deadline for electronic payments to clear into HMRC’s bank account

These contributions are typically due on benefits provided to:

• Company directors and those in controlling positions
• Employees
• Family members or household members of the above

Tax perks for Furnished Holiday Lets have ended. From April 2025, lettings fall under standard rental rules. Check the transition rules to avoid surprises.

The tax advantages that were previously available to property owners letting their properties as short-term holiday lets, known as Furnished Holiday Lets (FHL), has now ended. The changes took effect on 6 April 2025 for Income Tax and Capital Gains Tax, and on 1 April 2025 for Corporation Tax and Corporation Tax on chargeable gains.

The following is a summary of the key transitional rules that apply as FHL status is phased out and properties are brought under the standard property rental business regime:

• FHLs will no longer qualify for capital allowances but can claim "replacement of domestic items relief." Existing capital allowance pools can still use writing-down allowances, but new any expenditure will follow standard property business rules.
• FHL losses, which could only be offset against future FHL profits, will now be absorbed into the wider UK or overseas property business and offset accordingly.
• Carried-forward FHL losses can still be set against future profits of either the UK or overseas property business as appropriate.
• Eligibility for reliefs like roll-over relief, business asset disposal relief, and gift relief have now ended, however, where criteria for relief includes conditions that apply in a future year these specific rules will not be disturbed where the FHL conditions were satisfied before repeal.
• Business asset disposal relief may still apply if the FHL business ceased before the changes and disposal occurs within the normal three-year period following cessation.
• An anti-forestalling rule, effective from 6 March 2024, blocked the use of unconditional contracts to secure capital gains relief under old FHL rules.

Considering VAT deregistration? Whether compulsory or voluntary, knowing the rules, deadlines and risks of delay can save your business from costly penalties.

The decision to deregister for VAT may be necessary or beneficial in a range of circumstances. Whether it's a legal requirement or a voluntary decision, it’s important for businesses to understand the rules and deadlines to avoid penalties and ensure proper compliance. The rules differ depending on whether the deregistration is compulsory or voluntary.

You must cancel your VAT registration if your business is no longer eligible. This typically applies when a business:

• Stops making taxable supplies
• Sells the business
• Changes its legal structure (e.g., from sole trader to limited company)
• Disbands a VAT group
• Joins an existing VAT group
• Joins the Agricultural Flat Rate Scheme

In these cases, deregistration must be completed within 30 days of the change. Failure to do so may result in penalties. In some situations, it may be possible to retain the same VAT number, particularly where the business continues in a different form.

A business may also apply for voluntary deregistration if it expects its taxable turnover to remain below the current threshold of £88,000. HMRC may request supporting evidence to confirm that the turnover will stay below this level. It's important to note that voluntary deregistration cannot be backdated—the cancellation will only take effect from the date the request is received or a future date agreed with HMRC.

Even after deregistering, a business can still make late input tax claims on services received while it was VAT registered, as long as the claims fall within the standard VAT time limits.

An Employment Tribunal confirmed that using an employer's preferred method of communicating with employees to send offensive messages can serve as a ground for dismissal. A claimant was employed from September 2017 as a graduate trainee and then as a software developer until April 2021, at which juncture he was dismissed for gross misconduct. He subsequently brought three grievances during his employment, all of which were dismissed. The issue surrounded ‘Slack’ messages between the claimant and two colleagues sent during working hours using the respondent's systems. The claimant was suspended on 8 January 2021 while still on sick leave, pending a disciplinary investigation.

In a letter dated 15 January 2021, the claimant was invited to a disciplinary hearing. Attached to the letter was a five-page summary of comments alleging inappropriate and offensive language. Despite not attending the disciplinary hearing, the claimant shared his mitigating circumstances on 24 February 2021 and refused to disclose a copy of the Occupational Psychologist's report outlining his disabilities.  The Tribunal concurred that Risby had been correctly applied and that the dismissal was a proportionate response to certain of the respondent's legitimate aims under Section 15(1)(b) of the Equality Act 2010, given the foul and abusive nature of the language directed towards colleagues. The claimant’s medical arguments had, however, not been originally submitted and could not then be produced on appeal to substantiate a direct link between the language itself and the disability.

This judgement is a clear warning that any abuse directed towards colleagues made during working hours using the employer’s preferred communication system can be considered misconduct and result in dismissal. All employees should be cautioned that any miscommunications on work messaging systems are thus potential grounds for dismissal and, while extreme disabilities or mental health conditions might serve as mitigating factors, any claimant will need robust medical evidence to support such a defence.