The Bank of England’s Monetary Policy Committee (MPC) met on 1 August and in a very close 5-4 vote decided to reduce interest rates by 25 basis points to 5%. The 4 remaining members voted to keep the rate at 5.25%.

This was the first interest rate cut announced by the Bank of England since March 2020 and sees the interest rate fall from a 16 year high. The rolling twelve-month CPI inflation was at the MPC’s 2% target in both May and June, and this helped prompt the decision to reduce rates.

Whilst the figures demonstrated that inflationary pressure has eased there remains fears of higher inflation returning. The Governor of the Bank of England, Andrew Bailey was also keen to dampen expectations and point out that there is unlikely to be a succession of interest rate cuts in the near-term.

Delivering opening remarks at a press conference following the announcement, Bailey commented:

‘We need to make sure that inflation stays low. We need to put the period of high inflation firmly behind us. And we need to be careful not to cut rates too much or too quickly – all the while monitoring the evidence on how inflationary pressures are evolving.

The best and most sustainable contribution monetary policy can make to growth and prosperity is to ensure low and stable inflation – and an economy where people can plan for the future with confidence and in which money holds its value.

We have truly come a long way in returning inflation to target.’

The new Chancellor of the Exchequer, Rachel Reeves, delivered her widely anticipated House of Commons statement on 29 July 2024. The Chancellor asserted that the new government has inherited a £22bn hole in the public finances. The Chancellor said that she will take the “difficult decisions” necessary to find £5.5 billion of savings this year and £8.1 billion next year.

The main measures announced by the Chancellor included the following:

• The scrapping of the Winter Fuel Payment for those not in receipt of Pension Credit from this year onwards. The Government will continue to provide Winter Fuel Payments worth £200 to households receiving Pension Credit or £300 for households in receipt of Pension Credit with someone aged over 80. Winter Fuel Payments are devolved in Scotland and Northern Ireland.
• VAT will be charged at the standard rate of 20% on private school fees from 1 January 2025. This will apply to any fees for the term starting in January 2025 that are charged from 29 July 2024.
• The planned cap on care costs for adult social care due to be introduced in October 2025 has been scrapped.
• The scrapping of the Rwanda migration partnership and scrapping retrospection of the Illegal Migration Act.
• The cancelling of a number of large-scale road and railway schemes.

A date for the next Budget was also confirmed. The Chancellor announced that this will take place on Wednesday 30 October 2024. The Chancellor restated Labour’s manifesto commitment not to increase the basic, higher or additional rate of income tax, National Insurance or VAT.

However, we can expect additional tax and spending cuts in the upcoming Budget. The Chancellor still has scope to increase other taxes including Capital Gains Tax, Inheritance Tax, Stamp Duty and Fuel Duties at the upcoming Budget.

A new digital VAT registration tool has been launched by HMRC that can be used to help businesses work out the effects of registering for VAT.

The launch of the tool known as the VAT Registration Estimator came about following feedback from small businesses suggested an online tool would be helpful to show when their turnover could require businesses to register for VAT and its effect on profits. HMRC has said that there are more than 300,000 new VAT registrations each year.

A business must register for VAT if:

• their total VAT taxable turnover for the previous 12 months is more than £90,000 (£85,000 prior to 1 April 2024) – 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.

HMRC’s Director General for Customer Strategy and Tax Design, said:

'We know that the majority of our customers want to get their tax right. We have listened to what businesses have said and the new tool is designed to help them understand VAT registration, including when they might be required to register.

The VAT Registration Estimator has been developed in partnership with small businesses and trade representatives who tested the online tool and gave feedback before its launch.

We hope it will support businesses’ understanding of VAT registration, especially when combined with our guidance and other services.'

The VAT registration tool is free to use, and it should take around 20 minutes to complete on first use. The estimator is accessed through GOV.UK guidance pages, rather than the Government Gateway. HMRC has said they will not record any details that you input.

The VAT Registration Estimator can be found at the foot of this webpage https://www.gov.uk/guidance/check-what-registering-for-vat-may-mean-for-your-business

There are several types of reliefs from Inheritance Tax (IHT), one of which is IHT Business Relief. This can be a significant tax benefit for those with business interests, potentially offering either 50% or 100% relief from IHT on the value of business assets if certain criteria are met.

• 100% Business Relief can be claimed for a business, an interest in a business, or on shares in an unlisted company.

• 50% Business Relief is available for:

• Shares with more than 50% of the voting rights in a listed company.
• Land, buildings, or machinery owned by the deceased and used in a business they were involved with or controlled by.
• Land, buildings, or machinery used in a business and held in a trust benefiting from it.

This relief only applies if the deceased owned the business or asset for at least two years prior to their death.

However, there are limitations, for example, if the company primarily deals in securities, stocks, shares, land, buildings, or investments. In some situations, partial Business Relief might be possible.

Given its complexity, it is crucial to assess whether IHT Business Relief applies based on your specific circumstances.

You can access the Check Your State Pension forecast service on GOV.UK via this link: https://www.gov.uk/check-state-pension. This digital service is provided jointly by HM Revenue and Customs (HMRC) and the Department for Work and Pensions (DWP).

The service enables most individuals under State Pension age to view their pension forecast and identify any gaps in their National Insurance Contributions (NICs). This feature is particularly useful for those who want to make voluntary NIC contributions to boost their entitlement to benefits such as the State or New State Pension.

Typically, HMRC permits voluntary contributions for the past 6 tax years, with a deadline of 5 April each year. However, there is currently a special opportunity to address NIC gaps from April 2006 to April 2017 due to transitional arrangements related to the new State Pension. The deadline for making these contributions has been extended several times and is now set for 5 April 2025.

Regularly reviewing your State Pension status is important for optimising your benefits. Additionally, you should consider other savings or pensions you may need for a secure and comfortable retirement.