UK inflation has dropped, but remains in double-digit levels, as the cost-of-living crisis eased slightly in March.

The annual consumer prices index dropped to 10.1% in March, down from 10.4% in February, the Office for National Statistics (ONS) reported.

It was widely expected to fall below 10%, but food prices remained stubbornly high, rising at their fastest rate in 45 years.

Increased prices for bread, cereal and chocolate meant the cost of living rose more than expected last month.

David Bharier, Head of Research at the BCC, said:

‘Prices continue to rise at an alarming rate. Driven largely by housing and food costs, this is on top of an already high growth rate from this time last year.

‘Our research shows that inflation is still by far and away the top concern for UK SMEs. This has been driven by three years of global lockdowns, supply chain crises, energy shocks, and new trade barriers with the EU.

‘Small businesses, particularly those in the retail and hospitality sector, have been the least able to absorb cost rises, and we see that most have not invested or grown.

‘Businesses need to see a reduction in the cost and burden of exporting and importing, particularly with the EU, as well as increased support to deal with the unprecedented energy price shock.’

Internet link: ONS website BCC website

Research carried out by think tank the Resolution Foundation has suggested that the size of the UK’s six-year ‘stealth tax’ threshold freeze has nearly trebled to £25 billion.

The figure is significantly higher than the previous forecast of £9 billion announced during the 2021 Budget.

A small number of tax thresholds have been frozen since 2021/22 and are set to remain frozen until April 2028. The think tank found that next year’s threshold freeze will raise £12 billion a year by the time of the final freeze in 2027/28.

Adam Corlett, Principal Economist at the Resolution Foundation, said:

‘High inflation has pushed up the projected revenue take from the government’s personal tax threshold freeze to £25 billion a year – almost triple the amount forecast when the freeze was introduced. But higher-income households will be the ones most affected by next year’s major tax rises.

‘High inflation also means benefits are being uprated by 10.1 in April, which will boost low-income households’ finances, although benefits are only set to fully catch up with price rises after April 2024’s uprating.’

Internet link: Resolution Foundation website

HMRC has reminded businesses that file VAT returns annually that the online VAT filing portal will close from 15 May 2023.

The VAT portal closed to standard quarterly filers on 7 November 2022, but was kept open for a longer period for those who file annual returns.

In emails to businesses and tax agents, HMRC urged all VAT registered businesses to use Making Tax Digital for VAT (MTD for VAT) compatible software to keep VAT records digitally and file VAT returns.

Following the closure of the portal, businesses that file VAT returns annually will no longer be able to use their VAT online account and instead must use compatible software to file future VAT returns.

HMRC said that businesses that fail to do so may have to pay a penalty.

If a business is already exempt from filing VAT returns online or if it is subject to an insolvency procedure, it is automatically exempt. Business owners can apply for an exemption if it’s not reasonable or practical for them to use computers, software or the internet to follow the MTD for VAT rules.

Internet link: GOV.UK

The end of the Energy Bill Relief Scheme (EBRS) on 1 April could threaten the future of hundreds of thousands of small firms, according to research by the Federation of Small Businesses (FSB).

The Energy Bill Discount Scheme (EBDS) offers a far lower level of support for small businesses.

Although market prices have stabilised for those fixing their contracts now or those who are on variable tariffs, businesses that fixed last year will see huge increases as they are locked into a high price before the government’s relief.

A business paying £24,528 per year for energy under the old government support scheme will now pay £82,539 under the new scheme.

The FSB is calling for small firms to be allowed to renegotiate their energy contracts that were fixed last year. It is also calling for additional support for businesses to become more energy efficient.

Tina McKenzie, Policy Chair at the FSB, said:

‘The jump in energy bills on April Fool’s Day won’t be a laughing matter but will be a shock to hundreds of thousands of small businesses, who signed up to fixed contracts when the government discount was guaranteed under EBRS.

‘There’s much that could and should be done rather than leaving small firms high and dry. Allowing the most vulnerable small businesses to renegotiate or ‘blend and extend’ their energy contracts to better reflect lower wholesale energy prices is the least the government and energy suppliers could do.’

Internet link: FSB website

HMRC recently issued preliminary guidance in regard to the abolition of the pensions lifetime allowance.

At the Spring Budget, Chancellor Hunt announced that the lifetime allowance charge will be removed from 6 April 2023. The allowance will be fully abolished from the 2024/25 tax year via a future Finance Bill, HMRC said.

HMRC states that pension scheme administrators ‘will need to continue to operate lifetime allowance checks when paying benefits (for example, assessing whether an individual has available lifetime allowance) and to issue benefit crystallisation event statements.

‘However, following the standard lifetime allowance checks, for a benefit crystallisation event occurring after 6 April 2023 no lifetime allowance charge will arise and there will be no requirement to report lifetime allowance charges on the accounting for tax return (AFT).’

As a result of the abolition of the lifetime allowance, the maximum amount most members can take as a pension commencement lump sum will be frozen at £268,275, which is 25% of the current standard lifetime allowance of £1,073,100. However, members with a protected right to a higher pension commencement lump sum on 5 April 2023 will continue to be able to access this right.

Internet link: HMRC website