In this week’s Enews, we look at a report into the cost of tax compliance on UK business. There is also news on topping up State Pensions and the business response to a cut to interest rates to update you on.
News - 14 February 2025
Business tax compliance costs £15 billion a year
An increasingly complex tax system is costing UK businesses an estimated £15.4 billion a year in compliance, according to a report from the National Audit Office (NAO).
HMRC’s cost of collecting tax has risen by £563 million over the past five years due to added complexity in the system plus investments in staff and IT.
During this period, the government’s tax yield rose by £113 billion in real terms, said the NAO.
HMRC estimates that compliant UK businesses incur costs of £15.4 billion each year in meeting around 2,500 obligations across 27 policy areas. These include £6.6 billion of fees paid to agents, accountants and other intermediaries, £4.5 billion of acquisition costs, such as software, and £4.3 billion of internal costs.
The report warned that HMRC is underestimating these costs as it does not take into account all taxpayer obligations.
Frank Haskew, Head of Taxation, at the Institute of Chartered Accountants in England and Wales (ICAEW), said:
‘This report highlights how the UK’s increasingly complicated tax system is saddling businesses and HMRC with extra burdens and costs, which are growing in real terms. The report also substantiates our concern that the cost to businesses of complying with their tax obligations is likely to be understated.’
Internet link: NAO website | ICAEW website
£35 million added to State Pension pots
People plugging gaps in their National Insurance contributions (NICs) have added £35 million to their State Pensions since last April, according to figures from HMRC.
More than 37,000 online payments have been made through the online service, equating to 68,673 years of contributions.
The average online top-up payment is £1,835 and the largest weekly State Pension increase is £113.76. HMRC says that 65% of the years topped up by customers are from 2017 onwards.
HMRC and Department for Work and Pensions (DWP) are reminding customers they only have until 5 April to check their NICs record and fill any gaps from 6 April 2006 onwards.
From 6 April 2025, people will only be able to make voluntary National Insurance contributions for the previous six tax years, in line with normal time limits.
The Check your State Pension forecast service on GOV.UK is the quickest and easiest way to check if action is required, says HMRC. The HMRC app can also be used.
Angela MacDonald, HMRC’s Second Permanent Secretary and Deputy Chief Executive, said:
‘There are just two months left to check and fill any gaps in your NICs record from 2006 onwards to boost your State Pension entitlement. Don’t delay - it is quick and easy to check your NICs record on GOV.UK and it could help your finances in retirement.’
Internet link: HMRC press release
Rate cut brings ‘measure of relief’ to business
Businesses will get a ‘measure of relief’ after interest rates were cut by the Bank of England, says the British Chambers of Commerce (BCC).
The Bank cut the base rate from 4.75% to 4.5%, the lowest level since June 2023.
The Bank’s Monetary Policy Committee voted 7-2 in favour of the cut - those two members wanted a bigger cut, to 4.25.
The Bank also cut its growth forecast for the UK economy to 0.75% in 2025, down from a previous forecast of 1.5%.
David Bharier, Head of Research at the BCC, said:
‘Given the raft of cost pressures and global economic uncertainties businesses are facing, today’s interest rate cut provides a measure of relief for SMEs.
‘UK businesses are facing a range of challenges. Domestically, firms face increased tax bills and employment costs within weeks, with national insurance and minimum wage hikes. Internationally, a looming trade war could hit many UK importers and exporters. This is likely to feed into heightened inflation throughout the year.
‘The government needs to pull all levers possible to ease the cost pressures on firms and unlock investment opportunities. That includes accelerating business rate reform, supporting infrastructure projects and boosting trade opportunities.’
Internet link: Bank of England website | BCC website
