Low-paid workers in line for cash boost

More than a million of the lowest-paid workers in the UK will receive a financial boost from 2025.

New Government legislation just published confirms that around 1.2 million low earners who save for their pension through a Net Pay Arrangement (NPA) will get the same level of government top-up as those who use Relief at Source schemes.

For NPAs, pension contributions are deducted before income tax is calculated, whereas with Relief at Source it is after.

Take home pay boosted

Around 200,000 workers will receive a £100 increase in their take-home pay. The average beneficiary will receive an extra £53 a year, with 75% of affected workers being women.

The number of people eligible for a top-up of £100 or more is based on the total number of people in the UK who contribute at least £500 every year into their NPA pension but have no tax relief on that contribution.

Financial Secretary to the Treasury Lucy Frazer said: “A quirk in our pensions tax system has meant that over a million low-earners have lost out on government top-ups to their pensions, resulting in comparatively less take home pay.

“We are correcting this injustice so low earners will get the same level of Government support, no matter what type of pension they use.

Since 2015, people saving through an NPA have had less take home pay compared to similar-earning savers who use a Relief at Source scheme. Those using the latter type of pension scheme receive a 20% top-up from the Government on their savings, while those using NPAs receive tax relief at their marginal rate – 0%.

Professional advice

The Government has published legislation confirming that it has rectified this anomaly, and low-earning pension savers will receive similar top-ups regardless of what pension scheme they are using. Beneficiaries will receive their top-ups directly into their bank accounts from 2025 and HMRC will be notifying those who are eligible then.

There are several different types of pension contributions. If you would like pension advice, we would recommend seeking professional guidance.

Hospitality workers to benefit from tips regulation change

Hospitality staff will be able to keep their well-deserved tips from grateful customers under new legislation that has been backed by Government.

Although customers may leave cash to say thank you to their waiter staff, many employers still keep the money for themselves. For card payments, it is even harder to keep track of where the money has gone. Staff, many earning National Minimum Wage, may see a small percentage, but in too many cases are likely to be left empty-handed.

The Employment (Allocation of Tips) Bill, introduced by Dean Russell MP and backed by the Government, will ensure that all tips go to staff by making it unlawful for businesses to hold back well-earned service charges from their employees.

This overhaul of tipping practices is set to benefit more than 2 million UK workers across the hospitality, leisure and services sectors – who tend to rely on tips the most – and will help to ease pressures caused by global inflation and an increase to the cost of living.

Fair deal for millions

Dean Russell, Conservative MP for Watford, said: “I am delighted that my Tips Bill has passed second reading in Parliament. It is fantastic that we are on track to securing a fair deal for millions of people working in hospitality across the country.

“It has always felt wrong that some employers have retained tips intended for their staff. This new legislation will halt this practice, particularly given the current challenges around the cost of living. I would like to thank all of the businesses and stakeholders that have got in touch to voice their support.

“The move towards a cashless society has exacerbated the problem of companies keeping card tip payments for themselves, and these measures, once in law, will ban that practice.

Business Minister Jane Hunt said: “At a time when people are feeling the squeeze with rising costs, it is simply not right that employers are withholding tips from their hard-working employees.

“Whether you are pulling pints or greeting guests, these reforms will ensure that staff receive a fair day’s pay for a fair day’s work – and it means customers can be confident their money is going to those who deserve it.”

Request for information


Through the Bill, a new statutory Code of Practice will be developed to provide businesses and staff with advice on how tips should be distributed. On top of this, workers will receive a new right to request more information relating to an employer’s tipping record, enabling them to bring forward a credible claim to an employment tribunal.

UK Hospitality Chief Executive, Kate Nicholls, said: “Tips and service charges provide a significant and welcome boost to hospitality employees’ take-home cash. So we’re delighted to see this proposed legislation recommend that employers can set a fair distribution policy for staff, meaning they all benefit. This should also reassure prospective hospitality sector workers at a time when the industry is seeking to fill vacancies.”

Get help to avoid debts spiralling out of control

People who are worried about the impact of rising prices and its effect on household incomes are being urged to seek support.

Speaking to a trained and experienced debt adviser about your situation could help you decide what to do before the situation gets out of control.

Having early conversations is the best first step to resolving your money issues and avoiding missing payments. If you already have an Individual Voluntary Arrangement, Income Payments Agreement or Income Payments Order, this is what you could do:

Individual Voluntary Arrangements (IVA)

If you are in an IVA, you can ask your supervisor to review your income and expenses to see if you are eligible for a reduction in payments or payment break.

You will be required to provide evidence of your income and expenditure to support a change to your contributions. This could include providing payslips, statement of benefits or utility bills.

Any amendments to your contributions into your IVAs would need to be agreed with your creditors.

Your supervisor has been provided with the latest guidance on adjustments to payments, via the IVA Standing Committee, and they will also be aware of alternative solutions to help you resolve your debt issues and can help you find further information where appropriate.

Income Payments Agreements and Income Payments Orders

If you have an Income Payments Agreement or Income Payments Order, you can ask for a review of your income and expenses to see if you are eligible for a reduction in payments, or payment break.

The spending guidelines have been updated for inflation in the current financial climate and if you feel you need a review, you should contact the organisation you make payments to.

Other payment agreements

If you currently have an agreement to pay the Official Receiver as trustee in bankruptcy or liquidator of a company and are concerned about future payments, email the DART Team via mailto:dart.post@insolvency.gov.uk.

The Government’s MoneyHelper has lots of free information and resources to help you manage your money in uncertain times and how to keep up with essential bills and payments.

If we can help you with any money concerns, get in touch.

Millions of workers to benefit from tax cut

Around 30 million people across the UK will be looking forward to seeing extra cash in their pocket after the biggest personal tax cut in a decade came into force.

Some lucky workers will be saving £330 a year, with around 2.2 million no longer having to pay tax.

The £6 billion tax cut will see the level at which people start paying National Insurance rise from £9,880 to £12,570.

How much are you saving?

The threshold change means that 70% of UK workers will pay less National Insurance, even after accounting for the Health and Social Care Levy that is funding the biggest catch-up programme in NHS history.

Workers can check their salary in the government’s online tool to estimate the amount they could save between July 2022 and July 2023.

The last major personal tax cut of this magnitude was nearly 10 years ago, when the income tax personal allowance increased by £1,100 in 2013. This threshold change is more than double that, as working people are now able to hold on to an extra £2,690 free from tax.

The increase to the National Insurance thresholds will leave around 76% of National Insurance payers in the North East better off, 75% in the North West and Merseyside, and 62% in London.

The landmark personal tax cut came as the Government launched a new Help for Households campaign designed to raise awareness and signpost people to the £37 billion in support on offer and targeted at those most in need. The support provides millions of the most vulnerable households at least £1,200 of support in total this year to help with the cost of living, with all domestic electricity customers receiving at least £400 to help with their bills.

Income tax cut to follow in 2024

It also includes a 5p fuel duty cut – the biggest cut ever to fuel duty rates, a rise in the national living wage to give full-time workers an extra £1,000 and a cut to the Universal Credit taper rate to provide more than one million families an extra £1,000.

The change to National Insurance thresholds comes as part of the wider vision for a lower tax economy. At the Spring Statement, then Chancellor Rishi Sunak announced a 1p income tax cut in 2024 – which will be the first cut to the basic rate in 16 years and will save the average taxpayer a further £175 a year. The former Chancellor also committed to cutting and reforming business taxes later this year in the autumn, to help spur business growth and productivity. In the light of recent events, there has to be uncertainty around what happens next.

Amazon faces probe over third-party practices

Online retail giant Amazon is being investigated by the Competitions and Markets Authority (CMA) over concerns its practices could result in a worse deal for customers.

It is understood the investigation will be looking at how Amazon’s operations affecting sellers on its UK Marketplace may be anti-competitive.

This new investigation follows a current European Commission probe looking into similar concerns. With the UK no longer part of the European Union, the original enquiry does not cover issues within our borders.

How Amazon works

Amazon’s Marketplace sells a percentage of products through its own retail business. However, a large proportion are supplied by third-party sellers. Amazon provides services to these sellers, including those that are essential to make sales, such as matching sellers with consumers. It also offers optional services that incur additional fees, such as Amazon’s ‘Fulfilment by Amazon’ service. This handles some aspects of the sales process, including storage, packaging, and delivery.

The CMA investigation will consider whether Amazon has a dominant position in the UK and whether it is abusing that position and distorting competition by giving an unfair advantage to its own retail business or sellers that use its services, compared to other third-party sellers on the Amazon UK Marketplace.

The investigation will focus on three main areas:

  • How Amazon collects and uses third-party seller data, including whether this gives Amazon an unfair advantage in relation to business decisions made by its retail arm.
  • How Amazon sets criteria for allocation of suppliers to be the preferred/first choice in the ‘Buy Box’. The Buy Box is displayed prominently on Amazon’s product pages and provides customers with one-click options to ‘Buy Now’ or ‘Add to Basket’ in relation to items from a specific seller.
  • How Amazon sets the eligibility criteria for selling under the Prime label. Offers under the Prime label are eligible for certain benefits, such as free and fast delivery, that are only available to Prime users under Amazon’s Prime loyalty programme.

No conclusions reached

Sarah Cardell, General Counsel at the CMA, said: “Millions of people across the UK rely on Amazon’s services for fast delivery of all types of products at the click of a button. This is an important area so it’s right that we carefully investigate whether Amazon is using third-party data to give an unfair boost to its own retail business and whether it favours sellers who use its logistics and delivery services – both of which could weaken competition.

“Thousands of UK businesses use Amazon to sell their products and it is important they are able to operate in a competitive market. Any loss of competition is a loss to consumers and could lead to them paying more for products, being offered lower quality items or having less choice.”

The CMA has not reached any conclusions at this stage as to whether or not competition law has been infringed.

Government reviews personal insolvency framework

Have you ever found yourself in financial distress, struggling to juggle the bills and balance the books? Or perhaps you have supported someone with their debt issues.

The Government is looking for input from anyone who has been touched by severe money problems as it reviews the personal insolvency framework for England and Wales.

Anyone with any experience is being asked to share their views and give evidence on the effectiveness of the framework.

A call for evidence seeking stakeholders’ views and evidence on the framework and whether it serves the needs of debtors and creditors in the 21st century was announced on Monday, 5 July.

The last fundamental review of personal insolvency was carried out 40 years ago. The Government wants to see how the current set-up supports those in financial difficulty and how it is funded.

Fair system needed

Business Minister Lord Callanan said: “Any vibrant economy relies on people spending money, and for many, using credit is an important part of that. However, in situations where people are unable to repay borrowed money, it’s vital that we have a system that is fair to both them and their creditors.

“Our current personal insolvency framework has been in place for many years and so it is only right that we examine whether it works as effectively as it should in today’s world.”

The Government would welcome responses from people who have experienced debt, creditors and their representatives, trade bodies, debt advisers and charities, insolvency practitioners, recognised professional bodies, academics, and any other interested parties. Responses will help to inform the understanding and identify whether reforms are needed.

Peter Tutton, Head of Policy, Research and Public Affairs at StepChange Debt Charity, said: “We know from our clients that personal insolvency remains poorly understood, a source of potential fear and perceived stigma, and in many cases expensive to access at the outset and risky if circumstances change.

“We look forward to using the evidence from our client experience to help inform the review. We would see success as delivering an agreed pathway, supported by Government, towards a personal insolvency framework that works with debt advice to deliver sustainable, affordable and fair debt relief for those who need it, under a well-regulated and effective supervisory regime.”

Submit your responses

Eric Leenders, UK Finance Managing Director, Personal Finance, said: “As part of a highly regulated sector, our members work closely with their customers, and with debt charities, to provide tailored support to those facing into financial difficulty. This support always aims to help customers without the need for insolvency solutions. However, where such solutions are used, they should be accessible, understandable and fair for both borrowers and lenders. As such we welcome this review and will be happy to contribute to the call for evidence.”

Responses for the call for evidence must be received by 24 October 2022.

If you have any concerns about your finances, talk to a member of our team.

What does goodwill mean ?

In a business context, goodwill could be defined as the amount that a buyer would be prepared to pay for your business over and above the valuation of the business net assets.

Very often, it is the relationships that you have built with your customer base that is the most valuable asset. Buyers will be keen to acquire these relationships and will place greater reliance on this “asset” than any equipment or other on-balance sheet item you may be selling.

How is goodwill valued

There is no fixed formula for valuing goodwill. Its value is finalised by negotiation between buyers and sellers.

There are formulaic methods for including goodwill based on the ability of the buyer to recover their investment, from the business purchased, over a fixed term, say three to five years. Unsurprisingly, buyers of higher risk businesses will want a faster pay-back.

Annual valuations

Although your valuation of your business may be higher or lower than the amount a buyer is prepared to pay there is value on using a consistent process to produce an annual valuation. In this way you can monitor the growth of your business and work at developing those characteristics that will secure a higher price when you come to sell, for example, building an independent management team.

Easier access to free TV licenses

Pensioners on low incomes will find it easier and quicker to apply for or renew their free TV licence under reforms laid in Parliament today.

The legislative change will ease the administrative burden put on eligible over-75s when applying for a free licence. As it stands those affected are required to obtain and share documentation with the BBC to prove they are in receipt of Pension Credit.

As the global cost of living continues to rise due to the economic impact of the pandemic and war in Ukraine, this measure will support eligible pensioners struggling to keep on top of their bills to claim the £159 annual saving more quickly and with less hassle.

Under the new plans the BBC will be able to verify automatically whether a person applying for a free TV Licence is on Pension Credit with the Department for Work and Pensions (DWP). It will mean in most cases the 7,000 people who apply to TV Licensing for a free licence per month will simply need to apply online or over the phone without any need to supply additional paperwork.

In 2020 the BBC stopped providing free TV licences for all over-75s, but those in receipt of Pension Credit – a benefit which provides extra money for people on the state pension and on a low income – are still eligible.

Digital Secretary Nadine Dorries said:

“The BBC’s disappointing decision to stop providing free TV licences for all over-75s has left low-income pensioners who remain eligible jumping through administrative hoops to avoid paying the charge.

“The changes mean those receiving Pension Credit will get the savings with minimum fuss, ensuring more people get the support they are entitled to as we tackle the cost of living and grow the economy.”

Minister for Pensions Guy Opperman said:

“We want everyone to claim the benefits to which they are entitled, including Pension Credit which acts as a gateway for other benefits such as the free TV licence. This change will help reduce the administrative burden on over-75s and put their minds at ease.”

A statutory instrument has been laid in Parliament today to amend the Television Licences Act 2000. The changes to the application process are expected to come into effect next year.

Tax gap running at 5%

HMRC published a report last month that acknowledges it was only able to recover 95% of the taxes assessed for 2020-21.

In monetary terms, the tax gap for the 2020-21 tax year is £32 billion. At 5.1%, there has been no change in the percentage tax gap compared to the previous year, although the monetary value has fallen by £2 billion from £34 billion in the 2019 to 2020 tax year.

The total tax due to be paid fell from £672 billion in 2019-20 to £635 billion in 2020-21 due to the economic impact of COVID-19.

The estimate for the 2020-21 tax gap is the best assessment based on the evidence available at this time. There is some uncertainty for the tax gap estimates for the first year of the pandemic and estimates could be subject to revisions in future years.

HMRC has published tax gap estimates since the 2005-06 tax year. There has been a long-term reduction in the overall tax gap from 7.5% in 2005-06, to 5.1% in the 2020-21 tax year. The reduction is a result of the government’s action to help taxpayers get their tax right first time, whilst bearing down on the small minority who are deliberately non-compliant.

How does this affect the tax we pay?

Any taxes that are unpaid will create a shortfall in revenue that will add upward pressure to the taxes we pay – to make up the difference.

Current fiscal policy is wedded to the notion that taxes fund public expenditure in which case any tax gap will leave the Treasury short of funds to meet its expenditure commitments.

Unless the expenditure side of the equation can be reduced, by departments agreeing to a drop in funding, this shortfall – the tax gap – will have to be covered by short-term borrowing. Longer term, the shortfall may encourage the Treasury to seek increases in taxation.

Although 5% may not seem to be a significant percentage it amounts to £32bn. This is equivalent to double the amount of tax assessed on capital gains in a full tax year.

Business owners would be reluctant to accept that 5% of their hard-won sales were written off as bad debts each year and we can assume that HMRC will take steps to recover as much of tax assessed as is possible.

It will be interesting to see how effective HMRC will be in the coming year as inflation and a reduction in economic activity start to impact our ability to pay taxes due.

Tax Diary July/August 2022

1 July 2022 – Due date for corporation tax due for the year ended 30 September 2021.

6 July 2022 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2022 – Pay Class 1A NICs (by the 22 July 2022 if paid electronically).

19 July 2022 – PAYE and NIC deductions due for month ended 5 July 2022. (If you pay your tax electronically the due date is 22 July 2022).

19 July 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2022.

19 July 2022 – CIS tax deducted for the month ended 5 July 2022 is payable by today.

1 August 2022 – Due date for corporation tax due for the year ended 31 October 2021.

19 August 2022 – PAYE and NIC deductions due for month ended 5 August 2022. (If you pay your tax electronically the due date is 22 August 2022)

19 August 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2022.

19 August 2022 – CIS tax deducted for the month ended 5 August 2022 is payable by today.