PFS What's new bulletin - April I

TAXATION AND TRUSTS

Why savers need to act now over tax due on interest (AF1, RO3)

Why savers who owe tax on their savings interest for 2023/24 should contact HMRC if they have not received a letter from the tax office, to avoid the risk of fines

Each year HMRC issues tax calculations called P800s for those not in self-assessment to collect any extra tax on items like savings interest and benefits. Normally, these are issued between July and November following the end of the tax year. 

In HMRC’s December update it said that, due to higher-than-expected volumes, some taxpayers might have to wait until the new year to receive their P800s. This includes some PAYE taxpayers who think they may have additional tax to pay on savings for the year ending 5 April 2024. At the time, HMRC asked individuals who are not in self-assessment, but know that they have exceeded their savings allowance, to wait until the end of March to see if HMRC would issue a demand for the tax automatically. It added that, otherwise, they should contact HMRC after that date to advise them of their savings income.

The Association of Taxation Technicians (ATT) has now warned that thousands of savers who owe tax on their savings interest should contact HMRC if they have not received a letter from the tax office, to avoid the risk of fines.

With savings rates increasing over the past three years, many more people have found themselves exceeding the Personal Savings Allowance. Recent estimates show that an additional 893,000 taxpayers will have to pay tax on their savings by 2028/29 due to frozen personal savings allowances and higher interest rates.

HMRC had told taxpayers it would use information received directly from banks and building societies to calculate any tax due on savings interest, and then issue either a Simple Assessment, or adjust the individual’s tax code, preventing thousands of people needing to fill out tax returns. However, it has now acknowledged that around a fifth of all bank accounts cannot be matched to a taxpayer record, and the responsibility for paying any tax owed remains with the individual. Those who were not contacted by HMRC by 31 March must now get in touch as soon as possible to avoid late filing fines.

Senga Prior, ATT President, said:

“Strictly speaking, if an individual has interest which needs to be taxed they are required to register with HMRC within six months of the end of the tax year - unless HMRC sends them a tax computation.

“There are two problems with this - firstly there have been so many computations needed for 2023/24, that HMRC has only now finished issuing them, around five months after the registration deadline.

“Secondly, HMRC’s matching process is not perfect. They receive information from around 130m accounts and they have recently confirmed that they are unable to match around 1 in 5 bank accounts to their taxpayer records, which means approximately 20% of accounts are being missed.

“We raised concerns last year that, given these issues with the matching process, HMRC’s guidance to savers not already in self-assessment to simply leave it to them was not adequate. In December, HMRC updated their guidance to confirm that taxpayers who do not receive a letter by 31 March 2025, must contact HMRC as soon as possible to avoid a penalty.

“HMRC is making it clear that responsibility passes back to the individual to get in touch to pay tax, so we urge anyone who thinks they may owe tax on their savings interest to contact HMRC as soon as they can.”

Disguised Remuneration Loan Charge - call for evidence published (AF1, AF2, JO3, RO3)

A new independent review into the Loan Charge was launched by Exchequer Secretary to the Treasury, James Murray in January 2025.

The Loan Charge, first announced in 2016, was designed to tackle historical use of contrived tax avoidance schemes that seek to avoid charges of income tax and National Insurance by disguising remuneration as a form of non-taxable payment, typically a loan. These schemes have existed since at least the mid-1990s and have been considered by the courts. In the most notable case in 2017, the Supreme Court agreed with HMRC that schemes that redirect earnings and ultimately pay them in the form of loans do not succeed in avoiding tax. In a further decision, in 2022, the Court of Appeal confirmed that even where other parties (such as employers or agencies) have obligations to operate PAYE, the liability for income tax is that of the employee.

The loan charge affects individuals if they used disguised remuneration tax avoidance schemes and they did not repay their loans, or provide HMRC with all the necessary settlement information by 5 April 2019.

The loan charge also affects employers who provided loan funds through disguised remuneration tax avoidance schemes if, by 5 April 2019, their employee or former employee did not repay their loans, or they did not provide HMRC with all necessary settlement information.

A call for evidence has now been published, closing on 30 May 2025. Individuals or organisations wishing to respond to that are asked to do so at their earliest opportunity, using the document available to download from the first link here, which is in the form of a questionnaire.

The review team can be contacted at contact@lcreview2025.org.uk. Those who wish to provide evidence of the impact of the Loan Charge or other representations, including through the call for evidence, should use this email address.

The stated objectives of the review are:

·         Bringing the matter to a close for those affected;

·         Ensuring fairness for all taxpayers; and

·         Ensuring that appropriate support is in place for those subject to the Loan Charge. 

Drawing on work undertaken by the Low Incomes Tax Reform Group, TaxAid, and others, this review will examine the barriers preventing those who are subject to the Loan Charge but have not already settled and paid their tax liabilities in full from reaching resolution with HMRC. It will recommend ways in which they can be encouraged to settle with HMRC.

The reviewer is being asked to draw on the available evidence and expertise, engaging with stakeholders as appropriate, to consider in detail:

·         The settlement terms available to those who are subject to the Loan Charge who have not yet settled and paid their tax liabilities in full to HMRC and whether HMRC’s settlement and debt management processes sufficiently take into account their ability to pay and behaviours;

·         How that population could now be encouraged to reach resolution with HMRC; and

·         What decisions would be required to ensure that, as far as possible, any new settlement proposals were properly targeted whilst not imposing significant additional administrative burdens upon HMRC.

The review is specific to the Loan Charge and will not consider uses of disguised remuneration schemes that are outside its scope. That is, the review will only consider disguised remuneration scheme use between and including 9 December 2010 and 5 April 2019 that is in scope of the Loan Charge legislation (Schedules 11 and 12 to the Finance (No.2) Act 2017). It will consider both outstanding Loan Charge liabilities and the related outstanding liabilities arising from the underlying income received via this use of disguised remuneration schemes.

The reviewer will report and present their recommendations to the Exchequer Secretary to the Treasury by Summer 2025. The Government will consider the review once concluded and publish a response by Autumn Budget 2025.

There is a reminder in the document that, while the review is being conducted, the legislation giving effect to the Loan Charge remains in force.

 

 

 

 

 

INVESTMENT PLANNING

March inflation numbers (AF4, FA7, LP2, RO2)

The UK CPI inflation rate for March 2025, which was 2.6%, 0.2% down from February

Source: ONS

The CPI annual rate for March was 2.6%, 0.2% lower than February and 0.1% below market expectations.

The UK CPI reading was up 0.3% between February and March, which compares with a 0.6% rise in the corresponding period of 2024. The CPI/RPI gap remained at 0.6% with the RPI annual rate also falling by 0.2% (to 3.2%). Over the month the RPI index also rose by 0.3%.

The Office for National Statistics (ONS)’s favoured CPIH index outpaced the CPI and RPI with a decline of 0.3% to an annual 3.4%, narrowing its still historically high margin above the CPI. As we have regularly said in recent months, a large part of that excess is due to the owner occupiers’ housing (OOH) category, which has a 17.1% weighting in the CPIH but is absent from the CPI. The OOH inflation rate dropped 0.3% to 7.2%, 0.8% off its peak January 2025 level.

The ONS attributed the lower CPIH inflation to:

Main downward drivers

 

Recreation and Culture. Overall prices in the recreation and culture division rose by 2.4% in the year to March 2025, down from 3.4% in the year to February. The rate in March was the lowest since October 2021, when it was also 2.4%. On a monthly basis, prices were unchanged in March 2025, compared with a rise of 0.9% a year ago. The ONS attributed the slowing annual rate to relatively small downward effects from a variety of the more detailed classes. The largest came from games, toys and hobbies, and from data processing equipment, where prices fell this year but rose a year ago.

Housing and household services. The annual inflation rate for housing and household services was 5.1% in March 2025, down from 5.3% in February. On a monthly basis, prices rose by 0.2% in March 2025, compared with a rise of 0.4% a year ago.

Transport. Overall prices in the transport division rose by 1.2% in the year to March 2025, down from 1.8% in February. On a monthly basis, prices rose by 0.1% in March 2025, compared with a rise of 0.6% a year ago.

The slowing in the annual rate reflected a large downward effect from motor fuels (pre-Trump tariff tantrum). Overall motor fuel prices fell by 5.3% in the 12 months to March 2025, compared with a fall of 2.5% in the 12 months to February. With Brent crude down 10% and the dollar down 2.5% against sterling over the last month, there should be a further significant fall in April

Restaurants and hotels. The 12-month inflation rate for restaurants and hotels was 3.0% in March 2025, down from 3.4% in February and the lowest since July 2021, when it was 2.2%. The easing in the rate between February and March 2025 was caused by a downward contribution to change from accommodation services, where prices rose this year by less than a year ago.

Food and non-alcoholic beverages. Prices in this division rose by 3.0% in the year to March 2025, down from 3.3% in the 12 months to February. There was a small downward effect from confectionery, where prices fell this year but rose a year ago. This was partially offset by a small upward effect from milk, cheese and eggs, where prices rose this year but fell a year ago.

Upward drivers

Clothing and footwear. This division provided a partial offset to the declines elsewhere. Prices rose by 1.1% in the year to March 2025, compared with a fall of 0.6% in the 12 months to February. The rise in the rate partially reverses the easing seen between January and February.

On a monthly basis, prices rose by 2.3% in March 2025, compared with a rise of 0.6% a year ago. Prices usually rise in March as spring fashions continue to enter the shops, and the increase this year was relatively large, following February’s unusual fall in prices. The price movements between January and March this year reflected changes in the proportion of discounted prices in the ONS’s datasets. This proportion rose between January and February 2025, whereas it has historically fallen between these months.

Eight of the twelve broad CPI divisions saw annual inflation decrease, while three rose and one remained unchanged. The categories with highest annual inflation rate are Education (7.5%), Communication (6.0%) and Alcoholic Beverages and Tobacco (5.3%).

Core CPI inflation (CPI excluding energy, food, alcohol and tobacco) fell 0.1% to 3.4%. Goods inflation fell 0.2% to 0.6%, while services inflation was eased 0.3%, to 4.7% against market expectations of 4.8%.

The ONS has identified problems in the calculation of its Producer Price Inflation indices and last month issued a statement that publication of the data would be “paused” for the time being.

Comment

The inflation figures were better than expected, but, like similar data in the USA (where March CPI inflation was 2.4%), they are very much history. In the UK, the CPI has probably now hit its low for the year. Next month will see the April round of prices increases (notably for water and energy), and the employer National Insurance contributions (NICs) feed through, all enter the calculations. Ironically there is now likely to be a counterbalancing energy price drop, thanks to the Trump-driven decline in the oil price.

The Bank of England, which announces its next rate decision on 8 May, faces a difficult call. On the one hand, the CPI is heading towards target and there is the Trump threat to the UK (and global) economy, but, on the other hand, the April CPI will rise and the latest reading on earnings growth remains uncomfortably high at 5.9%.

NS&I revives Growth and Income Bonds (AF4, FA7, LP2, RO2)

NS&I’s announcement of the launch of 1, 2, 3 and 5-year Guaranteed Income Bonds and Guaranteed Growth Bonds for general sale

National Savings & Investments (NS&I) was given a remit to raise £12.0bn (±£4bn) in 2025/26 as part of the Spring Statement, £3bn more than its 2024/25 target. NS&I’s latest performance report shows that, three quarters of the way through the year, it had raised £8.8bn.

It may well be that to maintain fund-raising momentum, NS&I has just relaunched British Savings Bonds (Guaranteed Income Bonds and Guaranteed Growth Bonds) with a choice of 1, 2, 3 and 5-year terms. This is the first time all these variants have been on general sale since 2010. Hitherto, such bonds have mostly only been available for maturity reinvestments. The new rates are:

Product	Term (years)	Interest rate (%)
Guaranteed Growth Bond	1	4.05
Guaranteed Growth Bond	2	4.00
Guaranteed Growth Bond	3	4.10
Guaranteed Growth Bond	5	4.06
Guaranteed Income Bond	1	3.98/4.05 AER
Guaranteed Income Bond	2	3.93/4.00 AER
Guaranteed Income Bond	3	4.03/4.10 AER
Guaranteed Income Bond	5	3.99/4.06 AER

The maximum investment is £1m per person in each issue, with a minimum of £500.

The rates are not particularly competitive – the top market rates for 1 and 2 years are both 0.6% higher according to Moneyfacts, while NS&I’s 3 and 5-year rates are 0.45% and 0.52% short. As usual, higher rate taxpayers should consider low coupon gilts before turning to NS&I:

Gilt	Maturity	Net redemption yield	NS&I net yield
Treas 1.5% 2026	22/07/2026	3.12%	2.43%
Treas 1.25% 2027	22/07/2027	3.24%	2.40%
Treas 1.625% 2028	22/10/2028	3.11%	2.46%
Treas 0.375% 2028	22/10/2030	3.83%	2.44%

Source: https://www.yieldgimp.com/

Comment

The future of UK short term rates has been clouded by the Trump Tariff Tantrum. Tariffmageddon may encourage the Bank of England to speed cuts to protect the UK economy against the Atlantic waves, but the Old Lady will also be cognisant of stubborn wage inflation. The latest figures show wage growth still well over 5%.

Latest property statistics (AF1, RO3)

The latest UK property statistics provide residential and non-residential transactions estimates during the previous three years.

The provisional seasonally adjusted estimate of the number of UK residential transactions in February 2025 is 108,250, 28% higher than February 2024 and 13% higher than January 2025. The provisional non-seasonally adjusted number of UK residential transactions in February 2025 is 90,430, 24% higher than February 2024 and 10% higher than January 2025.

Non-seasonally adjusted and seasonally adjusted UK residential property transactions by month between February 2022 and February 2025:

The figures also show that: 

·         provisional figures for February 2025 indicate an increase of 13% for seasonally adjusted transactions from January 2025;

·         non-seasonally adjusted transactions increased by 10% in February 2025 relative to January 2025.

In relation to non-residential transactions:

·         seasonally adjusted transactions for February 2025 increased by 8% compared with January 2025;

·         non-seasonally adjusted transactions increased by 4% in February 2025 relative to January 2025.

 

 

 

 

 

 

 

 

 

 

PENSIONS

 

Awareness of the move to a State Pension Age to 67 (AF3, FA2, JO5, RO4, RO8)

A new report from the Institute for Fiscal Studies, which examines awareness of the next change in State Pension Age

We all know that the current legislated trajectory for State Pension Age (SPA) is for an increase to 67, starting in a year’s time. Or do we..?

The Institute for Fiscal Studies (IFS) has just published a comment piece which shows that as many as four in ten of people born between 1955 and 1965 do not. The IFS used data derived from questions answered by that age cohort as part of the English Longitudinal Study of Ageing between 2021 and 2023 and found that overall:

·         60% knew their SPA to an accuracy of within three months. Perhaps unsurprisingly this fell to 42% for those caught in the SPA phasing period between 66 and 67.

·         18% overestimated their SPA, thinking it was later than is the case. Again, the middling band stands out, with a 42% overestimate.

·         11% underestimated their SPA, thinking it was earlier than is the case.

·         11% - one in nine – were in the ‘don’t know’ category.

The IFS research found that certain groups of people were especially likely either to underestimate or to be unaware of their SPA. These included women, those with lower qualifications, those with lower levels of wealth, the self-employed and those not in paid work. People in the top-wealth fifth (quintile) were eleven percentage points less likely to be unaware or underestimate their SPA than those in the bottom-wealth quintile, while those not in paid work were seven percentage points more likely to be in this group than those working as employees.

The IFS says that this points to those people who may already be less financially secure being more likely to face additional financial risk because of their lack of SPA awareness. As the IFS also observes, this lack of knowledge is particularly worrying given that the State Pension (£230.25 a week in 2025/26) is a particularly big component of retirement resources for these groups.

Comment

After the ongoing legal battles with the WASPI women, it is surprising that the Government has not made more efforts to alert the people to their SPA. The IFS believes that the Government should write to people around their 50^th birthday setting out their currently legislated or likely SPA, and that it should guarantee not to make SPA changes for anyone within ten years of reaching it.

PPF publishes updated PPF 7800 index - April 2025 (AF3, FA2, JO5, RO4, RO8)

The PPF’s April 2025 updates to the estimated funding position of schemes

Since July 2007 the Pension Protection Fund has published the latest estimated funding position, on a s179 basis, for the defined benefit schemes in its eligible universe. This covers 4,969 schemes in the PPF-eligible universe, which is the same number as for the previous month. 

March 2025 update highlights:

·         The aggregate surplus of the 4,969 schemes in the PPF 7800 Index is estimated to have decreased over the month to £215.5 billion at the end of March 2025, from a surplus of £232.7 billion at the end of February 2025.

·         The funding ratio at the end of March 2025 was 124.7%, compared to 126.1% at the end of February 2025.

·         Total assets were £1,087.2 billion and total liabilities were £871.7 billion.

·         There were 1,408 schemes in deficit and 3,561 schemes in surplus.

·         The deficit of the schemes in deficit at the end of March 2025 was £29.8 billion, up from £25.6 billion at the end of February 2025.

Funding comparisons

	March 2024	February 2025	March 2025
Aggregate funding position	£219.2bn	£232.7bn	£215.5bn
Funding ratio	123.1%	126.1%	124.7%
Aggregate assets	£1,167.1bn	£1,124.1bn	£1,087.2bn
Aggregate liabilities	£947.9bn	£891.4bn	£871.7bn
Dataset / Assumptions	Purple 24 / A11	Purple 24 / A11	Purple 24 / A11

The PPF 7800 index is published on the second Tuesday of every month, and the PPF publishes The Purple Book each year.