PFS What's new bulletin - August

TAXATION AND TRUSTS

 

HMRC publish Transformation Roadmap outlining their vision for a modern tax administration system

(AF1, RO3)

 

HMRC has published a Transformation Roadmap which outlines their vision for a modernised tax administration system which will make better use of technology to achieve their overreaching objectives of:

 

·         improving day-to-day performance for individuals and businesses;

·         closing the tax gap; and

·         driving reform and modernisation of the UK’s tax and customs system.

 

Further detail on the most significant changes – such as the roll out in 2025/26 of a new online service which will enable PAYE customers to take more control over their tax affairs - has been provided in supplementary press releases. However other significant announcements – such as confirmation that Making Tax Digital (MTD) for corporation tax has been abandoned – were buried in the detail of the Roadmap document.

 

The key features of the Transformation Roadmap are summarised below.

 

Improving day-to-day performance for individuals and businesses

 

Currently around 76% of customer interactions with HMRC are digital and HMRC aims to increase the percentage of digital customer interactions to at least 90% by 2029 to 2030 by expanding digital services across more taxes, reaching more taxpayers, with new functionality built into the HMRC app. 

 

The Government’s priority is to reduce pressure on HMRC’s adviser-led channel and make it easier for customers to do business with HMRC through the use of AI to deal with the most common requests, automated ‘self-serve’ options for customers and online tracking services which will allow customers to check progress of their enquiries. while ensuring that advisers remain available for those who need extra support. 

 

Other plans for 2025/26 include a facility for reporting child benefit payments without the need to register for self-assessment; while HMRC intend to digitalise the inheritance tax (IHT) service from 2027/28.

 

Closing the tax gap

 

The UK tax gap currently stands at £46.8 million. In a bid to close the gap, HMRC plan to modernise how they use data to encourage compliance, for example, through improving the use of third-party data to pre-populate tax returns. The Government is also making legislative changes to crack down on tax avoidance and prevent non-compliance. This includes the publication of draft legislation to tackle PAYE non-compliance in relation to umbrella companies, enhancing powers and sanctions for HMRC to act against tax advisers who facilitate taxpayer non-compliance and mandatory registration of tax advisers interacting with HMRC from April 2026. 

 

Reform and modernisation of the UK’s tax and customs system

 

This part of the Roadmap commits to simplification of the tax administration framework, ‘with a focus on simplifying tax rules and reporting thresholds, making it easier for customers to understand their liabilities’.

 

Section 5.2 of the Roadmap confirms that HMRC have abandoned plans to introduce MTD for corporation tax. Instead, they will develop, in consultation with stakeholders, an approach to the future administration of corporation tax that is suited to the varying needs of the diverse corporation tax population. This confirmation ends years of uncertainty around if and/or when MTD for corporation tax would be introduced. 

 

Other announcements include plans to integrate the Valuation Office with HMRC by April 2026, as part of the Government’s desire to reform business rates; simplification of the process of reporting and paying tax on all employment benefits by mandating employers to report income tax and Class 1A National Insurance contributions for most benefits in kind in real time; and increasing the income tax self-assessment trading income reporting threshold from £1,000 to £3,000 gross thereby aligning it with new £3,000 gross thresholds for property and ‘other’ taxable income.

Comment

 

The Roadmap’s ambition has been welcomed by professional bodies although some have expressed disappointment in the lack of detail, prioritisation and timelines.

HMRC’s planned deliverables are summarised in an annex to the Roadmap, split by tax area, which can be accessed here.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Homebuyers warned as HMRC crack down on SDLT scams

(AF1, RO3)

 

HMRC is warning those purchasing properties to be on the lookout for tax agents offering to secure Stamp Duty Land Tax (SDLT) repayments on their behalf where repairs have been needed to a property they have purchased.

 

Some of the tax agents in question have stated that, for a fee, they can reclaim SDLT the buyer has already paid by saying that the property is non-residential because it is uninhabitable. However, making claims like this can often leave the homeowner liable for the full SDLT liability along with penalties and interest. 

 

In a recent Court of Appeal judgment, a case, (please see our previous article), has confirmed that ‘dwellings’ in need of repair are chargeable at the residential rates of SDLT, and that repayment claims based solely on a property’s conditions are invalid.

 

This decision confirms HMRCs view that if a property is in need of repairs, but retains the fundamental characteristics of a dwelling, it is still suitable for use as a dwelling and attracts the residential rates of SDLT. Whether or not a property has previously been used as a dwelling is a key factor considered when determining this.

 

HMRC says that it is taking decisive action on fake SDLT repayment claims, using civil and criminal powers in order to deal with those who undermine the tax system. 

 

Anthony Burke, HMRCs Deputy Director of Compliance Assets said that:

‘The Court of Appeal’s decision is a major win, protecting public funds. Homebuyers should be cautious of allowing someone to make a Stamp Duty Land Tax repayment claim on their behalf. If the claim is inaccurate, you could end up paying more than the amount you were trying to recover.’

 

Example

If Joe bought a house in London for £1,100,000 and his solicitor filed the SDLT return, SDLT was calculated at the residential rates (£53,750). As the house required modernisation and repair, Joe couldn’t move in straight away. The house needed a new boiler, rewiring and damp proofing.

 

Shortly after moving in, Joe received an advert in the post from a repayment agent which incorrectly suggested that due to the required repairs they could get him a refund of SDLT on a ‘no win, no fee’ basis. In Joe’s case the refund amounted to £9,250 (the difference between residential and non-residential rates), less the agent’s 30% fee. Joe agreed for the agent to make a claim on his behalf, and he received his repayment. Later in the year, HMRC opened a compliance check into the repayment claim and concluded that the property was residential. 

 

Consequently, Joe found out that he owed £9,250 SDLT, plus interest and a penalty, even though the agent only sent him £6,475, after deducting their fee. He is now out of pocket as the agent refused to cover the interest and penalty and the agent has since refused to respond to his emails and phone calls. 

 

INVESTMENT PLANNING

 

NS&I rate changes (AF4, FA7, LP2, RO2)

 

NS&I has announced an immediate increase to the interest rates for the one year term of British Savings Bonds (aka Guaranteed Growth Bonds and Guaranteed Income Bonds):

 

Product	Term	Old rate	New rate from 24/7
Guaranteed Growth Bonds
	1 year	4.05% gross/AER	4.18% gross/AER
Guaranteed Income Bonds
	1 year	3.98% gross/4.05% AER	4.11% gross/4.18% AER

 

Before NS&I’s announcement the best one year fixed rate in the market according to Moneyfacts was 4.53% AER and 4v.33% monthly  (also 4.53% AER).

 

The nearest equivalent gilts are Treasury 1.50% 2027 (TG26 maturing 22/07/2026), and Treasury 0.375% 2026 (T26A maturing 22/10/2026) which have net redemption yield as follows

 

Tax rate	0%		20%		40%		45%
Gilt	TG26	T26A	TG26	T26A	TG26	T26A	TG26	T26A
Net Redemption Yield	3.80%	3.62%	3.49%	3.55%	3.19%	3.47%	3.11%	3.62%
Gross equivalent	3.80%	3.62%	4.36%	4.44%	5.32%	5.78%	5.65%	6.27%

 Source: Yieldgimp.com

 

Comment

 

The Bank of England’s next rate decision meeting is on 7 August. At present the expectation is that another 0.25% cut is on the way. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UK dividend payments fell by 1.4% in the second quarter, thanks to lower one-off payments and sterling's strength

(AF1, AF4, FA7, LP2, RO2, RO3)

 

Headline UK dividend payments, which fell by 1.4% year-on-year in the second quarter, but the underlying trend was firmly in positive territory

 

UK Q2 Dividends

 

Source: Computershare

 

Computershare has just published its Q2 2025 UK dividend monitor, showing what appears to be disappointing news: a second quarter year-on-year fall of 1.4% in headline dividend payments to £35.1bn. As is usually the case with one quarter’s dividend data, analysis reveals a more nuanced story:

 

·         In Q2 2025, special dividends amounted to £2.0bn, down 46% year on year. In Q2 2024 these one-off payments amounted to more than was paid in total over the previous six quarters, largely because of a bumper £3.1bn payment by HSBC, following the sale of its Canadian business.

 

·         Underlying (regular) dividends were £33.1bn, up 6.8% on Q2 2024, on a constant currency basis. That is usefully above CPI inflation, which was running at 3.7% in June.

 

·         Computershare notes that ‘The most important contributor to [underlying] growth was Rolls-Royce, which paid its first dividend since the pandemic. Its £508m payout was larger than its pre-pandemic levels and accounted for just under a quarter of UK underlying dividend growth in the second quarter.’

 

 

·         The drag from mining – an important and volatile dividend source in the UK market – continued, but with a few exceptions in the precious metals sub-sector. Mining sector dividends fell 9.2% on an underlying basis. Four other of 21 sectors fell, leaving 16 recording higher payouts.

 

·         The Banking sector was the largest paying sector in Q2, accounting for almost on third of total dividends. On an underlying basis bank payouts were up 8.1%, something which may not escape the eye of a revenue-hungry Chancellor.

 

·         Payouts from the Top 100 companies rose 5.9% year-on-year on an underlying basis, while mid-cap payments rose by 6.7%. Computershare calculates that for the Top 100, real Q2 underlying dividends are now back at the levels last seen in 2018, while mid-cap payments are about two years further behind.

 

·         The concentration of dividend payouts in a handful of companies was much lower than a year ago, also due to that large special dividend from HSBC in Q2 2024. The top five payers (HSBC, Rio Tinto, Shell, Playtech and British American Tobacco) accounted for 36.3% (cf 45.0%) of total payments. The next 10 companies accounted for 26.1%, (cf 23.0%) meaning that just 15 companies were responsible for 62.4% of all UK dividends in the quarter (cf 68.0%).

 

·         A combination of factors, including a stronger pound, have prompted Computershare to predict a headline fall of 1.4% for the calendar year. However, on an underlying basis Computershare has upgraded its forecast to 2.8% growth.

 

Comment

Computershare notes that equity yields have been compressed by rising share prices. It projects the 12 month yield to be 3.4%, down from the 3.7% of three months ago.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PENSIONS

 

HMRC Pension Scheme Newsletter 171 – July 2025

(AF8, FA2, JO5, RO4)

 

Pension scheme newsletter 171 covers the following:

 

• reforms to inheritance tax on pensions
• lifetime allowance protections and enhancements — authenticated look up service
• relief at source
• Managing pension schemes service
• pension flexibility statistics
• qualifying recognised overseas pension schemes (QROPS) transfer data

 

Areas of particular interest:

 

Reforms to inheritance tax on pensions

 

On 21 July 2025 (Legislation Day), the government published  Inheritance Tax on pensions: liability, reporting and payment. This was the response to the 30 October 2024 technical consultation.

 

This set out a change in stance from the initial proposal and confirmed that, personal representatives, not pension scheme administrators, will be liable for reporting and paying inheritance tax on unused pension funds and death benefits.

 

The government has also confirmed that, from 6 April 2027, all death in service benefits payable from registered pension schemes will be out of scope of inheritance tax, regardless of whether the pension scheme is discretionary or non-discretionary.

 

Draft legislation has also been published for technical consultation. The mailbox is open for feedback on the legislation until 15 September 2025 — ihtonpensions@hmrc.gov.uk.

HMRC state that the government will publish further draft legislation in due course on the changes required to the information sharing regulations.

 

Pension flexibility statistics

 

HMRC outline the latest figures for pension flexibility payments.

 

From 1 April 2025 to 30 June 2025, HMRC processed:

 

• P55: 10,008 forms
• P53Z: 2,250 forms
• P50Z: 509 forms

 

Total value repaid: £48,701,927

 

There were around 20% fewer claims than for the same period last year, however, the average claim value has increased by nearly 8%.

Qualifying recognised overseas pension schemes transfer data

 

HMRC provide the latest data on the number of transfers in to qualified recognised overseas pension schemes.

 

In tax year 2023 to 2024 there were 7100 transfers, more than double the number in the previous 12 months.

 

The total value of these transfers was £1.14 billion up from £680,000 in the previous year.

 

Year	Number of transfers	Total value of transfers
2006 to 2007	2,500	£120,000,000
2007 to 2008	5,700	£350,000,000
2008 to 2009	6,100	£360,000,000
2009 to 2010	6,700	£460,000,000
2010 to 2011	12,800	£1,360,000,000
2011 to 2012	16,400	£1,040,000,000
2012 to 2013	13,400	£1,000,000,000
2013 to 2014	11,300	£860,000,000
2014 to 2015	20,100	£1,760,000,000
2015 to 2016	13,700	£1,500,000,000
2016 to 2017	9,700	£1,220,000,000
2017 to 2018	4,700	£740,000,000
2018 to 2019	5,000	£640,000,000
2019 to 2020	4,400	£550,000,000
2020 to 2021	3,000	£416,000,000
2021 to 2022	3,900	£517,000,000
2022 to 2023	3,300	£680,000,000
2023 to 2024	7,100	£1,140,000,000

Latest Government statistics show a 48% gender pensions gap in private pensions

(AF8, FA2, JO5, RO4)

 

The DWP has published its latest statistics measuring the gender gap in private pensions. The latest figures cover the period 2020 - 2022. 

 

The DWP’s measure of the gap is defined as the difference between female and male median uncrystallised private pension wealth. The statistics focus around the current normal minimum pension age range of 55-59. The gap is quoted as 48%. 

 

Since the last set of figures were issued, the Office of National Statistics have changed the method of calculating the estimated value of defined benefit pensions and as a result the figures are not comparable with previous releases. (The figures released for the period 2018 – 2020 showed a gap or 35%.)

 

The most recent data estimates the median fund wealth of £81,000 for woman and £156,000 for men. This would provide an estimated pension annuity of £6,000 per year for women and £11,000 a year for men, a gap or around £5,000 a year. 

 

The size of the gap varies widely according to age ranges. The smallest gap is for those aged 25-29 (22%) and the largest in the age range 45-49 (52%). The DWP note that this is similar to the gender pay gap which would be expected. 

 

Automatic enrolment has significantly increased the number of people saving into workplace pensions. Participation among eligible employees in 2023 is equal between men and women in both the private (86%) and public sectors (93%). However, as more women than men work in the public sector there are a greater proportion of eligible woman in workplace schemes overall – 89% or eligible women compared to 87% of eligible men. Over the long term this may help to reduce the gap but of course will also depend on earnings and contributions rates moving closer together.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Workplace pension participation and savings trends 2009 - 2024

(AF8, FA2, JO5, RO4)

 

The DWP has published their most recent finding on workplace pension savings in the document Workplace pension participation and trends of eligible employees 2009 - 2024.

 

This annual official statistics publication is the twelfth edition in the series. The latest edition offers greater information on the workplace participation of all employees, not just those eligible for automatic enrolment.

 

The main findings were:

 

• 89% of eligible employees (21.7 million) were participating in a workplace pension in 2024.
• This is an increase of 800,000 compared to 2023 - the freezing of £10,000 earnings trigger along with increases in wages thought to be the main driver.
• However, there are some noticeable exceptions to the general high participation rates, for example only 59% eligible employers working for micro employers (those with less than 5 employees) in the private sector are saving into a workplace pension.
• The annual total amount saved by eligible savers stood at £149.7 billion in 2024.  This is a £49 billion real terms increase compared to 2012.
• Overall, in 2024, contributions by employees accounted for 29% of savings, employer contributions accounted for 62% and income tax relief on employee contributions made up the rest.
• The number of active savers who stop saving has remained stable over multiple years at under 1% each quarter.
• Overall, 95% of the 12.8 million individuals in receipt of private pension income have some form of guaranteed income, from either a defined benefit pension or an annuity. 
• However, as you would expect, the statistics show a gradual move away from defined benefit schemes – for those accessing pensions for the first time, the proportion receiving benefits from a defined contribution scheme has increased from 37% in 2016/17 to 48% in 2024/25.