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UK TAX
Weekly News 20th JAN
Retail giant Next called on the government to stagger the tax changes over time
Since the release of the UK’s Autumn Budget, a series of tax hike plans have caused widespread complaints among business owners. In a recent interview, Lord Wolfson, the boss of retail giant Next, urged the Labour government to implement tax changes gradually rather than introducing them all in April. He warned that otherwise, business owners would be forced to lay off staff or freeze recruitment to cut costs.
He stated that the rise in employer National Insurance contributions would deal a heavy blow to the retail sector, as the industry is particularly reliant on minimum-wage or part-time workers. Moreover, inexperienced individuals seeking their first job would find it increasingly difficult.
It has been revealed that under the new policies, Next’s payroll costs will increase by £70 million. For part-time employees, their employment-related tax burden will rise by approximately 6.5%. The company stated that this would directly result in either a reduction in the number of part-time staff or a decrease in the working hours of each employee.
In light of this, Next’s boss has called on the Labour government to gradually lower the threshold for employer National Insurance contributions, rather than giving employers just a few months’ notice as was the case in the Autumn Budget.
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TikTok restores US service
Donald Trump has announced that TikTok will regain access in the United States, allowing the social media platform to resume its services. He also stated that the US would seek to establish a joint venture to ensure that the 170 million American users can continue using the popular short-video sharing app.
On January 19 (Sunday), just hours before new legislation banning TikTok was set to take effect, the app proactively “disconnected” from US users. TikTok announced, “We regret that a US law banning TikTok will take effect on January 19, forcing us to temporarily suspend services. We are working as quickly as possible to restore our services in the US and appreciate your support. Please stay tuned.”
The US government had previously expressed concerns that TikTok’s parent company, ByteDance, could misuse American user data. On 24 April 2023, President Joe Biden signed a congressional bill requiring ByteDance to sell TikTok to a non-Chinese entity within 270 days. Otherwise, the app would be removed from all US platforms by January 19.
During his term, Biden did not directly intervene or resolve this controversy, choosing instead to leave the matter for incoming President Trump. On the eve of his inauguration, Trump indicated that he would likely grant TikTok a 90-day reprieve and expressed a desire to negotiate a solution that aligns with US interests.
Under US law, if the President can demonstrate to Congress that significant progress has been made towards divestment, and a legally binding agreement has been reached, an extension can be approved. However, no such binding agreement has been publicly disclosed.
Trump wrote on his Truth Social platform: “I want the US to own 50% of the joint venture in TikTok.” Notably, Trump’s support for TikTok marks a reversal of his stance during his first term, when in 2020 he sought to ban the app, citing concerns over ByteDance’s potential sharing of US user data with China.
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Fall in UK inflation to 2.5%, as UK economy grows by 0.1% in November
According to data from the Office for National Statistics, the UK’s inflation rate dropped to 2.5% in December, down from 2.6% in November, indicating a slowdown in the pace of price increases. This has also raised the likelihood of a Bank of England interest rate cut next month.
Meanwhile, core inflation (excluding volatile items such as energy, food, alcohol, and tobacco) rose less than expected, falling from 3.5% in November to 3.2% in December. Inflation in the services sector, a key metric for the Bank of England, also declined, dropping from 5% to 4.4%.
Ruth Gregory, Deputy Chief UK Economist at consultancy Capital Economics, commented: “The latest data supports a 25-basis-point rate cut in February and partly validates expectations that interest rates will fall further and faster than the market predicts.”
Economists in the City had forecast that the inflation rate would remain unchanged from the previous month. However, inflation is still above the Bank of England’s 2% target, with experts warning it could rise above 3% by the end of the year. The current UK interest rate stands at 4.75%.
In addition, the UK economy grew by just 0.1% in November, falling short of expectations, though the trend has eased some of the pressure on Chancellor Rachel Reeves following economic contraction in the previous month. She acknowledged that the UK’s economic recovery would take time.
Simon Pittaway, Senior Economist at the Resolution Foundation, analysed the subdued figures, expressing concerns over potential economic stagnation: “Since the Autumn Budget, data has generally shown a negative trend, raising the risk of the UK slipping back into stagnation. The negligible GDP growth at the end of last year further underscores the urgent need for a strong government economic response.”
It is understood that over the coming weeks, 17 regulatory bodies will submit proposals to the Treasury for review, with each regulator required to present five recommendations.
