HMRC statistics, which show that only almost 60% of self-assessment return filings made during the past tax year were by agents.

According to HMRC, a record-breaking 11.5 million taxpayers submitted their self-assessment tax returns for the 2022/23 tax year by midnight on 31 January.

More than 12.1 million taxpayers were expected to file a tax return and pay any tax owed. Of those that met their obligations by the deadline, 778,068 beat the clock to complete it on 31 January, including:

• 61,549 taxpayers who filed between 16:00 and 16:59 – the peak hour for filing;
• 32,958 taxpayers who filed between 23:00 and 23:59.

AccountingWEB has obtained data from HMRC which shows that, of the 11.2 million self-assessment tax returns filed before the deadline of 31 January 2024, 59% (more than 6.6 million) were filed by agents – a term which includes professional tax agents and family members or similar completing the return on behalf of someone else.

The figure of 6.6 million returns filed by agents is similar to its 2020 equivalent (the last year HMRC provided data for), and in percentage terms has slightly declined in those four years.

When looking at the past four self-assessment deadline years split into who is making the filing (agent vs taxpayer) and how the return is filed (HMRC’s self-assessment portal vs third-party tax filing software), AccountingWEB found that the split in terms of agent vs taxpayer seemed roughly equal. This suggests a high number of individuals are not relying on agents to deal with their tax returns.

In addition, the figures highlighted the growth in individual taxpayers using HMRC’s self-assessment portal, with almost 4.5 million filing in this way – close to a million more than the corresponding figure in 2020. 97% of individual filings were made using HMRC’s self-assessment portal. In comparison, just 2.91% of individuals used third-party tax filing software, with the percentage figure for this actually in decline since 2020. This statistic alone highlights the scale of the challenge ahead for HMRC’s Making Tax Digital (MTD) ambitions. 

The current timetable for MTD income tax self-assessment (MTD ITSA) mandation – please see our earlier Bulletin – means that HMRC’s self-assessment portal for in-scope, unrepresented, taxpayers will be shut off from April 2026, and instead, more than 700,000 taxpayers (with a qualifying income of more than £50,000) will be required to buy third-party tax filing software, with a further 900,000 (above the income threshold of £30,000) brought in for the following year.

Qualifying income is the combined income that an individual gets in a tax year from self-employment and property income sources. It is the individual’s gross income or turnover before they deduct expenses. Sources of income such as income from employment, dividends or savings, do not count towards qualifying income.

An estimated 1.1 million taxpayers missed the deadline. As a reminder, the penalties for late tax returns are:

• an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time;
• after three months, additional daily penalties of £10 per day, up to a maximum of £900;
• after six months, a further penalty of 5% of the tax due or £300, whichever is greater;
• after 12 months, another 5% or £300 charge, whichever is greater.

There are also additional penalties for paying outstanding tax late. These are 5% of that unpaid at 30 days, six months and 12 months. Interest will also be charged on any tax paid late.

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As no last-minute extension was announced by the Government, Wills can no longer be witnessed by video link.

Prior to the Covid-19 pandemic, in simple terms a validly executed Will was:

1. In writing
2. Signed by the person making it (‘the testator’), in the physical presence of two independent witnesses; and
3. The witnesses have signed it in the presence of the person making it.

Lockdown restrictions suddenly created the need for change and, so, the Government amended Section 9 of the Wills Act 1837 to say that, in relation to Wills made after 31 January 2020, “presence” includes presence by means of video conference or other visual transmission, so that witnesses to Wills did not need to be physically present at the signing, but could be legally present, over a video link. Section 9 of the Wills Act 1837 states:

(1) No will shall be valid unless—

(a) it is in writing, and signed by the testator, or by some other person in his presence and by his direction; and

(b) it appears that the testator intended by his signature to give effect to the will; and

(c) the signature is made or acknowledged by the testator in the presence of two or more witnesses present at the same time; and

(d) each witness either—

(i) attests and signs the will; or

(ii) acknowledges his signature,

in the presence of the testator (but not necessarily in the presence of any other witness),

but no form of attestation shall be necessary.

[(2) For the purposes of paragraphs (c) and (d) of subsection (1), in relation to wills made on or after 31 January 2020 and on or before 31 January [2024], “presence” includes presence by means of videoconference or other visual transmission.]

The process of video witnessing of Wills was applied for an initial two-year period from 31 January 2020, but was then further extended to 31 January 2024.

The Law Commission has undertaken a consultation, which ended in December 2023, seeking views on whether a new Wills Act should permit electronic wills, either immediately or by allowing for them to be introduced later. Please see our earlier Bulletin. We will of course update you on the results of that consultation.

However, unless the Government reintroduces video witnessing of Wills, this is no longer an option and witnesses must be in person. The ability to witness a Will’s execution by video link has ended.

Comment

Whilst social distancing and lockdown restrictions made remote witnessing a necessity for all for a time, it is not at all clear just how popular this method was as time went on, given that the process is far more complicated than simply having to have two witnesses physically present. Although, of course, the challenges faced by those wanting to make a Will and who were (and still are) also shielding and isolating have not gone away.

A new report suggests that the State Pension Age may need to rise to 71 by 2050

The current legislated trajectory for the State Pension Age (SPA) is for an increase to 67 between 2026 and 2028, followed by another notch up to 68 between 2046 and 2048, although the 68 timing could change. Following an independent review and DWP review last year, the Government kicked the decision on whether to bring forward an SPA of 68 until a further study is completed after the general election. This was a repetition of the manoeuvre it had executed ahead of the 2019 election (please see our earlier Bulletin) in response to the Cridland Review. Controversially, Cridland had proposed a 2037-39 introduction for an SPA of 68 based on Office for National Statistics (ONS) 2014-based mortality data.

The topic of the SPA is kryptonite for politicians and has been made worse by the path of pensioner life expectancy over recent years (please see, for example, this recent Bulletin). It becomes much harder to justify SPA increases when life expectancy improvements are flatlining. However, life expectancy is not the only financial justification for raising the SPA. Another that is relevant for pay-as-you-go pension systems, such as the UK State Pension, is the old age dependency ratio – basically the number of workers (aged 16-64) per state pensioner.

A new report from the International Longevity Centre (ILC) says by 2050 the SPA needs to rise to between 70 and 71 to maintain the current status quo in terms of dependency ratio. It could be worse: the ILC says that if the UK’s working adult population is defined as 20 to 64 years, to account for time spent in full time education, the SPA might need to hit age 70+ as early as 2040 to maintain the current dependency ratio. The ILC accepts that the recent stalling in life expectancy during the austerity years and COVID has temporarily eased the pressure for increases in the SPA beyond 67 after 2027, but reckons that, in longer-term, the pressure will be to increase the SPA to 68 or 69 before 2040.

The ILC says that in the UK the problem becomes even more pressing because of the exit of workers from the workforce long before SPA, as it reduces the tax base to pay for pensions. Poor health is one of the key reasons for this workforce decline, which the ILC regards as one of the greatest barriers to economic prosperity currently faced by the UK. Research shows that, by age 70, at present only 50% of adults are disability-free and able to work.

The ILC calculates that if the proportion of the economically active population were to increase from current levels of around 78% to 85%, then it may be possible to hold the SPA at below 70 from 2040 – at least for a few years.

Comment

If the next Government is going to adopt the Cridland timing of 2037-39 and stay with the principle of giving at least ten years notice of an SPA change, it will need to commission that fresh study almost as soon as it enters office.

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How the new rules will limit tax-free lump sum payments in lifetime and on death

The lifetime allowance (LTA) will be abolished on 5 April 2024. It will be replaced by a new set of rules that will instead limit tax-free lump sum payments both in lifetime and on death. There will be no limits on any funds used to provide a taxable pension income.

Although no LTA charges have applied since 6 April 2023, for tax year 2023/24 the LTA framework has remained in place. This is an interim measure while HMRC work on a new set of rules to abolish the LTA entirely from 6 April 2024. HMRC have worked closely with the pensions industry to try and introduce a workable solution. Whilst there are a still a few technical issues to resolve, we now have a good idea of how the new rules are intended to work.

The aim is that there are no fundamental changes to the way pensions work. It’s just that new rules must be introduced to limit lump sum payments that were previously restricted by the LTA.

To read more in the full bulletin follow this link.

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