Making Tax Digital and Savings Rates

This BBC Podcast is supported by ads outside the UK. Du, jag skulle ju köpa några nya palpställd i lagret. Det kanske blev lite mer grejer. De hade ju allt, hade en skribd, jag köpte en sån här, och kontornstolar, och så hade de en skit snygg typcontainer. Vi har inredning för hela arbetsplatsen. Välkommen till AI-produkten!

Emerson presenterar Oskars lägg dig. Oskar har inte skottat på över tre år. Om man kan välja mellan trappor och rulltrappan så tar han hsen. Hans ben får inga svåra uppdrag nu för tiden. Men sen hoppade Oscar på Amazon och köpte en skivstång, fem kilor proteinpulver och en rejäl massagepistol. Nu kan Oscar mosa med luner med sina lår och askar lå mig full med supertajad bixor. Bra jobbat, Oscar! Få lägg det att hända hoppa på emmelson.se

Hello. In today's Money Box podcast, forget the gym, the language class, and the diet. What New Year's resolutions should savers be making? Twenty twenty six. I just wanna like be better with my money, you know, not spend as much hour getting food with my mates and having nothing to show for it the next day. And with the Bank of England cutting rates at the end of last year, what are the best deals?

As energy prices rise, so do energy bill scams, and listeners have been asking what the new rules for pensions and inheritance tax will mean. We'll explain all. A big change. That's how HMRC has described a major transformation starting in April to how sole traders and landlords report their income and expenses. The Tax Office has told Moneybox that self-assessment has to be modernised to reduce errors and allow them to collect more of what's owed to the Treasury.

It's called Making Tax Digital, and this first wave is going to affect about a million people who have a turnover, that's the business's gross income, above£50,000 a year. At the moment, self employed people put the details of their business accounts into their tax return just once a year on the government's own website or even on paper. But from April, they must use commercial software instead, which sends summaries to HMRC every three months.

It then adds all that information again to their end of year tax return, which they must then update with any other taxable income. Richard is an accountant and has 250 clients. He specializes in sole traders like builders, carpenters, or people who run pubs and shops, and he emailed us to say he's unhappy about the changes. I think it's gonna be a complete waste of time in a in a fiasco.

Dealing with a HNRC is not easy at the best of times. If there are millions of people trying to do their own courtly tax returns, if they're not sure what to do, they're going to contact HNRC and it will take them months to get a reply and then they're in the situation of either being penalised for sending in a return late

or penalised for sending an incorrect return because they didn't get the information they need. There'll be less money coming to the Chancellor Exchequer because people in the stock trading and being blumps, a lot of them would just revert to use doing cash work. Hank is a self-employed engineering consultant. He's used to filing a self-assessment online, which he says works well, but he contacted Moneybox asking about the new software. It forces me to buy

software to send it to HMOC. I don't like that. If HMS wants something they should provide. Something like this using a browser is perfectly fine. i have only one invoice in a year so three times a year doing an assessment is a bit over the top zero zero zero zero zero zero in the end of the uh i sent an invoice maybe i have a bit of a dividend and that's it Well there are some free options, but some of the software costs hundreds of pounds a year.

Jonathan Athow is Director General of Customer Strategy and Tax Design at His Majesty's Revenue and Customs. In the face of lots of opposition to this change, I asked him why making tax digital is happening. Felly, mae'r cymdeithasol, mae'r cymdeithasol, mae'r cymdeithasol, mae'r cymdeithasol, mae'r cymdeithasol, mae'r cymdeithasol, mae'r cymdeithasol, mae'r cymdeithasol, mae'r cymdeithasol.

Currently, one in three uh tax returns we get from uh self-employed people and landlords has an error in it. And we actually lose around six billion pounds a year in revenue that's not collected because of the errors in those tax returns. And will this do away with errors? Will it not simply give more scope for them? Rydyn ni'n cefnogi pobl i'w llawn i'w llawn i'w llawn i'w llawn i'w llawn i'w llawn i'w llawn i'w llawn i'w llawn i'w llawn i'w llawn i'w llawn i'w llawn i'w llawn.

And there are long lags in the system at the moment. You can sit on records for twenty-one, twenty-two months before needing to complete a tax return. And during that time, records can be be lost. So we want people to be keeping records digitally, less likely to get lost.

And keeping them closer to real time, which will improve the accuracy. So that's the underlying rationale for making tax digital for income tax. And how much will it actually save in terms of that lost revenue? So we're expecting uh just under when when it's fully rolled out.

Uh just under an extra billion pounds a year in extra tax revenue. That's our estimate uh that we think we'll get from that improved record keeping. So you still think five billion lost through people not m you know, not keeping good records or making those mistakes?

Well, th there's a number of reasons why we we don't get all the the tax uh that's due. Some of that is record keeping, some of it's deliberate evasion. This is not d designed to tackle deliberate evasion, but it's there to improve record keeping. uh and tackle what we call failure to take reasonable care, which is a big part of the reason we don't get all the revenue uh we should. Hank says it's over the top.

Is it? Well, we think i it's not unreasonable to ask people uh to keep records closer to real time. Many people already use software or already use agents to help them comply. And of course we are dealing with a very diverse population here. We've got about a million people who will start

uh with making tax digital uh this this April. But we think Asking people to keep records, using software and update us on a quarterly basis is not unreasonable given the challenges we face in administering the tax system. Uh and as I said, it goes with the grain of the way many people are already running their businesses. Uh Richard the accountant is also clearly not a fan. He thinks it will be a complete waste of time and a fiasco.

How do you respond to him? Mm-hmm. Well as I've said, uh we we do have a a challenge with the way self-assessment works at the moment. One in three tax returns having some form of error on them, six billion pounds lost. We want to do something different. We want to encourage people to use digital tools. We think that will be more accurate. allow us to have more up to date uh information. So

Overall, we think that will modernize the system. For some people, it is going to be a big change. If you're very paper-based at the moment, moving to software will be a big shift. But for some people already using software, the change will hopefully be quite minimal. But we have got a very diverse population brought in. As I said, a million people who brought in from April twenty twenty six. We know that will be a challenge for some people.

Rydyn ni'n ymwneud â ni'n ymwneud â ni'n ymwneud â ni'n ymwneud â ni'n ymwneud â ni'n ymwneud â ni'n ymwneud â ni'n ymwneud â ni'n ymwneud â ni'n ymwneud â ni'n ymwneud â ni'n ymwneud â ni. Okay, the main complaint about HMRC that we get from money box listeners is that they can't get in touch with you when they need you. Won't this make that work?

Well, we're hoping actually it will smooth out uh some of the peaks we have in the year. So uh we're currently in January, which is coming up to the self-assessment deadline, but that's a real peak for us. We're hoping by encouraging people to smooth out our activity through the year, those quarterly updates. it will actually be a little and often rather than a big peak at the end of the year. So we're hoping actually to sort of reduce some of the pressures we've we face.

And uh also historically, yes, we've not been meeting our service standards. We have a service standard of answering 85% of calls. We were missing that this time a couple of years ago, but we're now back in service standard. So if people do need to ring us, we should be able to answer people's calls.

Just this time last year, HMRC actually had to deny running a deliberately poor phone service. you're hoping that this is going to improve things, but are you scaling up to cope with any increased demand as this new demand, this new making tax digital begins? Yes, so there's a couple of things we're doing for the first year. We are putting in place a additional resources, additional people.

uh who can answer queries. But we'll also uh for that. How many additional people? How how much how many more phone hours will be available? Th there there will be a a a sizable uh additional number of people to deal deal with deal with queries, but we're able to scale that up or scale that down depending on the nature of those uh those queries. But we're also taking other steps.

One of the steps we're taking is for that first year, if you miss a quarterly uh update, there won't be any penalty points uh added. Uh so we're making it. Which we'll we'll come on to in just a moment. I'm just I'm just very, very interested in this.

Yeah, this question of of whether people will have i i enough people on the end of the phone to pick up to help them kind of get on on track with this. Because I'm wondering if it's gonna make it harder for everybody who needs to a interact with HMRC and not just the businesses that come under this new regime? No, we we've been piloting the system uh this year, so we understand a little bit about how people are gonna a interact with the system. Obviously that's a pilot not running

the full live system, but we've got flexibility to bring in more people if people need more support uh when we roll out making tax uh making tax digital. So we're hoping that we can cope with uh the the extra demand uh that might arise. Rydyn ni'n ymwneud â phobl yn ymwneud â phobl yn ymwneud â phobl yn ymwneud â phobl yn ymwneud â phobl yn ymwneud â phobl yn ymwneud â phobl.

So uh if people do need to fonus, there will be people there. But we're hoping through the support we can minimize the number of people who need to fon us because our guidance will be good enough to help them complete what they need to do. You've used the word hope. An awful lot. How confident are you? So look, th this is a big change. I'm certain there will be some bumps in the road as we get through to to i implement implementation.

But we are on track for delivery. The IT is on track. We've tested the system this year, albeit with a small number of individuals. As we roll it out, we're confident we can uh grow our our service. But obviously this is a big change. We are asking people to do things differently. We will need to respond as we roll things out, as we understand how people will use this new system, how we will respond to sort of challenges or issues as they arise.

But we are confident we have everything in place to deal with the uh with the rollout of the new service. Jonathan Athau from HMRC speaking to me earlier. He also told me that HMRC will write to everyone who'll be affected this year. That's after they file their tax return by the end of this month.

Now there is more information available online about how the new penalty system will work. And if you need to apply for an exemption, if you're someone who feels they can't do their tax return digitally, contact the Self-Assessment Helpline or write to HMRC for more information. Du, jag skulle ju köpa några nya palpstält i lagret. Det kanske blev lite mer grejer. De hade ju allt, man hade skribord, jag köpte en sån här, och kontorstolar, och så hade de en skit snygg till.

Vi har inredning för hela arbetsplatsen. Välkommen till Arm. Emerson presenterar Oskars lägg dig. Oskar har inte skottat på över tre år. Om man kan välja mellan trappor och rulltrappan så tar han hissen. Hans ben får inga svåra uppdrag nu för tiden. Men sen hoppade Oscar på Amazon. Och köp en skyvstång, fem kilo proteinpulver och en rejäl massagepistol. Nu kan oskar moda meloner med sina lår och anskar full med supertajda bixor. Bra jobbat, oscar! Få lägg det att hända. Shoppa på Amazon.se.

Now, many of us are on day three of our New Year's resolutions. I've already failed to get to the gym, but among the pledges that this is the year you get fit or you learn a musical instrument, what about sorting out your savings? Since the Bank of England cut the interest rate to three point seven five percent in December, around a third of providers have dropped rates on their savings products. That's according to the financial data firm MoneyFact.

Now we've checked this morning and you can still get just over four percent for an easy access cash ISA. But of course, that's if you can afford to save at all. Research from the Financial Conduct Authority has found that one in ten people have no cash savings, and one in five of us have less than£1,000 in an emergency fund. Joe Krasner asked these shoppers in Liverpool about their savings goals for the year ahead.

Rydyn ni'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd offers a good level of interest for the first year. So do you proactively look at the rates and change your money to get the best rates where possible? I don't but it's probably something I should be doing. I'm saving two hundred pounds a month, according to the 800 in my accountant.

It's going well. Because I'm only 17, I've got the only savings account I can open. I got my first job this year, so I've kind of been spending a lot, but I feel like 2026. I just want to like be better with my money, you know, not spend as much hour getting food with my mates and having nothing to show for it the next day. Are you saving any money at the moment? Yes, as much as I possibly can for the next year. Are you moving your money around to get the best rate? Not really.

I just ask my dad and he tells me uh where to put my money and that's where I keep it. Okay over to dad. Tell me about your saving goals. I save regularly, absolutely, monthly, with a view to getting the maximum interest that I could possibly can and I uh Yeah, I move my money regularly. Oh well done that dad. Uh well listening to that is Sarah Coles from the investment platform Hargreaves Lansdowne. Sarah, quite a few of those shoppers in Liverpool were saving.

That younger man though talking about needing to stop spending so much so that he can save. Now I know Hargreaves Landsdown tracks and analyses saving trends. Does it chime with what you're seeing? Rydyn ni'n gwneud y HL Savings and Resilience Barometr, ac mae'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd i'n mynd.

Um so the the bad news is our spending is rising. So, you know, the the your your interviewees were not alone, people are spending more than they would ideally like to. But because wages are also rising, it does mean people actually have more money to put away. And so we've been seeing people saving more. So um it's actually a trend that started in the pandemic. So if we when we went back just before the pandemic, a household on average was saving about sixty two pounds a month.

Now they're saving an average of£150 a month. So that's a massive change. And we are expecting that to grow again in 2026. But I would say that one of the sort of caveats to that is there is a really big gap between people on different income. So those who are earning more than average have seen their gr their savings really grow, whereas those on lower incomes their their sort of savings have stayed the same or gone down. So the

to sort of gap between those who have savings and those who don't is really growing. So what about those people who simply find they can't afford to save? Is it going to get any easier for them? Well, I mean there's a hope. There's always hope. Um so inflation is kind of one of the things that's you know, meaning that people are spending more rather than having money to put aside, and inflation is falling.

Felly mae'n ymwneud â'i cael ei wneud cael ei wneud cael ei wneud cael ei wneud cael ei wneud cael ei wneud cael ei wneud. So if you're getting a decent pay rise, you should actually be in a better position to save.

So at the moment, for example, wages are currently rising about one percent ahead of inflation. So if you're in that position, it really is worth kind of thinking about what you can do. It is again worth saying these are only averages. So one of the problems we have is the this weaker labour market will mean lots of people maybe haven't had wage rises, maybe aren't able to get the hours that they want or or the work altogether.

So if you are in a position to save, really don't waste the opportunity now is definitely the time to be putting money away. Well some lenders are offering lower savings rates after the drop in interest rates in December and Money Facts also said ninety percent had already made cut. since August. What kind of deals are out there? Well you're absolutely right, rates have fallen. Um but if you look at how much the kind of average rates have fallen compared to how much the Bank of England has cut.

you're actually getting some pretty strong rates out there. So at the moment, for example, you can get up to about 4.5% on easy access and up to, you know, somewhere between 4% and 4.5% if you fix. Now one of the things that's really interesting is the way that things are going to change over the coming year. So we are expecting easy access rates to fall back.

But we are expecting fixed rates to stay quite strong. So at the moment you can get a better rate by keeping on easy access. In future it might be that by fixing your money you can secure a better rate over the longer term. So maybe people who've been chasing rates in the past might need to think, can I afford to fix some of my savings and sort of lock in this great raid? Sarah Coles from Hargrove's Landsdown, thank you very much indeed.

Now, it is a very cold day, so rising energy bills could send an extra chill down your spine. On New Year's Day, the average annual household bill rose slightly, up 0.2% to£1,758. for an average household using gas and electricity and paying by direct debit, unless of course you're on a fixed tariff. Our reporter, Dan Whitworth, has more on this Dan.

Yeah, so Fleis, this isn't really about that small rise just now, but the fact that energy bills are still really, really high, up around forty percent on this time four years ago. Now this new cap shifts more of the cost of energy onto electricity. So that's rising by just over one pence per unit. Gas is actually getting slightly cheaper per unit. So it's going to be heavy users of electricity who will feel the biggest impact of these changes.

Standing charges for both are creeping up too, and the price cap just limits those unit prices. So remember, if you use more, you will pay more. I've mentioned it's cold. I'm gonna mention that Dan actually has his woolly hat on in the studio today. Woolly bobble hat. Um Dan, scammers are trying to exploit people's energy worries. Yes, so uh sad to say, criminals are sending texts and making calls.

Saying people are eligible for something called a warm home discount. Now, that is actually a government scheme that gives some people a one-off 150-pound discount off their electricity bill. But any message about it is not. from the government. If you're eligible, you will get a letter. So don't click on any links sent by email, text or message that have been sent by criminals. Delete them. Bobble Hat Dan, thank you very much.

Now, plenty of people are a bit unsure about the rules for pensions and a bit unsure about the rules for inheritance tax. So smash those two together. It's probably unsurprising that around three-quarters of people don't know that unspent pension pots. will be subject to inheritance tax from April next year. That's according to the Mutual Pensions and Investment Firm Royal London.

So at the moment, people who die before they've spent all their pension fund can leave it to their heirs entirely free of inheritance tax. It doesn't count towards their allowance. But the estate of anyone who dies after the sixth of April twenty twenty seven will include those unused pension funds. Now you'll only pay inheritance tax, of course, if the total value goes over the normal threshold.

of between three hundred and twenty-five thousand and a million pounds. But lots of listeners have been asking us questions about this. Listeners like Valerie. I'm under seventy and I have a personal pension. all this gets more and more complicated as as time goes on and rules and pensions changing. You believe you're putting in a pension, your company puts in money into your pension scheme. You personally put money into a p personal pension plan.

and then the law changes and it all becomes very, very complicated. I'm trying to draw as much pension out uh the plan as I can. to try and leave as little as possible now, which wasn't originally my intention. I just don't know how it would work, how you'd get your valuation, whether that's down to the executor or the beneficiary to arrange. It all sounds a little bit difficult to me. So I'd be grateful if you could explain how all this would work.

Valerie, thanks for that. Claire Moffat is a pensions and tax expert from Royal London. Claire, most people save for their retirement, so they might not actually have much much cash left when they die. Who is this about? That's right. So most people you will use their pension in retirement and it's really important that people still know that pensions are really good to save for retirement.

But there are people who had very big pension pots or maybe lots of different pots and they were planning on passing on some of their pensions. So it's really important that they know um that this change is coming in in April twenty twenty-seven and that pensions will be included. And that's actually been the Treasury's point with this, that pensions are for retirement rather than wealth and inheritance planning.

That's right. And and so they are are making this point that because of the benefits of that tax top up, um tax relief that you get from the government, paying into pensions is a really good idea. um and most people will use them. But there are people who had been planning on on passing them on, like Valerie mentioned. Okay, well to Valerie's question then. How will this all work? Who actually has to sort out paying the inheritance tax?

Well, so it kind of as it works just now, uh on your death, your executor or or your personal representative, that's a legal term for it. Um they will s look at all of the different things you have, whether that is bank accounts, property, and they'll get valuations for all of these different things. Now from April twenty twenty seven your pensions will be included with that. So your pension company will give a valuation, they'll say who's going to be paid your pension.

um and if it's going to a husband or wife because it then it will be inheritance tax fee. Now we also find in our research that a third of people who are married or in a civil partnership didn't know that you can pass um money or assets to your husband or wife or civil partner and that would be inheritance tax fee. So that's really important to know as well. Um then the um

The executor will sort of put all these valuations together, they'll work out if there's inheritance tax due. The pension company can pay that inheritance tax directly. to HMRC. So if the beneficiary asks for that to happen, that will be able to happen. And then the inheritance tax will be paid and probate applied for. Okay. If someone inherits a pension pot then, does it come to them as A pension pot as pension savings or as a lump sum of cash.

Well it depends. In most circumstances what happens is you get the choice if you're the beneficiary and you can take it as cash, you can have it move into beneficiary drawdown. So that just means you can take it out as and when you like, but still stay invested. or you more unusually know it could buy an annuity. Rydyn ni'n ddim yn ddewisio beth yw'r pethau'r pethau'r pethau'r pethau'r pethau'r pethau'r pethau'r pethau'r pethau'r pethau'r pethau'r pethau.

Oh, that's a really good point, actually, because we've had lots of emails. We get lots of emails from people who are worried about double taxation once the inheritance rules change for pensions. Explain then why, if money is inherited from a pension, the recipient could end up paying tax on it beyond the inheritance tax that's been paid.

So what happens is if someone dies when they're seventy five or over, then the person receiving the pension, um cash or however they receive it, will pay income tax. Um now So if then we kind of think about the fact that from twenty twenty seven there could also be inheritance tax, not all the time, but sometimes there might be.

I think it is worth saying though that many things have double taxation. So if you pay into an ISA, it often, you know, it'll be it's from your salary, it's taxed income, and then it might also be subject to inheritance tax. And the same with property. There's different forms of taxation. So But that is what will happen with pensions if someone is seventy five or over when they die. And we should say as well that uh the vast majority of people's estates don't end up with a tax bill.

Um we've said so it's it's actually it's one in twenty estates actually paid inheritance tax in the latest figures. Adding in unspent pension pots is forecast to take that up to one in ten. It is rising. Should more people be thinking about it? I think It is rising and the inheritance tax nil rate ban, so that £325,000 threshold you mentioned, has been frozen since 2009 and it's going to be frozen until...

2031, properties are increasing in value, pensions will increase in value. So more people sh are thinking about it. What I would say is if people do have a lot of money in pensions and other assets, Especially people who are not married.

who don't have this ability to pass on wealth to each other and have the there's a kind of magic million pound figure when you add together all of the different Felly, os ydych chi wedi'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i'i

Claire Moffat, thank you very much indeed. Now, a couple of weeks ago, the Money Box podcast marked 50 years since the Sex Discrimination Act gave women equal access. To financial services like loans and mortgages, you inundated us with emails. So on Wednesday, I'm taking a closer look at women's finances, from the gender pay gap to pension pots.

And we want to hear from women of all ages. Email us your questions, your comments, and your experiences to moneybox at bbc.co.uk or send a voice note or comment on WhatsApp. The number is 03306. seven eight three one eight three. And by the way, if you're stuck for a new year's resolution, why not subscribe to Moneybox on BBC Sounds and then you never miss an episode. You can even listen to the podcast at the gym if that helps.

In this podcast, the team was Dan Whitworth, Ema Devlin, Catherine Lund, and Joe Krasner. The studio manager Patrick Shaw, our editor is Jess Quail. I'm Felicity Hannah and this was a BBC News Money and Work Production for BBC Sound. Hello, I'm Amal Rajan and from BBC Radio 4, this is Radical. We are living through one of those hinge moments. In history when all the old certainties crumble And a new world struggles to be born.

So, the idea behind this podcast is to help you navigate it. What's really changed is the volume of information that has exploded. And also by offering a safe space for the radical ideas. Go to the transfer and say cut. Taxes of those with children. Telling our stories is is powerful and a radical act. Listen to Radical with a Mo Rajan on BBC Sounds.

If there was a big red button that would just demolish the internet, I would smash that button with my forehead. From the BBC, this is The Interface, the show that explores how tech is rewiring your week and your world. This isn't about quarterly earnings or about tech reviews. It's about what technology is actually doing to your work, your politics, your everyday life, and all the bizarre ways people are using the internet. Listen on bbc.com or wherever you get your podcasts.

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