In this week’s Enews, we look at HMRC’s campaign on personal expenditure on self assessment tax returns. There is also news on the tax authority’s changes to late and penalty interest rates and the deadline for extending Child Benefit claims for 16-19 year olds to update you on.
HMRC targets personal expenditure on self assessment
HMRC will run a digital campaign to ensure that self assessment taxpayers do not claim tax relief for personal expenditure on 2025/25 tax returns, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
HMRC has told the ICAEW that the digital campaign follows a trial in 2024.
This trial generated over £27 million in tax revenue and ‘highlighted reporting of disallowable private use in business expenditure’.
HMRC says that it will be opening more enquiries to check that sole traders, partners and landlords only claim deductions for business-related expenses. This includes ensuring that mixed use expenses are apportioned correctly between business and personal use, which considers the circumstance of the particular tax year.
The legislation states that in order for an expense to be deductible, it must be ‘incurred wholly and exclusively for the purposes of the trade’.
Where an identifiable part of an expense is incurred for trade purposes, that part of the expense is an allowable deduction. It is important that the method of apportionment used is:
- supported by records (eg, mileage records); and
- applied consistently from one tax year to the next.
It must also be the case that the expense is not capital in nature. Capital allowances are available for qualifying expenditure on plant and machinery.
Taxpayers have the option to use flat rate ‘simplified expenses’ to work out allowable expenses on motor costs, use of home and private use of business premises.
Internet link: ICAEW website
HMRC cuts late payment interest rate to 8%
HMRC will reduce late payment and repayment interest rates from 27 August following the 0.25% cut in the base rate earlier in the month.
The Bank of England cut the base rate to 4% on 7 August, triggering a 0.25% cut in HMRC interest rates which are pegged to the base rate.
From 27 August, the late payment interest rate will be cut to 8.0% from 8.25%.
The repayment interest rate will be cut to 3% from 3.25% from 27 August.
HMRC late payment interest is set at base rate plus 4%. Repayment interest is set at base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%.
Following the cut to the base rate, Tina McKenzie, Policy Chair at the Federation of Small Businesses (FSB), said:
‘The small business community will now look to lenders to reflect this rapidly across their offering, cutting the cost of finance. They will also want to see the Bank of England set out a clear path for the rest of the year, with a further easing in the base rate badly needed to reduce the financial strain they are under.
‘There will be no growth in the economy overall unless small firms are able to expand and fulfil their potential, but their confidence is still firmly in negative territory, according to our research.
‘Lower borrowing costs will encourage small businesses to invest, giving the wider economy a much-needed fillip.’
Internet link: GOV.UK FSB website
Deadline approaching to extend teen Child Benefit claims
Parents have less than two weeks to tell HMRC their 16-19-year-old is continuing education or training, or their Child Benefit payments will stop.
Hundreds of thousands of teenagers will decide on their future after they receive their GCSE results on 21 August 2025.
For parents of 16-19-year-olds who haven’t yet extended their claim, Child Benefit payments will stop after 31 August. If their child is going to continue in approved education or training, parents can continue receiving Child Benefit and HMRC is urging them to extend their claim now.
Parents can quickly and easily extend their Child Benefit claim online on or via the HMRC app.
According to HMRC, more than 509,000 parents have extended their claim digitally so far, with the changes applied to their record without the need to wait on the phone.
Child Benefit is worth up to £1,354.60 a year for the first or only child and up to £897 a year for every additional child.
Myrtle Lloyd, Chief Customer Officer at HMRC, said:
‘Teenagers can be expensive and Child Benefit is an important source of income for your household. As soon as you know what your teen is doing in September, don’t miss out. You can extend your claim in minutes through the HMRC app or online to ensure your payments continue.’
Internet link: HMRC press release
