It has been a busy few weeks here at Gorilla, as we caught up with all our current clients, onboarded plenty of new customers and made sure everyone’s finances were in check to start the financial year off on a strong footing.
As an accountancy firm dedicated to serving the financial needs of Small Businesses and Contractors in the UK, we understand the importance of staying informed about the latest developments that can impact your business. We use our blog to offer valuable insights and practical advice to help you navigate the ever-changing business landscape.
It’s also incredibly important that as a small business owner, landlord, freelancer or contractor, you use an accountant who you trust with your finances whether you speak to them daily, or you’re taking a well-earned holiday and leaving your business in good hands.
Let’s take a look at the latest industry news, to ensure you’re up to date with everything you need to know ahead of the summer holiday season.
Interest Rates rise again
For the 13th consecutive time, The Bank of England has raised interest rates, this time from 4.5% to 5%, meaning it is now at its highest level in 15 years, as the Bank tried to slow the rise in the cost of living.
And it’s set to continue to increase as prices continues to rise throughout the cost of living crisis. The financial markets expect rates to peak at about 6% early next year.
In theory, raising interest rates makes it more expensive to borrow money, meaning people have less to spend, bringing down demand and slowing price rises. Although it’s not great news for any borrowing you’re intending to do, it is good for any savings you might have.
There has been a series of Bank rate increases since December 2021 attempting to control inflation. The inflation rate target is 2%.
In terms of inflation, you’ll be aware of price rises for materials, food and petrol across the board. According to the Office for National Statistics, prices rose by 8.7% in the year to May.
How do interest rates affect me?
Mortgages
- Just under a third of households have a mortgage. Those on variable mortgages or tracker mortgages will see an immediate increase in their monthly payments when interest rates rise.
- The Prime Minister has urged homeowners and borrowers to “hold their nerve” over rising interest rates aimed at bringing down stubborn inflation.
- In recent weeks, banks and building societies have been withdrawing mortgage deals in anticipation of higher interest rates.
Credit cards and Loans
- Even ahead of this decision, the average annual interest rate in April was 21.86% on bank overdrafts and 20.13% on credit cards.
- Lenders could decide to put prices up further, if they expect higher interest rates in the future.
Savings
- Banks and building societies usually pass on interest rate rises to customers, so deals are pretty good at the moment. Shop around for a better savings rate if you can.
Latest on the Renters (Reform) Bill
The Renters (Reform) Bill, was introduced to Parliament last month on the 17th May, and is the first time the reforms have been seen after four years of promises and proposals. It represents what is probably the biggest shake-up to private rented sector in over 30 years.
Overall, the measures within the newly introduced bill could change the way landlords (and the letting agents that they employ) operate rented homes. The plans set out to “redress the balance” between landlords and tenants.
Michael Gove announced, “Our new laws introduced to Parliament today will support the vast majority of responsible landlords who provide quality homes to their tenants, while delivering our manifesto commitment to abolish Section 21 ‘no fault’ evictions.”
Although we’re still quite far off the Bill becoming law, it’s likely that some of the measures may change during its passage through Parliament, but there will be changes that landlords and tenants alike. It is set to impact how tenancies and evictions, property standards, marketing and everything around the admin between landlords, agents and tenants works.
But should landlords be concerned? Here’s a few things you need to know:
Landlord Registration
This proposal has two elements:
- Privately Rented Property Portal: A database of landlords and properties that is accessible to the public. This will provide information for landlords to understand and comply with their legal obligations.
- Private Rented Sector Ombudsman: A scheme that allows tenants to seek redress if they have complaints about their landlord.
All private landlords will be required to register themselves and their properties on the portal and join the Ombudsman scheme, with a fee for each. If landlords let any property without it being registered with the portal or the Ombudsman, the local authority could fine them up to £30,000.
Scrapping Section 21 notices
As unpopular as the decision may be, landlords will lose the right to take back their property at two months’ notice without having a good reason. In reality, most do have a good reason to evict a tenant, through a Section 21 or Section 8.
It is easier to move to a possession claim after a Section 21, either because they refuse to leave or so the tenant can apply for local authority housing,
Under the new proposal, landlords can take back their property if they need to under Section 8 if:
- The tenant is in rent arrears
- The tenant has caused nuisance or damage
- If they have broken the law or been involved in domestic violence
- You want to sell
- You want to move themselves or close family into the property
The rules for issuing prescribed information may change
For a section 21 notice to be valid, prescribed information to the tenant must be valid. However it is not yet clear what will come in place in relation to documents such as the EPC, gas safety certificate and deposit protection when Section 21 disappears.
Introducing 2-month notice periods for tenants
It sounds like this may be a point within the Bill that will be reviewed, and for good reason if we think about students as an example. Landlords who let student properties currently issue 12 month fixed term tenancy agreements, so that the whole year is tenanted rather than just the academic year.
If this proposal goes through, students could leave before the summer holidays, or if they fall out with housemates, leaving the property empty for those months. It is difficult to find students who need accommodation over the summer or in the middle of the academic year, so landlords are worried about this. With demand for student rentals already exceeding supply in many cities where universities are, a mass exodus of landlords would be awful, therefore this is likely to be reviewed.
As the bill passes through Government, we will keep our landlord clients up to date with any changes they need to make.
Innovate UK: the latest public sector organisation fined for IR35 non-compliance
It has been reported that the UK’s innovation body owes HMRC £36M in tax for IR35 non-compliance over the last three years. This came to light in the UK Research and Innovation (UKRI) annual accounts for the 2021/22 financial year.
Innovate UK is part of UKRI, a non-departmental public body. It was found to have placed workers outside of IR35 when, according to HMRC, they “should have been considered to be inside the scope of IR35”.
It was launched in 2018, sponsored by the Government Department for Science, Innovation and Technology.
Is it time you had an accountant on hand that you trust?
With so many changes across the industry, including MTD, IR35, interest rates and the cost of living, it’s worth having an accountant on your side who can guide you and look after your finances.
Switching accountants couldn’t be easier. We make the process quick, efficient, and hassle-free so that you have peace of mind that your finances are all in order.
Working with specialist accountants like Gorilla will make your finances much easier to handle, and you’ll know exactly what your tax obligations are from the get-go.
You can learn more about our services at Gorilla here or join us today.
