Accountants believe that employee perks like salary sacrifice pension schemes and electric vehicle leasing may face cuts in the Budget. This follows HMRC’s release of two surveys exploring employer views on changing these benefits. With Government borrowing costs rising due to inflation and global trade issues, Chancellor Rachel Reeves may look to raise taxes. Salary sacrifice schemes, which reduce income tax and National Insurance (NI) contributions for both employees and employers, are under scrutiny. Last year, NI tax relief for pensions cost £23.5bn, and income tax relief totaled £28.5bn. One potential change floated is limiting NI exemptions to the first £2,000 of salary sacrificed annually. However, some experts believe the Government might target other areas first if it needs to boost revenue. Caroline Harwood, head of employment tax at BDO, said there are “potentially other lower-hanging fruits” that the Government “could make more money from,” should ministers decide to raise taxes.

Over 60,000 workers have received back pay totalling £7.4m from 518 employers who failed to comply with minimum wage laws, according to HMRC data. The investigations, conducted between 2015 and 2022, have seen the Department for Business and Trade publish a name and shame list, with Pizza Express, British Airways, Capita, Lidl and Halfords among those highlighted. TUC general secretary Paul Nowak emphasised the need for rigorous investigations into minimum wage breaches, saying: “Wage theft is bad for workers, families, and the economy.” It is noted that the National Living Wage increased from £11.44 to £12.21 per hour in April.

Business confidence fell steeply in the three months to May, according to the Confederation of British Industry’s (CBI) Sector Services Survey, with tax hikes and higher wages having an impact. Consumer services’ optimism fell for the eighth consecutive month of decline, hitting -42%. In business and professional services, optimism slid to -43%, compared to -28% in February. Alpesh Paleja, deputy chief economist at CBI, said: “Businesses continue to cite the impact of higher employer NICs and the National Living Wage both hitting their own cost base and depressing demand from clients.” The survey of 215 firms found that those in the business and professional services sector expect profitability to fall to in the next three months, while those in consumer services expect to further reduce staff numbers.

The Society for Motor Manufacturers and Traders data shows that 59,203 vehicles were manufactured in the UK last month. This marks the lowest April output since 1952, with the exception of 2020. April’s total was down a quarter of March’s output and 16% on April 2024. Car production for exports fells by 10.1%, with demand from the US and EU, the UK’s biggest export markets, down.

HMRC is expanding its criminal investigation powers as part of a drive to recover revenues lost to tax evasion. It has been estimated that tax evasion cost £5.5bn in 2022/23, with this equivalent to around 0.7% of all taxes owed, but a Public Accounts Committee report suggests that this figure could be “just the tip of the iceberg.” The Chancellor, Rachel Reeves, has announced plans to raise over £1bn in additional gross tax revenue annually by 2029/30. HMRC has increased the size of its fraud investigation service from 4,400 people in 2018/19 to 4,800 and plans to further expand it to 5,400 by 2029/30. Gideon Sanitt, a partner at law firm Macfarlanes, says “new funding, commitments to close the tax gap, and more direct measures like the whistleblowing scheme may represent a real shift in how HMRC deals with fraud,” while Debbie Jennings, VAT director at Moore Kingston Smith, notes that HMRC is “targeting businesses that have not taken responsibility for the actions of their suppliers.”

Debbie Crosbie, chief executive of Nationwide, has expressed concern over potential tax changes to cash ISAs, warning that such a move could lead to increased mortgage costs. She said: “I’m not sure [a cut to the tax-free allowance] would prevent people from lending, but what it could do… is increase the costs of mortgage lending.” Ms Crosbie questioned whether a cut to the tax-free limit was the “right way” to promote growth, noting that cash ISAs are crucial for funding home loans and that many customers value tax-free savings.

Labour is poised to lift restrictions on pension savings, allowing surplus funds to be invested in businesses, which critics warn could jeopardise millions of final salary pensions. Approximately 8.8m individuals are part of defined benefit schemes, currently holding a collective surplus of £160bn, according to Hymans Robertson. Critics caution that companies may exploit these changes to access pension funds, with Dennis Read of Silver Voices saying: “If a company has cash flow problems, it will be tempting to raid the pension fund.” The reforms could potentially generate £40bn for the Treasury if the entire surplus is drawn down, but concerns about the stability of pension schemes remain high.

Andrew Bailey, the governor of the Bank of England, has suggested that stronger ties between the UK and the EU could “minimise negative effects” of Brexit on trade which he believes have “weighed” on the UK economy. He also highlighted the need for co-operation, particularly in financial services, to bolster economic resilience. Mr Bailey has praised the Government’s efforts to reset relations with the EU, describing them as a “welcome step forward.” He has also warned that a breakdown in global trade could complicate the Bank’s ability to manage inflation, which rose to 3.5% in April. Mr Bailey said: “Our jobs are much harder if we face more inflexible and uncertain supply side conditions in our economies.”

Ethical hacking platform Ethiack has warned that UK fintechs are putting customers at risk by leaving themselves vulnerable to a cyber-attack. Ethiack analysed almost 800 firms’ digital presence and found that four in ten fintechs gave hackers a “powerful head start” by revealing software details on their web servers. Nearly a fifth of platforms were found to be using expired or invalid SSL certificates. It was also shown that more than 50% of fintechs relied on servers provided by Cloudfare, Nginx or Apache. Jorge Monteiro, chief executive and co-founder of Ethiack, said: “Were a vulnerability to emerge among any of these providers, hundreds of fintechs – and thousands of customers – could be placed at risk.”

Economists have predicted that interest rates will be cut only once more this year, a disappointing forecast for mortgage holders. High inflation and robust growth have led to this revision, with inflation currently at 3.5%, exceeding the Bank of England’s expectations. Sam Miley, head of forecasting at the Centre for Economics and Business Research, said: “We have expressed similar views, expecting interest rates to be cut only gradually as a result of continually problematic inflation.” The National Institute of Economic and Social Research also anticipates just one cut, while some experts, like Andrew Sentence, suggest that no further cuts may be necessary. He warned of a potential surge in inflation, predicting it could exceed 4% this summer.

Germany is contemplating a 10% tax on major online platforms, including Alphabet and Meta. Culture Minister Wolfram Weimer said the initiative aims to address “cunning tax evasion” by such corporations, which he claims benefit significantly from Germany’s media and infrastructure while contributing minimally in taxes.