Blick Rothenberg has raised concerns over HMRC’s consultation on tax rules for small businesses, warning that it will not effectively close the tax gap. The 12-week consultation is looking at plans to mandate the reporting to HMRC of transactions between close companies – those with fewer than five shareholders – and their participators. Ruth Porteous, senior manager at Blick Rothenberg, noted that increased reporting complexity could lead to higher costs for businesses. She said: “HMRC’s objective is to increase the tax paid by these companies… however, these proposals won’t reduce the small company tax gap.” She added that the tax office “would be better served by focusing their efforts on identifying these tax evasive transactions before increasing the reporting, and thus administrative costs, for small businesses.”

HMRC data shows that millions more people in the UK are paying income tax due to frozen thresholds. In 2023/24, 36.7m people paid tax, marking a year-on-year increase of 2.2m. Of the total, 8.2m are pensioners, a rise of more than 1m. Many retirees are now taxed on pension income, with 7.8m relying on pensions as their main income source. Data shows that higher earners shoulder a disproportionate share of the tax burden and wealthier individuals are also more exposed to taxes on savings interest and dividends. Sarah Coles, head of personal finance at AJ Bell, says higher earners “are firmly in the frame for tax attacks,” adding: “The better your income, the worse your tax bill, and the more that frozen tax thresholds will have syphoned from your pay packet.”

The Bank of England has maintained the base interest rate at 3.75% but warned that rates could increase this year as officials look to curb inflation following a “significant energy price shock” from the conflict in the Middle East. The Bank’s Monetary Policy Committee (MPC) voted eight to one to keep rates unchanged, with chief economist Huw Pill advocating for a 0.25% increase. The MPC has warned that interest rates could climb back to 5.25% amid concerns that inflation – which recently rose to 3.3% – is set to climb further. While traders anticipate no rate cuts in 2026, experts suggest that mortgage rates may slightly decrease due to stable Sonia swap rates. The Bank’s growth forecast has been revised down slightly from 0.9% to a range between 0.8% and 0.7%. Ruth Gregory, deputy chief UK economist for Capital Economics, said “the chances of near-term rate hikes are rising,” adding that “one or two hikes in the coming months are certainly possible” if oil prices do not come down.

UK business leaders are preparing for hiring freezes as headcount expectations fell to -3, according to the Institute of Directors (IoD). The IoD’s economic confidence index rose slightly to -64 in April, but remains near historic lows. Chief economist Anna Leach warned that firms may impose hiring freezes due to rising costs linked to the Iran war. Ms Leach noted a “small improvement” in outlook but cautioned that gains are from low bases, with ongoing cost pressures and weak demand. Meanwhile, a business barometer from Lloyds Bank indicates that 17% of firms expect to reduce staffing levels.

Financial Conduct Authority (FCA) chief executive Nikhil Rathi says global clients trust the UK in times of uncertainty, telling an Association of Foreign Banks event that “in times of operational and geopolitical stress … they know ours is a system proven under pressure, with the reliable execution, deep liquidity, and resilient infrastructure they need to do business.” Describing the FCA as a “reform-minded regulator,” Mr Rathi told attendees: “For regulation to keep pace, we have to remain clear about our standards, but more flexible in how they are applied.” He also said the City watchdog will remain clear on its standards and “rigorous in how we uphold them … but also open – working with the market, willing to make changes where needed.” Highlighting that the FCA’s “primary task is to ensure market integrity,” Mr Rathi added that “fighting financial crime is a priority for us and we are increasingly hawkish.”

Small businesses are experiencing significant challenges as sales growth fell to 2.9% year-on-year in Q1, down from 5.2% in Q4 2025. A survey by Xero of 440,000 small firms revealed that January and February saw minimal growth, with only 1.4% and 2.4% increases, respectively. Kate Hayward, UK managing director of Xero, commented: “Margins are squeezed by energy and finance costs,” leading to cautious behaviour among business owners.

The High Street experienced its worst sales month in a decade, with non-essential goods sales falling by 1.6% last month, according to BDO. This marks the eighth consecutive month of declining purchases, exacerbated by rising food and energy costs due to the ongoing war in Iran. Sophie Michael, head of retail and wholesale at BDO, said: “There is little evidence at present to suggest a meaningful improvement in the near term.”

Whitbread, the owner of Premier Inn, plans to cut 3,800 jobs in the UK and Ireland as part of a five-year strategy to save £250m. The company also plans to sell off the freehold rights to a number of its Premier Inn hotels in a £1.5bn deal. Chief executive Dominic Paul said rising costs necessitated these changes, with a hike in National Insurance contributions hitting the business.

UK homeowners are increasingly investing in home improvements, spending an average of £3,140 annually, up from £2,870 in 2024. A survey of 2,000 homeowners revealed that 30% plan to spend even more in 2026. Many are sacrificing holidays (24%) and new cars (14%) to focus on energy efficiency. Lucy Gaby, residential marketing manager at Daikin, stated: “We’re seeing a clear shift in priorities, with homeowners increasingly willing to invest in their living environment.” Two-thirds of homeowners view energy efficiency as crucial for comfort and future resale value.