HMRC has updated guidance on when tax relief is available on travel expenses for staff who work from home.

The tax authority is responding to the growth of flexible and hybrid basis working contracts, particularly since the Covid-19 pandemic.

HMRC confirmed that 'under such arrangements, the employee will have a base office and journeys from home to that location will be ordinary commuting'.

These trips are not eligible for tax relief.

Whether or not an employee's home is a workplace does not affect the availability of tax relief for travel expenses.

Travel expenses from home to a permanent workplace will only qualify for tax relief if the journey qualifies as travel in the performance of the duties of the employment.

HMRC states: 'Even though it may have been accepted that the employee's home is a workplace, it does not necessarily follow that they'll be entitled to tax relief for the cost of travel between their home and a permanent workplace.'

This is because the place where an employee lives will ordinarily be down to their personal choice, not an objective requirement of the job.

Figures have shown that UK borrowing over the last financial year was £7.6 billion lower when compared to the year before.

The Office for National Statistics (ONS) data also showed that borrowing was £120.7 billion in the year to March - £6.6 billion more than the Office for Budget Responsibility (OBR) previously predicted.

The figures revealed that the UK has a moderate current deficit of 3.0%. Debt levels are at their highest, however, at 89.4%.

Cara Pacitti, Senior Economist at the Resolution Foundation, commented: 'Last year was one of high but falling inflation and rising interest rates, causing both spending and tax receipts to rise in nominal terms compared to the year before.

'While lower than last year, borrowing is already £6.6 billion higher than forecast at the Spring Budget last month. So far there are no signs of any new fiscal wriggle room emerging that might allow the Chancellor to announce another pre-election Budget in the Autumn.' 

Data published by HMRC has revealed that inheritance tax (IHT) receipts rose to a record high of £7.5 billion in the 2023/24 tax year.

The latest figure is £400 million higher than in the same period last year. Experts have predicted that IHT receipts could hit £9.5 billion before the end of the decade.

Chancellor Jeremy Hunt was previously under pressure to abolish IHT altogether, but opted for national insurance cuts in fiscal events instead.

IHT receipts have risen partly due to the threshold at which the tax is payable having been frozen at £325,000, preventing it from rising with inflation and bringing more families into its scope. 

Ruth Gregory, Deputy Chief UK Economist at Capital Economics, commented: 'If the Chancellor was hoping March's figures would provide more scope for tax cuts at a fiscal event later this year, he will have been disappointed.

'Just based on the larger-than-expected budget deficit and the recent shift up in market interest rates, he may have even less fiscal 'headroom' (perhaps about £5 billion) for tax cuts than the £8.9 billion left over in March.'

The government has been accused of confusing small firms before new import rules on plant and food products are introduced, according to the Federation of Small Businesses (FSB). 

The FSB says the government has bypassed formal channels and left small firms out of the conversation, leaving them unsure as to who they can trust.

Officials from the Department for the Environment, Food and Rural Affairs (DEFRA) say new checks – due to come in on April 30 – may not be turned on as expected.

However, small firms have not been formally told of the changes, and instead found out after a document was leaked to the press.

Martin McTague, National Chair of the FSB, said: 'It's left them unsure as to who they can trust. Many have invested considerable time and money making sure they're getting it right, but now they're left scratching their heads at the conflicting messages coming out of Whitehall – will they or won't they face these checks and have to start paying on April 30?

'Government has had years to get this right. Small firms deserve clarity, and they really do not have time to decode messy and unclear Whitehall messages that contradict each other. 

'The government really ought to put small firms, the most affected by these changes, at the heart of the conversation.'

HMRC's pilot scheme for Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) launches today (22 April).

Accountants and agents are now able to sign up to the pilot and test the programme out. The pilot aims to assess the MTD for ITSA reporting environment, with an initial focus on clients who are self-employed and landlords with annual income exceeding £50,000.

These clients will be mandated to keep digital records and submit quarterly updates on their income and expenditure to HMRC via MTD-compatible software from April 2026.

HMRC has urged accountants and agents seeking to participate in the pilot to ensure that their record keeping software is up to date and compatible with MTD prior to signing up. Accountants' clients must also have MTD-compatible software.

A spokesperson for HMRC said: 'Taking part in testing is a good opportunity to familiarise yourself and a small number of your clients with MTD for ITSA well ahead of 2026. This will help you to prepare your business and be ready to support the rest of your clients.'

Government proposals to enact a due diligence regime for the umbrella company market are in a 'precarious position, unless government shows some urgency, the Association of Independent Professionals and the Self-Employed (IPSE) has warned.

The government has said that it is 'minded to introduce a due diligence requirement to drive out bad actors from labour supply chains'.

HMRC will also publish new guidance later this year, including an online pay checking tool to help umbrella company workers to check whether the correct deductions are being made from their pay.

IPSE said it supports this proposal but warned that a lack of parliamentary time before the next General Election puts the plans in a 'precarious position'.

Andy Chamberlain, IPSE's policy director, said: 'It's great that government is minded to do something about non-compliance in the umbrella company sector. Contractors want to see a regulated umbrella sector, and we're ready to work with government to chalk up how a due diligence requirement could work.

'But we need some urgency from government. It's been almost a year since it began consulting on the proposals – ones that should have been in place before the off-payroll working rules. With an election on the horizon, the plans are in a precarious position and risk being delayed even further.'

Business price pressures persist despite the UK's inflation rate falling to its lowest level since September 2021.

The business group warned that uncertainty remains amongst UK small firms, with its recent Quarterly Economic Survey showing that almost half of firms polled expect their prices to rise over the next three months.

Labour costs were cited as being one of the main drivers of price increases, and political and global uncertainty are also adding to firms' worries.

Commenting on the data, David Bharier, Head of Research at the BCC, said: '[The] figures confirm inflation is continuing to slowly head in the right direction. That's good news for both consumers and businesses. 

'Businesses will be keen to see how this data translates into changes on interest rate policy. More than a third of SMEs we surveyed at the start of the year have seen increased borrowing costs because of the current interest rate.'

The UK's annual inflation rate fell in March for a second consecutive month, dropping to 3.2%, according to the latest figures from the Office for National Statistics (ONS).

It is the lowest rate since September 2021 and eases the pressure on households amid the cost-of-living crisis.

Data from the ONS showed inflation continued to fall from 3.4% in February, as food prices rose at a slower pace than a year earlier. City economists and the Bank of England had forecast a slightly larger decline to 3.1%.

David Bharier, Head of Research at the British Chambers of Commerce (BCC), said: 'Today's figures confirm inflation is continuing to slowly head in the right direction. That's good news for both consumers and businesses.

'However, a lot of uncertainty remains among the firms we speak to. Our most recent Quarterly Economic Survey showed almost half of firms in fact expect their prices to rise over the next three months. Labour costs are cited as the main driver, but increasing political and global uncertainty is becoming a key factor.

'Business conditions more generally remain challenging, and firms need to see a clear long-term vision for the UK economy from politicians.'

The British Chambers of Commerce (BCC) has warned that UK small firms are 'treading water' on investment.

The BCC's Quarterly Economic Survey found that there was no improvement in business conditions in the first quarter of 2024 as measured by sales, cashflow and investment. It showed that levels of business confidence remained unchanged – 56% of businesses expect an increase in turnover in the coming 12 months.

Firms also anticipate hiking their prices in response to volatile inflation. Meanwhile, economic headwinds 'continue to impact heavily on business investment', with 'large sectoral disparities' in investment levels.

David Bharier, Head of Research at the BCC, commented: 'Although business confidence remains buoyant at the start of the year, most SMEs are still not reporting any tangible improvement to business conditions.

'The lack of investment among most SMEs is a real concern. Inflation, skills shortages, and an almost endless list of new trade barriers with the EU, coupled with a lack of clear direction on infrastructure and technology investment at the government level, have led to paralysis for many businesses.' 

The Federation of Small Businesses (FSB) has urged the government to ensure that small business growth is 'nurtured rather than left to wither'.

The FSB responded to figures published by the Office for National Statistics (ONS), which showed that GDP rose by 0.1% in February 2024 when compared to the previous month.

The business group has urged the government to consider how it intends to support existing businesses, especially in sectors which have been hit hardest by rising costs and strong headwinds.

According to the FSB, politicians must create 'bold and ambitious' plans to help small businesses grow, access finance, take on staff and deliver day in, day out for communities across the UK.

Commenting on the matter, Tina McKenzie, Policy Chair at the FSB, said: 'There are signs of cautious recovery among the small business community – but it is important to emphasise that this is not evenly distributed between sectors.

'It will take more than flashes of growth to raise spirits in the hospitality and retail sectors, for example, whose confidence scores were way below the headline figure for all businesses at the end of last year, according to our Small Business Index.

'Now the government needs to ensure that growth among small firms is nurtured, rather than left to wither.'