UK unemployment rises, and HMRC support businesses moving over to the new Making Tax Digital app
Bad news for the economy as the UK unemployment rate rises to 5%, and HMRC continue their campaign to support businesses as they aim to Make Tax Digital.
UK Unemployment Rises to 5% as Job Market Shows Signs of Strain
The UK unemployment rate has risen to 5% in the three months to September, the highest since early 2021, according to the latest figures from the Office for National Statistics (ONS). The increase was slightly higher than expected and adds to signs that the jobs market is starting to soften.
The rise comes ahead of the government’s Budget later this month and may add further pressure to the Chancellor’s decisions.
Signs of a cooling jobs market
While unemployment has ticked up, the number of job vacancies has remained broadly unchanged at around 723,000 between August and October. Early data suggests the number of people on company payrolls fell by 180,000 in the year to October – more than forecasters had predicted.
Liz McKeown, director of economic statistics at the ONS, said the latest data “points to a weakening labour market”, with unemployment reaching a post-pandemic high. The ONS noted that its unemployment figures should be treated with caution while it continues work to improve data quality.
Wage growth slows
Average pay growth across the economy stood at 4.6% in the third quarter, slightly down from 4.7% in the previous three months. The difference between public and private sector pay continues to widen: public sector wages rose 6.6%, while private sector grew 4.2%.
According to Yael Selfin, chief economist at KPMG UK, public sector pay growth is “approaching a peak” as last year’s pay settlements work their way through the system. She added that private sector pay is likely to slow further as more people re-enter the workforce, reducing wage pressures.
What this means for employers
For many businesses, the figures reinforce what’s already being felt on the ground. Richard Carter of Quilter Cheviot suggested that with the Budget only weeks away, many companies have “shelved any major hiring plans” amid uncertainty over potential new costs or tax changes.
The Federation of Small Businesses (FSB) echoed that view, warning that regulation, litigation and tax burdens continue to make it harder for smaller businesses to employ staff.
Looking ahead
The Bank of England has projected that unemployment will remain close to 5% for the next few years, suggesting employment growth could remain subdued over the medium term.
For business owners, the key questions now centre on the upcoming Budget – whether measures will support job creation and investment, or whether further cost pressures could make a challenging jobs market even tougher.
See: https://www.bbc.co.uk/news/articles/cdxrp7znkdlo
Have You Received a Letter from HMRC About Making Tax Digital?
HM Revenue and Customs (HMRC) are writing to some taxpayers to tell them what they need to do to get ready for the new Making Tax Digital rules that come into force next April.
What is Making Tax Digital?
Making Tax Digital for Income Tax is a new way for sole traders and landlords to provide their business accounts and tax information to HMRC.
It involves using software to maintain digital accounting records and then submit reports to HMRC each quarter.
From 6 April 2026, Making Tax Digital will be mandatory for almost all sole traders and landlords who had gross income over £50,000 in the 2024/25 tax year.
Why have you received a letter?
If your 2024/25 tax return has already been filed and your total gross income from self-employment and/or rental income is more than £50,000, then HMRC are likely to have written to you.
It is worth noting that even if HMRC have not sent you a letter but your income from self-employment and/or rental income for the 2024/25 tax year is more than £50,000, you will still be required to follow the new Making Tax Digital rules from next April.
What to do next
A small minority of taxpayers may be exempt from the new rules, so you may want to check this first. For instance, if it is not reasonable for you to use software to keep digital records or submit them to HMRC, it is possible to apply for exemption. HMRC would then confirm whether they accept your application.
Otherwise, you will need to:
- Choose compatible software to keep the digital records needed for the new system. If you already use software to manage your accounting information, check with your provider that the software is ready for Making Tax Digital.
- Sign up on GOV.UK for Making Tax Digital for Income Tax.
If you need any help with signing up, choosing software or submitting reports to HMRC, please get in touch. We can offer you anything from tailored advice to a full Making Tax Digital service designed to give you peace of mind.