If that wasn’t enough, there’s a lot going on in tax at the moment, from MTD Income Tax to new agent registration rules and more tax changes than expected mid-year. Lindsey Wicks explains all the changes.
Finally, we get an insight from Junaidy Ab-Mutalib about the profession in Malaysia. What are the unique opportunities and challenges for the profession in the region?
Host
Philippa Lamb
Guests
- Suren Thiru, Chief Economist, ICAEW
- Lindsey Wicks, Senior Tax Technical Manager, ICAEW
- Junaidy Ab-Mutalib, Managing Partner, JM & Co
Producer
Natalie Chisholm
Series Lead
Mark Rowland
Transcript
Philippa Lamb: Welcome back. Today, we're looking at the economy. Will a new PM create yet more uncertainty for business? With the peace process in Iran still in the balance, ICAEW's Chief Economist, Suren Thiru, is here with his thoughts. Next up, we'll have Lindsey Wicks, ICAEW's Senior Tax Technical Manager. She's joining us remotely with the latest on digital transformation at HMRC, from making tax digital to new cybersecurity measures. Zooming out from UK problems, what are the issues for members overseas? Junaidy Ab-Mutalib, ICAEW member from Malaysia and Managing Partner of JM&Co. in Kuala Lumpur, will fill us in on how the profession is managing its own challenges there and what we can all learn from it. A quick reminder for all the accountants out there, click through to the ICAEW site from the show notes for this episode on your app, and you can log your listen as CPD straight away. So, kicking off with economics, Suren Thiru is here. Hi.
Suren Thiru: Hi there.
PL: Fair to say, I think, that 2026—it hasn't gone quite as planned on the economy front, has it? Just as things looked like they were picking up, we had the Iran conflict. Now we've got a leadership contest for a new PM. I'm wondering what this will mean for current policy plans?
ST: I think the new prime minister will have a couple of issues. I think the first thing is that some of the big government initiatives, whether it's the defense investment plan, whether it's resetting the relationship with the EU, all these big things are going to be on the back burner over the summer as they get people imposed, even if there's no leadership contest. So that'll be more uncertainty for businesses who don't know who the new chancellor is, what the future path is of tax policy and spending, and that will again have a chilling effect on business confidence, recruitment plans, and also wider economic growth.
PL: Yeah, on the practical front it's feeling like a likely delayed Autumn statement, isn't it? If we'll have a new leader in place by September, that's not going to happen straight away, is it?
ST: Other statements typically happen around October / November time and last year was quite late, around the 25th of November.
PL: Later than expected, wasn't it?
ST: Yeah, exactly, which created its own uncertainty last year. We will see a similar timeframe towards the back end of November. What we're quite interested to see is when the new chancellor's in post, will they move from one fiscal event, which Rishi was really strong, one fiscal event a year, and back to two fiscal events a year. So maybe having a more light touch Autumn Budget and a stronger spring statement where they've got their feet on the table a bit more. But what I do expect is that this is not necessarily a new thing, as Andy Burnham's been in the pipeline for quite a while now. So I imagine some of these economic plans may have been in place for some time, so it may move a bit quicker than many people expect.
PL: Well, see, from the point of view of business, this is going to defer decision-making, isn't it, until there's clarity. Business will sit on its hands, won’t it? Until it knows what it's dealing with.
ST: Yes. A good comparator is what happened last year and went up to the 2025 Autumn Budget where we saw a lot of speculation around tax increases, particularly on businesses, a huge round of speculation, a later than usual budget as well. What we saw is a business confidence slide. Our own business confidence monitor showed that confidence fell to a three-year low last year. We also saw recruitment plans being frozen, investment plans being frozen as well. So businesses hate uncertainty. The problem is, uncertainty's the one certain thing over the last couple of years.
PL: As we're all learning, I think, aren't we? Well, thinking about Iran, we have this memorandum of understanding between the US and Iran, hopefully paving the way to the end of hostilities, but it's already looking precarious, isn't it? It's, I think, fair to say it is very hard to put a timeframe on the end of that conflict. So even when it ends, how long will it be? Do we really know until things start to right themselves? Because I think is it about six hundred ships stranded in the strait right now, and that's just a part of it, isn't it?
ST: Yes. It's certainly good news, a positive step that the agreement is in place. But it's certainly going to take a long time for things to normalise, certainly to pre-war levels. I think we are seeing some flow of ships moving through the Strait of Hormuz, but it's clearly not anywhere near where it was previously. And I think there's sort of economic bottlenecks there. There's structure damage. All these sorts of things are going to weigh on traffic movement of goods through that place. One interesting example is what happened in Red Sea attacks a couple years ago, 2023 where we saw commercial vessels being attacked, and what we saw, the reaction to that is that supply chains didn't revert back after that period. There was still a lot of traffic through, but not back to levels pre that happening. I think we'll see maybe some of that here. So we'll see people diversifying their supply chains, moving elsewhere, partly because things like insurance will be a lot higher now, probably for quite a while.
PL: That's interesting. Geographically and financially permanent supply chain route changes, that's going to add cost, isn't it, in a big way? It's going to be inflationary.
ST: Certainly. It certainly will add cost. It will still be a very important route. Say, for example, around a fifth of the world's oil goes through the Strait of Hormuz. So you won't see a massive departure from that simply because it's such a crucial pathway.
PL: But Iran's talked about charging in the future, hasn't it?
ST: Well, that will add to the sort of cost pressures and the need to diversify elsewhere. It'll be potentially a huge political tool for Iran to close it if there are issues, and we've obviously seen that previously. So that again will be another incentive for people to go elsewhere and try to find different routes, even if they're longer than going through the Strait of Hormuz.
PL: So thinking about the fallout, we understand there's fallout in terms of getting jet fuel production and processing up, all that sort of thing, that's going to take time. But more immediately, on inflation for us here up to the end of the year, we already know there's going to be issues with food yields because of those fert-fertilizer shortages earlier in the year, don't we? There's going to be inflationary pressure feeding through, I'm assuming, regardless of what happens now. Is that right? How do you see that playing out?
ST: Certainly. What was particularly sharp in the crisis was what happened with the fuel prices. We saw as the war started particularly in the beginning part of March, we saw the price of a barrel of crude oil rise to over $120 which is not quite where it was in the Ukraine war, but it's still high, really high by historic standards. What we've seen since the peace deal was agreed is that oil prices are back down below pre-war levels, which is a clear positive sign. Unfortunately, there's a lot of inflation in the pipeline building up from what we've seen previously. So in the UK, for example, we are expecting inflation to still rise in the short term, and that's because, partly because of the way that people's energy bills are regulated in the UK, where you have an energy price cap which sort of limits big movements in energy prices. So what we'd like to see from July is around a 13% rise in, on average, people's energy bills. That'll feed into higher inflation over the summer, as well as higher, as you say, higher food prices as well will increase inflation. But what the peace deal does, it helps to lower the peak of inflation. So we expect inflation to peak at a lower level, possibly below 4% because if a deal does hold, it clearly is a big 'if' still. Having said that, given the damage to energy structures, supply chains we don't expect inflation to fall back meaningfully, back from a 6% target, for example, until well into next year.
PL: because I mean, I'm not clear on the reconstruction timetable for that sort of infrastructure, but people have been talking about 18 months, haven't they? That would be a very significant issue, wouldn't it, inflation running over that period of time before those sorts of things popped up to the sort of level of production we were seeing before?
ST: I think there'll be competing headwinds for inflation over the second half of the year. On the one hand, you're seeing the price of commodities like food be quite inflationary. But on the flip side, you're seeing fuel costs actually falling as well. So that, again will have a lot of downward pressure on inflation as well. What may also help keep a lid on inflation is that we expect the labor market to be fairly weak as well and people won't be able to ask for higher wages, all these sorts of things help to limit inflation over the next 6 to 12 months.
PL: So when we do have a new PM and a new chancellor, and obviously that's something of a vexed question as we're recording this right now, a lot of speculation about who that might be and we finally get an Autumn Statement whenever that shows up. What is business going to be hoping for?
ST: There's three main things when we speak to businesses that they're really concerned about. Firstly, it's too costly to do business at the moment whether it's taxes, whether it's administration burdens, regulatory burdens on businesses, which makes it too complicated to do business. That's another thing we hear about, and any uncertainty point. I think that's a really clear thing that we hear from businesses, that there's so much uncertainty globally. What can we do at home domestically to improve certainty? So whether that's a more simplified tax system, stop tinkering on the tax system, or whether it's the government's broad economic plan. So one of the big things with this current prime minister is the Industrial Strategy plan, which is basically the government's plan for the economy, pick out the key sectors, that sort of thing. Now, there have been several versions of that over ten decades, which doesn't help business. We hope that this Industrial Strategy is carried over into the new prime minister and chancellor going forward as well, because businesses need that sort of long-term horizon when they're making investment plans, when they're making staffing plans, and that's all really important and needs to be a clear way forward for those sort of things.
PL: Presumably, a new chancellor will be very keen indeed to woo finance and business, to calm any anxiety about bad outcomes under this new administration. Do you think, is there any chance there might be reversals of some of the let's say, less popular business-affecting policies that the current administration has introduced since they were elected?
ST: I think there'll be a lot of fiscal challenges with the new prime minister and chancellor that come in, so I imagine there'll be a reluctance to maybe go reverse some of those things given they've already been announced and the government's taken the pain for those announcements. They're obviously helping to pay for other things. I think it could be really difficult and we found that when, in March, Keir Starmer came in as well. There's difficult choices to be made about what you want to do and do you want to spend more on certain parts of the economy? If you do, then you need to raise taxes. So it's those sorts of questions that they need to answer really. But the big question is, how are you going to get economic growth going? That's what several governments have not been able to do because of the financial crisis. So how are you going to do that? That means longer term investment in key parts, whether it's infrastructure, whether it's digital infrastructure, whether it's investing in skills across the UK, all these sorts of things. The challenge with all these sorts of things is that they take a long time to bear fruit. So the economic cycle is much longer than the political cycle, which again feeds into that sort of wider policy challenge that the current prime minister or the new prime minister will face.
PL: So watch and wait for business, as ever lately. These unexpected challenges, as you say, they do seem to be the norm. I know you've got a new business confidence index coming out. I think it's next week, isn't it?
ST: Wednesday, yeah.
PL: So we'll have some insight into how business has been feeling in the last quarter. But what can businesses do to mitigate this volatility?
ST: I think we're seeing businesses moving from an operating model of trying to achieve great efficiency to moving to a model of greater resilience. I think we saw some of that at the start of the conflict where we saw a lot of businesses stockpiling, key products, key inputs to the business they operate in. I think we're just going to see a lot more of that, whether it's, as I say, stockpiling or additional supply chain routes or these sorts of things. So I think that's where we've seen that big shift for businesses, particularly those global businesses that rely on global activity to drive their business. What we need from the government is that sort of support when things go wrong. So one of the big things that came out when the Middle East conflict kicked off was the need to ensure a steady supply of finance to businesses if they're looking to tie themselves over a certain period of time, through this type of volatility.
PL: Thank you very much, Suren. Thanks.
ST: Thank you.
PL: Let's move on to HMRC's digitalisation. Lindsey Wicks joins us now. Hi, Lindsey.
Lindsey Wicks: Hi, Philippa.
PL: HMRC has been doing a lot of work on this, haven't they, lately? Can you just outline all the changes going through right now?
LW: Well, the biggest change is the introduction of Making Tax Digital for income tax. But there are a few other changes too. There's mandatory tax advisor registration, and that has a new digital registration route for UK advisors. There's various digital self-serve options for taxpayers that were set out in HMRC's transformation roadmap that it published in 2025, and we're actually expecting a new inheritance tax digital service from the 2027/2028 tax year.
PL: So, lots going on. Now, MTD, looping back to that was introduced in April, I think, wasn't it? How's it gone so far?
LW: It's quiet at the moment. The first phase is for taxpayers with qualifying income over £ 50,000 in their 2024/2025 self-assessment return, and that qualifying income is a combined gross income from sole trades and property rental businesses that was reported on their 2024/25 tax return. We're expecting about 864,000 taxpayers in that first phase. but that data is based on their 2023/24 return, so that there's not quite a match in terms of the numbers and actually what data is required for them to join making Tax Digital.
PL: When's the first deadline for that quarterly report?
LW: The first deadline is the 7th of August, and we're just approaching the end of the first quarter. The first quarter will end on the 5th of July or the 30th of June if you're using calendar quarter reporting. The last I heard is that HMRC had received around 370,000 sign-ups, and the sign-up process is required because taxpayers are moving HMRC platforms in the background, so there's a data check. But before the first deadline, you need to have functional compatible software, you need to authorise and connect your software to HMRC's systems, and you need to select your accounting period. Now, that can be based on the standard tax year from the 5th of April of one year to the 6th of April the next, or on a calendar basis, so from the 1st of April through to the 31st of March. Also, you need to create digital accounting records. So it's not just about the deadline, it's all those other steps that you need to do to be able to submit your first quarterly report by that deadline.
PL: It's quite a lot, isn't it, and quite significant choices around things like software, as you say. There's a lot of people who have not done that yet by the sound of it?
LW: No, a lot of people haven't signed up, but I think that HMRC was expecting that. It is a big change, and there's obviously awareness amongst ICAEW members and the agent population, but there's a lot of taxpayers out there who are unrepresented and who won't necessarily have understood what they need to start doing.
PL: Or quite how to go about it, presumably.
LW: Exactly.
PL: Am I right in thinking there's no penalties for not filing on time just yet? Presumably there will be, but there aren't right now?
LW: There aren't any penalties for not filing your quarterly updates on time during 2026/27, but you could get a penalty point if you file your tax return late at the end of the year. It's a new system of penalties, so you get penalty points before you get a financial penalty. So it's not quite as harsh as the current system of penalties for filing.
PL: Do those penalty points roll over year to year?
LW: They do, although they do wipe clean after a certain period of time of compliant. So they will accumulate for a time, but then they will fall out if you have been compliant.
PL: Now, in the same period, we've seen the announcement of mandatory agent registration and multi-factor authentication on agent accounts. It's a lot of change for agents, isn't it?
LW: It is. There's a lot going on at once.
PL: Do we have clear timelines for all this?
LW: We do. For mandatory tax advisor registration, there's four tranches for registration, and the first tranche is open for registration now, and that is from the 18th of May to the 18th of August, and that tranche is generally for people who haven't previously had any agent accounts with HMRC. For multi-factor authentication, that will be switched on for agents between the 28th of September and the 15th of October, but there are two earlier opt-in dates as well.
PL: Why has this mandatory agent registration been introduced?
LW: The policy's been introduced to ensure that all tax advisors interacting with HMRC on behalf of their clients meet some minimum standards. But it doesn't tackle those who don't interact with HMRC, so I think that there are a lot of people questioning how much it will improve standards in the market.
PL: How much of an issue is it for ICAEW members?
LW: Well, ICAEW members should be meeting these standards, as they should be complying with professional conduct in relation to taxation. Also, the majority of them will be treated as registered anyway because they already have an agent services account, or ASA as it's known, so they won't actually need to take any action until the final tranche of registration, which is in early 2027.
PL: The multi-factor authentication, we're seeing that everywhere now, aren't we? But how, how big is the cybersecurity threat for tax agents and HMRC, do you think?
LW: You currently log into agent accounts just with a username and password, but I know that when I logged into my own HMRC account earlier in the week, you also have a time-based one-time passcode that you have a certain amount of time just to put that code in. That doesn't apply at the moment to agent accounts. So, we do see regular phishing attempts to obtain that information, so just the username and password, and often from people masquerading as HMRC. Security breaches can be incredibly stressful for our members. They'll have their access blocked while HMRC sorts out that security breach, and that means that they can't act for clients and if it spans where there's a significant deadline, whether it's a VAT deadline or an income tax deadline, they can't actually be filing those returns on behalf of their clients.
PL: So this is really something that agents need to be aware of?
LW: They do, and they need to get ready for it. As I said, multi-factor authentication will provide that extra layer of protection, but they need to get ready for how they're going to receive that passcode. So the passcodes can be received via an authenticator app by SMS or by voice call, and they can select more than one option, so they have a backup option as well.
PL: Okay, and there's no preferred option in terms of level of security?
LW: No. I think that for many, an authenticator app will probably work the best, but it's deciding how it would work best for your firm and how to get ready for it. We do have a tax guide that sets out more information to help firms decide what might work best for them. Even though it's not, MFA's are not currently activated on most agent accounts, multi-factor authentication preferences might have been set when the account was created, and that could have been quite some time ago, and they could be out of date. So the key is to go in and check to see if there are any existing preferences and whether they are still, they still work for your firm as well. Because the last thing you want is for the MFA to be activated on your account and actually text messages going to a phone that doesn't exist.
PL: A dead phone.
LW: Yeah, exactly.
PL: You make an excellent point. We'll link to that guide in the show notes, Lindsey. But before we let you go, as we said, there's been a lot going on. Are we expecting any more significant changes in the rest of the year?
LW: Well, there's lots of changes already on the stocks. So for 2027, we've got things like the first phase of mandatory pay rolling benefits in kind. But just back on the 23rd of June, we had lots of consultations and announcements under the banner of a Tax Update Day. Now, a lot of these changes are sometime in the future, but we've got some significant ones. So, for example, we've got more timely payment of self-assessment with the aim of bringing payment of the tax closer to when the income arises. Now, that will be from the 2029, 2030 tax year, but then we've also got a transition where people are currently paying on the current pattern. So it's how we manage that transition as well, and that's just one of three consultations on payments. There's also direct recovery of small tax debts, and there's another one requiring payment of PAYE and VAT by direct debit. Then there's another consultation, again, without a timeline, but it's about the tax framework for distributions, and that's really wide-ranging, and it encompasses things like demergers, capital reductions, interactions with loan to participators, purchase of own share rules, transactions in securities rules. So that's another one to look out for.
PL: So where do members go for more information on all of those things if they need to dig a bit deeper, Lindsey?
LW: Well, we've had a summary article already on the Tax Update Day, but we will be issuing more articles with more detail on all of those consultations as well.
PL: That's great. Thanks very much.
LW: Thank you.
PL: So Junaidy Abd Ab-Mutalib joins us now to give us a Southeast Asia perspective. It's nice to have you back, Junaidy.
Junaidy Ab-Mutalib: Thank you, Philippa.
PL: Nice to have you in the studio, too. I think you were remote last time, weren't you?
JAM: Yeah I was remote last time, yeah.
PL: You were listening to the interview I just did with seren, ICAEW's chief economist. There's a lot of worry and pessimism in the UK right now. I'm interested to know what the mood music is in Malaysia in the business and finance community.
JAM: Comparing the UK and Malaysia, yeah, obviously, I think there are some similarities, but perhaps the mood in Malaysia is generally a little bit more optimistic. Like any other country, we also face some sort of economic uncertainty, rising costs, and geopolitical concern as well, but Malaysia has been quite resilient, yeah. The businesses in Malaysia are used to adapting to changes whether they are economic cycle regulatory development, or technological disruption.
PL: So has Iran been an issue and the conflict in the Strait?
JAM: Not really.
PL: It's interesting because obviously that's been a big topic of conversation here.
JAM: It is, but then I'm talking for the accounting profession. From our perspective, accountancy remains a respected and relatively stable profession, so the organisation, our clients have continued to demand for trusted advisors, auditors, and finance professionals regardless of the economic conditions.
PL: Now, I know one of the big challenges facing you is a brain drain.
JAM: Yes, yeah.
PL: So tell me how that manifests itself. How does that work? You hire graduates, then what happens?
JAM: I think one of the problems that we're facing in Malaysia is talent retention. There are many highly qualified professionals that have opportunities abroad, so particularly with countries where the salary is much higher than Malaysia. So salary is certainly one of the factors. But professionals can earn more, substantially more, in places like Singapore, Australia, or the Middle East. However, for some of the graduates, it's not all about money. They are also attracted by international exposure, career development opportunities, and of course chance to experience different cultures and business environments.
PL: I was interested, when we were chatting earlier, you were saying that you hire in graduates and you're still, I believe, hiring as many as you ever were. You haven't reduced your graduate intake, is that right?
JAM: Yeah, that's right. We are still taking as many as we can.
PL: But you lose quite a lot of them at an early stage?
JAM: Yeah, I lost quite a lot of them. After maybe like half a year.
PL: Before they've qualified?
JAM: Before they're qualified. Before they're qualified, they will go to other firm or they go to other countries.
PL: I'm interested that other firms would hire them when they're not even qualified.
JAM: Yeah, they just need the experience. They would join with another firm, maybe at the same position, but with a slightly higher salary.
PL: Yeah. So they're trading up their salary, and then they do maybe another six months there, and then potentially move again?
JAM: Yeah, you never know. Yeah, it happens. Yeah, move again into a bigger firm or another firm in another country.
PL: In this country, we've heard a lot in the media and in the professions, the stress levels amongst younger workers and particularly Gen Z, and I'm wondering how that plays out in Malaysia.
JAM: No, I don't think the youngest or the accountants are struggling with stress and pressure in Malaysia. I don't believe that 100% completely, because I think we are giving more attention to a younger generation because they are just entering the workforce, and they're adapting to this very demanding environment. But the pressure, I think, exists at all levels. I think senior managers, directors, partners, CFO, and other business leaders all face significant responsibility as well, because they are making difficult decisions, managing teams, responding to regulatory changes, and dealing with the stakeholders' expectations. However, the nature of the pressure might be differ, but the stress is certainly not just confined to the young professional.
PL: So are the firms evolving the way in which they manage their people then to manage these heightened stress levels?
JAM: Yeah. I believe now leadership plays a very important role. I think leadership starts with the need to create the environment where the people feel supported and valued. This means that the leaders must have this open conversation about the workload, the well-being, rather than waiting for the problem to emerge. So this means things like investing in training, mentoring, and professional development so that the people feel equipped to deal with the challenges.
PL: See here, post-COVID, we've seen hybrid working really pop up in a very major way, and it's way beyond just flexible working, but people in the office one, two days a week. Is that a thing in Malaysia?
JAM: Yes and no. It depends on the organisation itself.
PL: Do you do it at your firm?
JAM: I try to be flexible. Yeah, I do.
PL: And do you do it yourself?
JAM: Yes, I do. Because I do believe that we need to set an example as leaders, so if we want to prioritise well-being and resilience, we also must demonstrate that behavior ourselves.
PL: So how many days a week are you actually in the office now?
JAM: Because everything can be done remotely, everything is accessible by the system. So I can do my work at home. Generally I would spend like maybe two or three days in the office and the rest at home.
PL: And your colleagues are mostly doing the same sort of thing?
JAM: Depends. Yeah, sometimes because they need to visit clients, so they need to go to the client premises, so they need to be physically there. So it varies between assignments.
PL: So based on the experience you've had in recent years, what is your best advice to firms in the same position?
JAM: I think my advice for them is that we need to give support and make the people feel trusted and connected rather than just doing auditing or accounting. They must feel connected to a larger purpose. As a leader, we must give that environment to them. That means that auditing or accounting is not just ticking the box or producing reports or meeting deadlines. We must think about the bigger purpose, and the bigger purpose could be like, we're helping people to make better decisions, building trust in the business, and then we protect the investor and stakeholders. I think if the younger generation can see the larger purpose, I think they will stay on.
PL: What do you think it's going to take then to reverse that brain drain?
JAM: I think leadership again. It plays a very important role, so that the people will stay. If they feel connected to the organisation I think chartered accountancy has always been a profession that builds on trust, resilience and adaptability. The challenges may change over time, but those qualities remain constant. If we continue to support our members to embrace innovation and invest in the next generation, I believe the future of the profession in Malaysia and globally remains very positive.
PL: Thank you very much indeed.
JAM: Thank you.
PL: That's it for this episode. Check out the links around the subjects we've covered today when you go to the show notes to log your listener CPD. In the next episode of Behind The Numbers, we'll be looking at AI. Is there a bubble? Will it deflate or even burst? And what would happen if it does? If you have feedback or ideas for the podcast team, please do share them with us. Here's the email address, podcasts@ICAEW.com. Meanwhile, if you can find a moment to rate the series on your app, we would be very grateful. Every rating helps us reach new listeners. Thanks for being with us.