Trump Threatens "High Tariffs" on the UK? 580,000 Face VAT Late Payment Penalties! Hundreds of Thousands of Young People Could Claim Over £2,000 in Savings
- TBA
- Apr 27
- 5 min read
Trump threatens 'high tariffs' if UK does not drop digital services tax on US tech firms
Last week, U.S. President Donald Trump warned that if the United Kingdom does not abolish its Digital Services Tax (DST) on American technology companies, the United States will impose “high tariffs” on British goods in response, further escalating already tense UK–US trade relations.
The Digital Services Tax was introduced in 2020, imposing a 2% tax on revenues earned by certain large tech companies in the UK market. It primarily targets companies with global digital revenues exceeding £500 million and more than £25 million in revenue from UK users—most of which are American tech giants.
Trump told the media last week that the U.S. could “easily respond” to this tax by raising tariffs, warning the UK that it “had better be careful.” He said: “If they don’t remove this tax, we will most likely impose a substantial tax on the UK, and it will exceed what they collect from this tax.”
Trump argues that the Digital Services Tax is a discriminatory policy aimed at American companies, accusing the UK of trying to “make easy money.”
Although the issue was discussed in the UK–US trade agreement reached in May 2025, the final deal did not include any changes to the DST. However, Trump recently said in an interview that the agreement “can be modified at any time,” leaving room for policy adjustments.
Notably, this is not the first time the United States has threatened tariffs over digital tax policies. Previously, the U.S. has repeatedly warned that it may impose additional costs or export restrictions on countries implementing similar taxes or regulations affecting American tech companies.
At present, several European countries—including France, Italy, and Spain—have also introduced digital services taxes.
Analysts believe this dispute will further strain UK–US relations following disagreements between the two sides over the situation in the Middle East.
Trump has long criticized UK Prime Minister Keir Starmer, saying he is “not a Winston Churchill–type figure,” and expressing dissatisfaction with the current state of the UK–US “special relationship.”
In response, Starmer reiterated the UK’s position during a parliamentary session, emphasizing that the country will not become involved in the Middle East conflict. He stated: “Our position has been clear from the beginning—this is not our war. Despite significant pressure, I will not change the decision.”
As trade frictions and diplomatic disagreements intertwine, the future trajectory of UK–US relations remains uncertain.
HMRC slaps 582k taxpayers with fines for late VAT payments
According to the latest data from HM Revenue and Customs (HMRC), approximately 582,000 taxpayers were fined over the past year for failing to pay Value Added Tax (VAT) on time, with total penalties reaching as high as £302 million. This means that roughly one in four VAT-registered businesses or sole traders faced penalties.
Currently, around 2.3 million entities in the UK are registered for VAT. The high number of fines indicates that about 25% of relevant businesses and sole traders were penalized for failing to pay their quarterly tax liabilities. In the 2024–2025 fiscal year, a total of 582,000 late payment penalties were issued, slightly up from 569,000 in the previous year. The total value of fines increased by 2.7% year-on-year from £294 million, showing relatively modest overall growth.
Despite the substantial penalty amounts, they still represent only a small portion of the total unpaid tax. According to the latest tax gap data released by HMRC last month, unpaid VAT accounts for 5% of the total tax gap. This gap has widened by a further 0.3%, adding approximately £500 million and bringing the total VAT gap to a striking £11.9 billion.
Analysts note that the 2.2% increase in penalties reflects the multiple pressures businesses are facing, including rising costs, tighter regulations, and economic uncertainty. They also point out that the stricter VAT late payment penalty regime introduced in 2023 is one of the key reasons for the increase in total fines. Under the new rules, taxpayers are charged a 3% penalty on unpaid tax after 16 days of delay, with an additional 3% penalty applied after 31 days—meaning businesses face more frequent penalties.
At the same time, HMRC is increasing investment to strengthen its debt management and recovery capabilities, with spending reaching £629 million during the current parliamentary term. This signals that businesses can no longer adopt a “wait-and-see” approach to tax debts, as authorities are likely to take more stringent enforcement actions against those who ignore overdue payments.
For businesses temporarily unable to pay VAT, it is recommended to negotiate a “Time to Pay” (TTP) arrangement with HMRC to ease short-term cash flow pressure. Data shows that in the 2024–2025 fiscal year, total overdue tax debt in the UK reached £42.8 billion, yet only £5.7 billion of this amount was covered by installment payment agreements.
Thousands of young people could get more than £2,000 in new HMRC trust fund drive
UK tax authority HMRC recently announced that it will step up efforts to help young people reclaim forgotten "Child Trust Funds," with hundreds of thousands expected to retrieve an average of approximately £2,200 in savings. Currently, more than £1.5 billion remains unclaimed across the UK.
The Child Trust Fund is a long-term tax-free savings scheme for children born between 1 September 2002 and 2 January 2011. The government initially deposited £250 into each account at the time of setup, with an additional £250 for children from low-income families or those in local authority care. Over time, with accumulated interest, most accounts have grown significantly in value.
Data shows that among the approximately 6 million beneficiaries, two-thirds have already turned 18 and are eligible to access their funds. However, around 750,000 young people have yet to claim their accounts, with a total value of up to £1.5 billion.
Lucy Rigby, Economic Secretary to the UK Treasury, said: "Hundreds of thousands of young people in the UK don't even know they have a Child Trust Fund, let alone how to claim it. These funds could make a real difference as they start their adult lives."
HMRC notes that accounts are typically "lost" because the account holder or their guardian has forgotten about the account or failed to keep track of it. The authorities advise that young people receive a notification containing their National Insurance number before turning 16, which also includes instructions on how to locate their trust fund.
The Child Trust Fund has since been replaced by the Junior ISA. Both are long-term tax-free savings vehicles, but the Junior ISA no longer comes with an initial government contribution upon account opening.
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