Got an HMRC nudge letter? Here’s why

HMRC has been sending out what are known as ‘nudge’ letters and follow-up texts to taxpayers who may have needed to estimate some of their calculations for the 2024/25 tax return. It has identified taxpayers that it believes have included ‘round sum’ estimates in their self-assessment return for 2024/25, and is reminding them they need to refile the correct return if they haven’t already done so.

This can happen if you don’t have all the exact information to fill in your tax return, and you need to estimate an amount so you can submit it on time. Failing to do this would lead to a late filing penalty if you filed after January 31, so it can make sense to submit what you think is correct, and then make any amendments later.

But those people who haven’t refiled their correct return yet, are being reminded that they need to by HMRC.

Don’t ignore the letter

If you have received one of these letters from HMRC, please don’t ignore it. You usually have 12 months from January 31 to refile the return with correct information. This would mean you should have until January 31, 2027, to amend the 2024/25 tax return. But HMRC is encouraging people to make their amendments sooner, and the letters may have a different deadline, said the Low Incomes Tax Reform Group (LITRG).

Similar messages will be going out to all taxpayers in an equivalent position, and are designed to encourage you to check your returns in case they need refiling. If you haven’t got a letter but know that you need to refile your return with the correct information, then now would be a good time to adjust it.

Even if the amended figures are the same as the ones you submitted originally, you should still refile the return, said the LITRG. This is because you may have ticked a box on the original return saying it contained provisional figures. If that is the case, you need to refile and remember to untick that box before you resubmit your return.

What if I think my return is correct?

If you receive one of these letters but you believe everything in your tax return is correct, then you should contact HMRC’s Self-Assessment Helpline, said the LITRG, and they should be able to give you the right guidance.

You can also speak to your accountant to make sure you’re not mistaken and do have amendments to make to your tax return. Either way, checking now will be far better than realising a mistake has been made later.

If you choose to ignore the letter, or fail to contact HMRC by the date specified in the letter, you may find HMRC opens an enquiry into your self-assessment return for 2024/25, said the LITRG. If they then find your return does contain inaccuracies, you could face a penalty, and you may have to pay late payment interest if you haven’t paid enough tax.

We can help you

If you think you may need to refile your 2024/25 self-assessment tax return because you needed to update the figures, or because you believe you have made a different mistake, then please contact us and we will do everything we can to assist you.

Making Tax Digital has arrived – here’s what you need to do

Making Tax Digital (MTD) has finally arrived, having gone live on April 6, 2026, and it is going to change the way those affected need to file their returns to HMRC.

If you are self-employed, receive property income, or both, and have total qualifying income from self-employment and property above £50,000 – remember this isn’t profit, it is income – then you are likely to be an MTD taxpayer. Your total income will include payments from multiple sources, which is especially relevant if you are a landlord with more than one property.

If you’re not sure whether you qualify for MTD, then you can always ask your accountant. In fact, even if you know you qualify, it would be best to speak to your accountant to make sure you comply with all the different changes that MTD brings. Many people think it is just a change in the way you need to file your tax returns. But there is more to it.

Choose your software

Quarterly updates are the big change for people affected by MTD, and this is facilitated by accounting software that allows you to send your quarterly updates directly to HMRC from your system. If you don’t already use accounting software that allows you to send updates directly to HMRC, then you will need to choose it quickly to make sure you don’t miss the first deadline. This will be August 7, 2026, which covers the period from April 6, 2026, to July 5, 2026, if you use standard update periods.

Once you have chosen your software, which could be FreeAgent, QuickBooks or Xero among others, then you also need to link your bank accounts to it, so your transactions are brought into your accounting software and you can reconcile all transactions in one place.

If you haven’t done any of this yet, or you’re still using spreadsheets to do your accounts, then you need to act fast. Making these changes sooner rather than later will give you the information you need, where you need it, when the time to file comes. And planning ahead is much better than trying to make these changes in a panic. Remember, you need to link all your business accounts, if you have more than one.

Why is this so important now?

If you haven’t done any of this before you need to send your first quarterly update, then you will be playing catch-up – and that can become uncomfortable. You need to make sure all the data is flowing as it should be, rather than trying to reconstruct it later.

For the same reason, you should check the data you have already included in your accounting software for your year end. You should check all your expenses are coded correctly, and that all your eligible income is included in the right place.

If you have any personal spending that has gone through the business, you will need to identify this correctly so it isn’t included within your business accounts. You should also make sure there are no duplicated transactions in the accounts, as that can give you errors that might be difficult to unpick later. The closer you can get it to being exactly right before you start your quarterly updates, the better.

Review your accounts each month

If you want to really keep on top of things and ensure you’re doing everything right, then reviewing your accounts each month is a good idea going forwards. Take a day each month where you know you have less work to do, and use it as an admin day where you review your monthly transactions and make sure they are correctly categorised.

The latest accounting software can help you keep on top of your expenses more easily, as you can upload images of your receipts in real time. Taking a snapshot with your phone camera and uploading this will mean you don’t have to go through shoeboxes full of receipts when you get to the end of the quarter. As they can be categorised as you go, you will save yourself a lot of time when you need to send your update to HMRC.

The other important thing to do is decide what your accountant will do, and what you will do when it comes to MTD. It might be that you want to do the monthly bookkeeping, but you ask your accountant to check it for you. Or you may want your accountant to do the monthly bookkeeping, but this is likely to increase your costs. So, have a discussion now before you need to send your first quarterly update, to make sure you know who is doing what. It can save confusion later.

You can find out more about MTD on Gov.uk.

Contact us

If you would like to find out more about MTD and whether you are affected, then please get in touch with us and we will explain what you need to know.

Savers could face an unexpected tax bill

Savers making the most of the rise in interest rates could get an unexpected tax bill if they breach the Personal Savings Allowance (PSA).

The PSA was introduced in April 2016, and it allows basic rate taxpayers to earn up to £1,000 in interest on their savings per year without paying tax on it. But the allowance hasn’t changed in value since it was launched, and as interest rates have increased in recent years, there is a greater chance of savers breaching this limit.

The PSA is separate to the Individual Savings Account (ISA) limit, and there is an argument that people might be better off using an ISA so they can have more of their interest growing tax free, as there is no income tax to pay on interest through an ISA, no matter how much they receive.

How the PSA works

As already mentioned, basic rate taxpayers can earn up to £1,000 in interest on their savings each year, without having to pay any income tax. Higher-rate taxpayers can only earn up to £500 in interest before they start paying income tax on their savings interest. Additional rate taxpayers don’t have any PSA, so would pay tax on all interest paid outside an ISA.

Since the PSA was introduced 10 years ago, basic-rate taxpayers will have paid around £4.7 billion in tax on their savings interest, according to analysis of HMRC’s data by Yorkshire Building Society. But it needs updating, according to Rachel Springall, Finance Expert at Moneyfactscompare.co.uk.

She added: “While [the PSA] protected savings interest from tax when it was launched for many, it’s outdated and needs to change. The fact that millions of ordinary people risk paying a tax bill on their savings shows how the PSA has not moved along with the times.”

Why are more people being taxed?

More people are being pushed into higher income tax bands as wages have increased, but income tax thresholds have been frozen. As people move into higher income tax bands, their PSA allowance is cut.

In fact, the number of higher-rate taxpayers increased from around 4.4m in 2016, to 7m in 2025/26. The number of additional rate taxpayers has risen from 0.4m to 1.23m over the same period. Plus, higher interest rates now compared to 2016 mean that for the same amount sitting in the account, there is a higher chance of the PSA being breached.

For example, a higher-rate taxpayer in 2016 could have saved up £50,000 in a one-year fixed account paying a typical rate of 1% before breaching their PSA. But if they deposited just £12,000 into a one-year bond now, paying 4.50% AER, they would earn £540 in interest and be liable to pay tax, according to figures from Moneyfactscompare.co.uk.

Many people would be better off using a cash ISA to protect their savings interest from income tax. You can currently deposit up to £20,000 in a cash ISA each tax year, and any interest earned is completely exempt from income tax.

Cash ISAs will often pay rates similar to non-ISA accounts, especially towards the end of the tax year when companies are trying to encourage people to use up their ISA allowance, said Ms Springall.

Even if you’re not at imminent risk of paying income tax on your savings income, it is worth acting now to protect your money from any potential liabilities you might face in future. For example, from the 2027/28 tax year, anyone aged under 65 will only be able to deposit £12,000 into cash ISAs each year. The allowance will remain at £20,000 for those over 65.

We can help you

If you would like to find out how you can make the most of your savings, keeping more of your interest in your pocket without breaking any rules, then please contact us and we will do everything we can to assist you.

Start of the new tax year – now’s the time to use allowances

Many of us love to work to a deadline, but when it comes to maximising your tax allowances each tax year, it isn’t a great strategy to leave it until the last minute to mop them up. If you want to maximise allowances, you have up to 12 months to do so by starting as soon as you can, and this can also make it possible for those with less disposable income to see greater benefits.

As the income tax thresholds have been frozen for another year, you need to make the most of the tax allowances you do have, especially as many of them are set to reduce in coming tax years.

Rachael Griffin, tax and financial planning expert at Quilter, said: “This is a year to use the allowances you can, but the bigger task is getting ready for the major structural shifts arriving in 2027. Cash ISA limits will be cut for under‑65s and savings income will be taxed more heavily, while unused pensions will fall within inheritance tax (IHT), so households need to… prepare for a very different tax landscape.”

For example, if you start your saving into your Individual Savings Account (ISA) as soon as you can, you have more time to use the full £20,000 allowance. You could put up to £1,666 per month into an ISA to build up to the full £20,000 over 12 months. This might be easier for some people than finding the full £20,000 in one go and can also boost your savings over time.

The two extremes of ISA investing were evident at one of the world’s largest investment management firms on April 5 and then April 6 this year. The final investor of the 2025/26 tax year invested via the Fidelity International platform with just 20 minutes to go at 23:40 of April 5. While the first investor of this tax year put money into their ISA within the first hour of April 6.

Fidelity has also calculated that by using your ISA allowance early, you benefit more, as you can see from the table below. Early Shirley, who has invested the full allowance for the last 10 years as soon as possible, has the largest pot at £321,570. Monthly Monty, who puts in the full amount allowed each month, has £303,625 – ahead of Last-Minute Lara who invests at the end of the tax year, and has £299,385. The difference between Early Shirley and Last-Minute Lara is a whopping £22,185 over 10 years.

Returns generated after 10 years of investing the maximum ISA allowance

Source: Datastream, Fidelity International, 05/04/2016-06/04/2026. Total return in GBP of FTSE All Share

What else should be considered now?

Topping up your pension is one thing you should try to do early in the new tax year. You can put up to £60,000 a year, or 100% of your earnings, whichever is lower, into your pension each year and receive tax relief.

If you haven’t used up your full allowance for previous years, you can add more into your pension pot by using what are known as “carry forward” rules. This has an additional benefit of reducing your tax bill, while boosting your long-term retirement plans, but you should speak to your accountant before actioning this.

You can also gift up to £3,000 a year free of IHT, said Ms Griffin, or £6,000 jointly for a married couple or civil partners. If you didn’t use the allowance for the last tax year, then you can gift as much as £12,000 as a couple in this tax year.

One major change to be aware of this tax year is the requirement for some taxpayers to do ‘digital reporting’ to HMRC. From April 6, you are required to submit quarterly updates under new reporting rules if you are self-employed or a landlord earning over £50,000. Even though there are no penalties for missing a filing this year, it is sensible to get used to how the system works to make sure you don’t get caught out later by errors, or penalties, which will apply from January 31, 2027, if the last return of the year is late.

Let us help you

If you are interested in seeing how you can use your tax allowances earlier in the tax year, or need more information about digital reporting, then please get in touch with us and we will do what we can to help you.

Will it still be sensible to take income in dividends?

Increases in the dividend tax levels from April 6 are set to eat into the income of directors, who will often pay themselves in dividends, but is it still sensible to take payments this way for the coming tax year?

The dividend tax rates are set to rise by 2 percentage points from April 6. This will raise the Basic Rate from 8.75% to 10.75%, and the Higher Rate from 33.75% to 35.75%. But the Additional rate of 39.35% will remain the same.

So, does this rise create a case for paying yourself via a salary rather than dividends going forwards, or are dividends still the best way for directors to pay themselves from their companies?

Dividends still win, but a mix of salary and dividends is best

Even though the increase in dividend tax rates will reduce the benefit of paying yourself in dividends, it still makes more sense financially to take dividends than it would to pay yourself a salary alone in most cases.

By taking a salary, your company would need to pay Employer National Insurance Contributions (NICs) on your salary at 13.8% for any amounts of £9,100 or above. You would also need to pay employee NICs on your salary above £12,570 – which is the level of the personal allowance – at 8% up to £50,270, and at 2% above this level. On top of this, you also pay income tax at 20% as a basic rate taxpayer, 40% as a higher rate taxpayer, or 45% as an additional rate taxpayer.

By taking dividends, assuming your Corporation Tax has already been paid and your profits are high enough for you to do so, you would usually have more in your pocket as they are not subject to NICs like a salary. Your company would pay no NICs, and neither would you, and the dividend tax levels are also below the higher rate and additional rate income tax bands.

If you’re not earning much in dividends, you should check with your accountant whether you’re better off taking your earnings as a salary or in dividends, as there could be a point where the balance tips in favour of salary. But typically, you are still better off taking dividends, even though the benefits are narrowing.

Still, the best way to pay yourself from your company is likely to be via a mix of the two. This would mean taking a small salary, equivalent to the personal allowance of £12,570, and then taking the remainder in dividends. This means you pay some NICs, which will still qualify you for the State pension, but you will pay little or no income tax on the salary, and a salary is also deductible for Corporation Tax.

Let us help you

If you are interested in seeing how you can legitimately reduce your tax burden through dividends, then please get in touch with us and we will do what we can to help you.

£50,000 a year earners and landlords need to get MTD ready

New Making Tax Digital (MTD) rules coming into force in April mean around 850,000 landlords and self-employed people earning more than £50,000 a year, which would be declared on their 2024/25 tax return, are required to register for MTD by April 6, 2026, if they haven’t done so already.

The new rules mean taxpayers must give HMRC records of self-employment and property income and expenses every quarter, rather than once a year. But they still only pay their tax bill once a year as they do now.

The quarterly submission deadlines are August 7, November 7, February 7, and May 7, with a requirement to submit a final tax declaration by January 31 of the following year, in the same way someone would approach a self-assessment submission now.

However, this final declaration, within which any adjustments to the records can be made, will replace the annual self-assessment return for those affected.

Why doesn’t everyone have to sign up in April?

HMRC is getting people signed up to MTD over time. While landlords and self-employed people, or sole traders, earning over £50,000 of qualifying income must join from April 6, those with qualifying income of £30,000 or more will join from April 2027, and those earning £20,000 or more of qualifying income will be required to join from April 2028.

By that final date, around three million people will have to send quarterly reports to HMRC through MTD for income tax. These taxpayers will have to submit their tax information to HMRC by using compatible and approved software packages, as HMRC does not provide this software. You can find out more about approved software packages at Gov.uk.

If you don’t comply with the rules of the new regime, you will accumulate points and eventually could receive an automatic £200 fine. You will get points for late filing and/or late payment. The points will stay on your account for two years, and after this they will be removed. Any taxpayer can apply for a digital exemption if they believe they are digitally excluded.

Let us help you

If you think you might be affected by this change, then please get in touch with us and we will do what we can to help you.

Maximise your tax allowances before April

There’s just over a month until the end of the tax year on April 5, and if you have any available tax allowances that you haven’t used up completely, now is the time to start working out how to use as much of them as you can this tax year.

Various tax rules are set to change from April 6, so it is important to use up what is available this tax year to maximise the current rules.

There are many ways to reduce your tax liability each year through proper and full use of the allowances, but it is always best to work with your accountant to do everything the right way, so you don’t create a problem for yourself further down the line.

Check that your State Pension NICs record is complete

One important thing to check is that your National Insurance contributions (NICs) record for your State Pension is complete. You need to have 35 years of qualifying NICs payments to receive the new full State Pension, and at least 10 years to receive any State Pension at retirement age.

Missing years can occur if, for example, you’ve had any time off to look after children, or missed work years for any other reason, such as being ill or taking time off to travel. Even if you haven’t taken time off, you need to check your record is correct, because mistakes happen.

People who have stayed at home to look after their family should have received their NICs contribution years for this period under the Home Responsibilities Protection scheme, or by the National Insurance Credits for Parents and Carers in 2010, which replaced it. Both schemes would give you qualifying credits for the State Pension while you weren’t working. But the system hasn’t been perfect, so there is currently a government initiative to correct missing HRP records between 1978 and 2010. If you think you or someone you know may have been affected during this time, it is even more important to check your record.

If you have any gaps that aren’t mistakes, it is possible to pay voluntary contributions for up to the past six years to fill those gaps in your National Insurance record and boost your qualifying years. These payments must be made before April 5 each year.

You can get a State Pension forecast at Gov.uk which will tell you if you have any years where your contributions weren’t complete. This is an important step, because not checking could result in paying contributions that aren’t necessary to make.

Make the most of your pensions contributions

You can put as much as you like into a personal pension scheme, but there are limits on how much of your contributions will benefit from tax relief. For example, if you’re not earning at all, you can add a maximum of £3,600 including tax relief into a pension. If you are earning, you can put up to 100% of your relevant UK earnings into a pension to get tax relief, up to a maximum of £60,000. So, even if you earn enough to get more tax relief than this, you won’t receive it on contributions above this figure.

You also cannot reclaim more tax relief in a year than you were due to pay in tax, so you need to ensure your pension planning takes this into account. But you can do something called Carry Forward, which enables you to use any unused annual allowance from the previous three years, to maximise the benefits of any unused amounts from these years.

If you earn more than £200,000 a year, your annual allowance for pension contributions could reduce from £60,000 to as low as £10,000, so you must take this into account when making decisions about optimising your tax allowances towards the end of the tax year.

One important thing to remember is that if you are a 40% or 45% taxpayer, you may need to reclaim your additional pension contribution tax relief – anything above the basic rate of tax relief of 20% – through your tax return directly from HMRC. So, if this hasn’t been done, even in previous years, you should speak to your accountant for advice.

Company owners should pay themselves in dividends

Company directors can often take money out of their business more tax efficiently through dividends than as a salary, but you can only distribute dividends if you have enough ‘distributable reserves’. Bear in mind though that from April 6, 2026, the basic and higher dividend tax rates will rise by 2 percentage points, to 10.75% and 35.75% respectively, which reduces the benefit to some degree.

Also, it is typically more tax efficient if the company pays your pension contributions for you, so if there is enough money in the business to do this, then speak to your accountant about how to action this properly.

If you’re an experienced business owner, you may also want to consider investing in a Seed Enterprise Investment Scheme (SEIS), which is designed for fledgling companies looking for investment, or Venture Capital Trusts (VCTs). These both offer tax benefits that help reduce your liabilities.

Qualifying Enterprise Investment Schemes (EISs) – which would include some AIM-listed companies – offer tax relief at 30% on investments up to £1m, or £2m if the company you’re investing in qualifies under the ‘Knowledge Intensive Companies’ rules, which typically refer to companies heavily involved in research in areas such as technology or biotechnology.

The VCT tax relief is currently available on qualifying investments up to £200,000 at 30%, but this reduces to 20% from April 6, 2026.

Contact us

If you are keen to optimise the tax relief available before the end of the tax year, then please get in touch with us and we will explain what you need to know.

Taxpayers must be careful how they report CGT this year

Taxpayers with capital gains liabilities that they need to declare in their self-assessment tax return need to take extra care this year to avoid receiving a penalty from HMRC.

Changes made to the Capital Gains Tax (CGT) rates part-way through the 2024/25 tax year mean it will be more complicated to determine exactly what rate applies to each gain and, unfortunately, HMRC’s self-assessment software won’t calculate the correct amount for you. Instead, you will need to do this yourself or with your accountant, and the timing of each transaction will make a difference.

So, you will need to speak to your accountant to either help you file your return, or if your return has already been filed, to check that the calculation you have made is correct, as the sooner you remedy any underpayments, the better it is for you.

How did the rates change?

The CGT rates increased from October 30, 2024, which was the day of the Autumn Budget that year, and they applied to the disposal of assets, except for residential property and carried interest.

On that day, the rates increased as below:

• 10% to 18% for basic rate taxpayers.
• 20% to 24% for higher-rate taxpayers.

This created the complication for this year, as taxpayers need to split gains they made at different dates and then calculate the right amount of tax due, based on the relevant rates. They also need to allocate any losses and the annual exemption to gains realised either on or after October 30, to make sure they maximise their tax relief.

Yet despite the change being made by the Government a relatively long time ago, as already mentioned, HMRC’s software cannot do the calculation for you. So, there is an adjustment on the self-assessment form, in box 51, which you should have used to pay the correct amount of tax. If you didn’t, or you haven’t explained your calculations on the form in box 54, then you might need to make a change after filing. This is where your accountant will be able to help you.

Is there any way I can check my calculation?

Yes, HMRC has made a specific adjustment calculator available. But there is one other thing HMRC will be expecting in your tax return – you would need to have included a disclosure if you entered an unconditional contract before October 30, 2024, if it completed after that date.

Elsa Littlewood, private wealth tax partner at BDO, said: “Changing the CGT rates part way through the year has the potential to be a real banana skin for those completing the form and can be particularly tricky for those doing so without professional help. There is a risk that people unfamiliar with the rate changes will unwittingly input the wrong information as the self-assessment form will not automatically calculate the right CGT liability.

“It is helpful that HMRC have released a calculator that can be used to work out the adjustment to capital gains tax, but it would have been better if this was integrated within the tax return software.

“We would hope that HMRC would not charge penalties if tax returns submitted using HMRC’s software are incorrect and the amount unpaid is minor. But there is a risk of mistakes being made and it could lead to a flurry of disputes with HMRC later. Even if you have already submitted your self-assessment form, you may wish to go back and double check it to ensure it’s right.”

We can help you

If you have already filed your self-assessment tax return and think it might be worth revisiting it with us to check everything is correct, then please contact us and we will do everything we can to assist you.

Missed the January filing deadline? Here’s what to expect

Thousands of people once again took the chance to use some quiet time over the festive period to file their self-assessment tax returns, with 4,606 people even filing their return on Christmas Day.

In total, 37,435 people completed their return over the three days of festivities, Christmas Eve, Christmas Day and Boxing Day. But there are still thousands more taxpayers who are yet to file, which means they could be facing penalties for late filing after the January 31 deadline.

The penalties start as soon as you miss the deadline, whether there was any tax to pay to HMRC or not. If you are only due to file a self-assessment return to deal with the High Income Child Benefit Charge, there is a new PAYE digital service. If you had signed up to this before January 31, you could opt out of filing a self-assessment and chosen to pay back any money you owed through your tax code. But if you have missed the deadline, then for now, you still need to file a self-assessment.

How do the penalties work?

If you have to file a self-assessment tax return, you must file before January 31, 2026. If you missed this deadline, or you failed to pay your bill on time, then you will face a penalty.

You will immediately face a £100 penalty for filing late. If you still haven’t filed your return within three months, you will face additional daily penalties of £10 per day, to a maximum of £900. If you haven’t filed after six months, you will face a further penalty of 5% of the tax due, or £300, whichever is higher. If you haven’t filed within 12 months, then another 5% of the tax due is added, or an additional £300, whichever is greater.

If you’re filing your return as part of a partnership and it is filed late, then every partner will be charged a penalty. These are 5% of the tax due at 30 days, six months, and 12 months, plus interest on the amount owed.

What else do I need to know?

If you register for self-assessment after October 5, and also don’t file your return and pay your tax bill on time, you may get a ‘failure to notify’ penalty, according to HMRC. You can find more information on ‘failure to notify’ penalties on Gov.uk.

If you get a penalty, then you need to pay it within 30 days of the date on the penalty notice. You can appeal against a penalty if you disagree with it. However, if there is a good reason why you couldn’t file your self-assessment or pay your tax bill, such as being in hospital or losing a close relative, then you may be able to get the penalty waived.

If you find yourself in a situation where you are facing a tax penalty for any reason, then the best thing to do is speak to your accountant as soon as possible, and give as much information as you can to resolve the issue quickly.

We can help you meet your obligations

If you receive a penalty notice, or know you haven’t met your tax and filing obligations in good time, then please get in touch and we would be happy to give you the guidance you need.

Holders of cryptocurrency in HMRC’s sights from January 1

UK residents who hold cryptocurrency are facing more scrutiny from HMRC from New Year’s Day, as cryptocurrency service providers will begin passing details of UK holders to the taxman from that date.

HMRC will begin implementing the Cryptoasset Reporting Framework (CARF) from January 1, 2026, which enables cross-border information exchange between tax authorities in relation to transactions involving crypto assets.

CARF rules have been developed by the Organisation for Economic Co-operation and Development (OECD) and incorporated into UK law, because of the rapidly expanding interest and investment in cryptocurrency.

How many people invest in crypto assets?

One in four people in the UK invest in crypto assets, according to a recent survey by Gemini, with the majority of UK residents saying they intend to invest in crypto in the coming year. In fact, 88% of them expect to invest at least 5% of their portfolio in crypto.

These people will have their information sent to HMRC by the reporting crypto asset service providers (RCASPs) as tax authorities request comprehensive information on crypto holdings, and will require UK RCASPs to undertake due diligence in relation to their users.

This means that from January 1, 2026, HMRC “will have CARF data on all UK taxpayers using a UK based RCASP together with information concerning UK taxpayers from overseas RCASPs through the exchange of information”.

Does this only apply if you are using a RCASP based in the UK?

The way this measure is being implemented, and the nature of sharing CARF data across borders, means HMRC will have CARF data on those using UK-based and non-UK based RCASPs. The various jurisdictions participating in this initiative are doing so to increase data transparency and support international tax compliance.

The move is designed to tackle both tax evasion and avoidance, and “to help UK taxpayers meet their tax obligations”. If you extrapolate the Gemini research data of one in four UK residents holding crypto assets, with around 69.3m people living in the UK according to data from the Office for National Statistics, that means as many as 16.63m people could expect to find their data being passed to HMRC in relation to crypto assets.

Most of these (76%) are aged 16 to 44, and men are more likely to invest in crypto assets than women, with 69% of holders being male, according to figures from HMRC. Those from an Asian or Asian British ethnic background make up 11% of holders. The information required is expected to be collected through tax returns and compliance teams, with the accuracy of tax returns kept under review.

We can help you

If you are one of the millions of people who invest in crypto assets either through a UK provider or one overseas, and you want to know what these changes will mean for you, then please contact us and we will do everything we can to assist you.

New tax codes issued in January – make sure yours is right

Tax codes for the coming tax year will begin to be sent out to taxpayers from January, but you will need to make sure the code you’ve been given is correct for your situation. HMRC does make mistakes, but if you resolve them before you begin the new tax year on April 6, you might save yourself some hassle.

If you pay your tax under the Pay As You Earn (PAYE) system, then you will be given a new tax code which will apply for the coming tax year. But if your earnings have changed, or you now have a company car, for example, or you no longer receive Benefits in Kind, it is especially important to make sure your tax code is correct.

If you don’t, you may find you’re paying more in tax than you need to, and you would then need to reclaim that tax back. Or worse, you could find you aren’t paying enough in tax, and then have to pay more later to catch up. So, checking your code as soon as you get it could mean you save yourself some trouble, and keep the right amount of money in your own pocket.

What should I expect to see?

The most common tax code in the 2025/26 tax year is 1257L, which is used for most people with one job and no income that is untaxed, or any taxable benefits such as a company car, said HMRC. As the personal allowance has remained at £12,570 for the 2026/27 tax year, this is likely to remain the most common tax code, as this number relates to the amount of personal allowance you have.

If the number is different to this, you usually multiply it by 10 to find your actual personal allowance. Also, if this code is followed by W1, M1, or X, then it is an emergency tax code, which is typically used if a new employee doesn’t have a P45. If this is the case, then the sooner you address this and get the correct tax code, the better it is for you.

Any tax codes that begin with the letter K denote deductions from wages for company benefits, state pension, or tax owed from previous years that are higher than the personal allowance. For example:

An employee with tax code K475 and a salary of £27,000 has taxable income of £31,750 (£27,000 plus £4,750).

The tax deduction for each pay period cannot be more than half an employee’s pre-tax pay or pension.

Source: Gov.uk

What if things change within the tax year?

The most likely reason for a change in your tax code within the tax year, is if your personal allowance or something else related to your Benefits in Kind changes. This might be a previous benefit that has been withdrawn by the company, such as a company car no longer being included as part of your job.

Your company will typically receive an alert if your tax code changes during the tax year, and your tax code should be updated before you receive your next paycheque.

So, keep an eye on your tax code throughout the year as well in case it changes. Again, there could easily be a mistake made.

We can help you meet your obligations

If you are unsure about your tax code, or whether you have had the correct amount of personal allowance allocated to you, then please get in touch and we would be happy to give you the guidance you need.

VCT and EIS changes – good for companies, not investors

Investors who use Venture Capital Trusts (VCTs) or Enterprise Investment Schemes (EISs) to invest in start-ups and benefit from tax relief as a result, will face new rules from April 6, 2026, thanks to changes made in the Autumn Budget.

These investment vehicles are great ways for companies to raise early investment from investors at what can be the riskiest time to invest in a business. The reward for those prepared to take the risk on investing in a start-up through VCTs or EISs are the tax breaks that are available. But investors are facing a reduction in these tax benefits from April, thanks to changes to the current rules.

The changes are different for both VCTs and EISs, and how much a company can raise with each vehicle under the new rules will depend on what type of business it is.

What are the new investment limits?

Eligible companies will be able to have a maximum of £30m in ‘gross assets’ immediately before the share issue through EISs from April 6, 2026, and £35m immediately afterwards. This is an increase of £15m and £19m respectively, compared to the amounts currently allowed.

Through both EISs and VCTs, the annual combined amount it is possible to raise will double to £10m, and as much as £20m for knowledge-intensive companies (KICs). In a lifetime, a company will be able to raise £24m through these vehicles, again doubled from the current £12m, and up to £40m for KICs.

However, investors may find these vehicles less appealing, as they will see a reduction in their upfront income tax relief on VCT investments from April 6, 2026, when it will fall from 30% to 20%, while tax relief on EISs will remain at 30%. But the way EIS and SEIS shares are treated for inheritance tax (IHT) will change, and from April 6, 2026, 50% of any value over £1m will become subject to IHT at an effective rate of 20%.

Why will these changes be made?

The changes are designed to extend the EIS and VCT limits to support both new companies, and those that are scaling up, while also equalising the tax treatment of VCTs and EISs, as EISs don’t offer dividend relief, said HMRC.

Qualifying companies are those that “are not registered in Northern Ireland trading in goods or the generation, transmission, distribution, supply, wholesale trade or cross-border exchange of electricity. These companies will remain eligible for the current scheme limits,” according to Gov.uk.

Businesses that qualify will be able to access more investment through these schemes, and there isn’t expected to be a significant change in the amount of administration required. For the several hundred businesses that are near to the current limits, this change will offer a considerable boost.

What is the impact on the people who invest via these vehicles?

Around 24,000 people invest in these vehicles, and those using VCTs will see less upfront income tax relief on their investments. But there should be no change in the way they deal with HMRC.

HMRC said this measure “does not change or introduce any tax obligations or processes”.

The largest gender investing in VCTs is men, amounting to an estimated 76% of all investors, even though men make up around 50% of the overall population. Most people (57%) investing in VCTs are aged between 45 and 64, even though this age group makes up just 31% of the overall population.

Contact us

If you are already investing in VCTs or EISs and want to know what these changes will mean, or you are interested in investing in these vehicles for the first time, then please get in touch with us and we will explain what you need to know.

Tax on property income, dividends and savings up 2%

Tax rates on dividends, property income and savings will be raised by 2% from April 6, 2027. This means those paying tax on rental income, will face a basic rate of 22%, rather than the usual 20%; 42% for higher rate taxpayers instead of 40%, and 47% for additional rate taxpayers, up from the usual 45%.

The Rent a Room Allowance is unchanged, and any carried forward property losses must still be offset against property income. Relief for residential property costs will also be calculated at 22% when the rate changes.

When calculating income tax allowances or reliefs, these will be applied first to income that is not generated from property, savings or dividend income. If the allowances or reliefs exceed this type of income, they will then be deducted from these other types of income in the way that is most beneficial for the taxpayer, according to the Budget documents.

What are the new savings and dividend tax rates?

The rates of income tax on savings will follow the pattern of property income tax, at 22%, 42% and 47% for the basic, higher and additional rate taxpayers respectively. The way they are applied will become a little more complicated, as the starting rate for savings income is 0% up to £5,000 for those taxpayers with income up to £17,570 that is not from savings, dividends or property.

The Personal Savings Allowance gives a 0% tax rate on income up to £1,000 for basic rate taxpayers and up to £500 for higher rate taxpayers. These will also apply from April 6, 2027.

The new dividend tax rates will apply earlier, from April 6, 2026, and from that date they will also rise by 2 percentage points. This will put the dividend ordinary rate at 10.75%, the dividend upper rate at 35.75% and the dividend additional rate at 39.35%.

The Budget documents added that the “rate charged to companies under the loans to participators regime is automatically tied to the dividend upper rate and so will also increase to 35.75%”. The dividend allowance will stay at £500.

Claire Trott, Head of Advice at St. James’s Place, said: “Raising dividend, property and savings taxes by 2% only adds further layers to an already overly complicated tax system. Many individuals will now need to rethink how they structure their holdings to remain tax efficient. The justification provided that an extra 2% brings these taxes more in line with the NICs paid on earned income overlooks the fact that business owners are likely to feel the greatest impact, particularly those already affected by earlier NICs increases.

“We now have three separate tests on pension contributions: the annual allowance, the limit on income tax relief, and the new limit on NICs savings. At the same time, income is taxed at different rates depending on whether it is earned, from property, from savings, or from dividends. Layered on top are multiple allowances, many of which taper away as frozen thresholds pull more people into higher tax brackets.”

How do you work out what you need to pay?

Understanding what you need to pay and how each element of the allowances and changes are applied is definitely more complicated than it was. The new, separate rate for property income, will be taxed “after employment, trading and other income but before savings and dividend income”, according to the Budget documents.

Working out your liabilities will be more complicated, and it would be wise to speak to your accountant if you have any uncertainty about what you might need to pay when the new regime is in place.

The Budget documents include an example tax calculation which may help to explain how this new system will work when all new tax rates are in place:

In the tax year the individual has following income:

• employment income (£30,000)
• property income from residential letting (£3,000 share of profit)
• finance cost relief for a rental property (£1,000 share of interest expense)
• interest on savings of £400
• dividend income of £200

The personal allowance and rate bands are unchanged.

Amounts of taxable income after steps one to three:

• personal allowance must be set off against employment income first. Employment income: £30,000 – £12,570 = £17,430

Amounts of Income Tax calculated at step 4 (employment first, then property):

• employment income: £17,430 at 20% = £3,486
• property income: £3,000 at 22% = £660
• savings income: £400 at 0% = £0 (Personal Savings Allowance)
• dividend Income: £200 at 0% = £0 (Dividend Allowance)

Total tax due (step 5):

• employment income (BR): £3,486
• property income (BR): £660
• total tax due: £4,146

Finance cost relief tax reduction at step 6:

£1,000 at 22% = £220

No additional tax charge at step 7.

Total Income Tax due: £4,146 – £220 = £3,926

Source: Gov.uk

We can help you

These changes are a lot to take in, and will increase the complexity of your taxes if you have these various types of income. If you need help unpicking all of this, then please contact us and we will do everything we can to assist you.

Cash ISA allowance reduced to £12,000 for under 65s

The Chancellor took aim at cash ISAs in her Budget, and is reducing the amount that can be put into a cash ISA from £20,000 to £12,000, with the remaining £8,000 being eligible for investment ISAs.

These changes, which will apply from April 6, 2027, will not affect those over age 65, who will still be able to put the full £20,000 into a cash ISA each year if they prefer. The move is designed to encourage people who have typically chosen the cash ISA in preference to investment ISAs to broaden their portfolio into investment products, which traditionally have delivered better returns over the long term.

Michael Summersgill, CEO of AJ Bell CEO, said: “The Chancellor clearly recognises the huge benefit of long-term investing and the boost it can provide to people’s finances, but today’s announcement is a missed opportunity to reshape ISAs with the consumer in mind.”

Does this increase the complexity of ISA investing?

The move increases the complexity of ISA investing, at a time when experts are calling for more simplicity and flexibility for individuals, who already often find it difficult to navigate the investment landscape more widely.

Mr Summersgill said: “Government should be focused squarely on simplifying the market to make it easier for ordinary people to navigate, providing flexibility for consumers, rather than adding friction in the form of new allowances and added complexity.”

He would like to see the Government ask itself “two key questions” before implementing these proposals. The first is whether any serious person would design a system with “umpteen ISA products all with different allowances”. The second is whether there is any evidence at all that this measure will encourage people to invest.

Mr Summersgill added: “The answer to both those questions is no. Government should go back to the drawing board and examine the evidence in earnest before these proposals move forward.”

Let us help you

If you would like to know more about how you can maximise your tax efficient savings, then please get in touch with us and we will do what we can to help you.

Voluntary repayment window for Covid grants opens

Individuals and businesses that received Covid payments they weren’t entitled to have until December to pay back any money owed under a voluntary repayment scheme. This period offers the grace of a ‘no questions asked’ solution for people to repay any grants they shouldn’t have had. So, if you’re in this position, it would be best to act now.

This is the last chance for anyone owing money to come forward and repay before HM Treasury starts more severe recovery processes next year, which could include prosecution. There isn’t a set date for this window to close, we only know it will be open ‘until December 2025’ according to the Low Incomes Tax Reform Group (LITRG).

Grants covered in this window include a variety of Covid support payments, such as the Coronavirus Job Retention Scheme, the Eat Out to Help Out scheme, and the Self-Employed Income Support Scheme (SEISS).

What were the SEISS grants?

The SEISS support scheme helped self-employed people who were struggling and needed Government support during the pandemic. It ended in September 2021, and consisted of five separate grant payments for those who met certain eligibility criteria. You can find more details on who would have qualified for these grants and who may need to pay them back at Gov.uk.

Some self-employed people may have made mistakes on their grant applications in relation to fully meeting all criteria and tests that were specified. Someone may have inadvertently looked at the wrong criteria, or simply didn’t understand the rules properly when they applied.

If you think you might be in this position, then it would be wise to speak to your accountant to double check, and if you find you have made a mistake, then you should begin the process of paying the money back during this window.

How do you make a repayment under the scheme?

If you think you might have received Covid support money you shouldn’t have had, then the first step is to go to the relevant webpage for more information about each Covid support scheme. If the grant you need to pay back is an SEISS grant, then there is more information specifically about these and how to deal with repayments at Gov.uk.

Use the ‘start now’ button at the bottom of this page to begin the process and you will be asked a series of questions, which you will need to answer based on your circumstances. You will also need some specific information to hand before you start, including:

• Your Government Gateway user ID and password.
• Your Self-Assessment Unique Taxpayer Reference (UTR) number.
• Your grant claim reference number.

Source: LITRG

Your UTR is on your self-assessment tax return or in your personal tax account with HMRC. If you can’t find it, your accountant will be able to help. Your grant claim reference number is on the online copy of your grant claim according to the LITRG, which you would have got when you made your SEISS claim.

After you file the form, HMRC will come back to you with details on what to do next, and how to make the payment.

We can help you

If you think you may need to repay Covid grants, or you simply want reassurance that you have done everything correctly, then please contact us and we will do everything we can to assist you.

Record number of self-assessments sent in first week of tax year

Just under 300,000 self-assessment tax returns were filed in the first week of the 2025/26 tax year, according to HMRC, way ahead of the deadline of January 31, 2026.

A total of 299,419 tax returns were filed between April 6 and April 12 – 28,503 more than the same period last year. Some 57,815 people filed on the opening day, a Sunday, which was slightly down on the 67,870 who filed on the first day last year. But the figures were impressive during that week as you can see in the table below.

*weekend days

Source: HMRC

Who needs to file a self-assessment return?

There are many different scenarios that might result in you needing to file a self-assessment tax return, including people who:

• Are newly self-employed with a total income of over £1,000.
• Are self-employed and earn below £1,000 and wish to pay Class 2 National Insurance contributions (NICs) voluntarily to protect their entitlement to state pension and certain benefits.
• Have received any untaxed income over £2,500.
• Are renting out one or more properties.
• Claim Child Benefit and they or their partner have an income above £60,000.
• Are a partner in a business partnership.
• Have taxable income earned from savings and investments more than £10,000.
• Have dividend income of more than £10,000.
• Have Capital Gains Tax to pay on assets that were sold for a profit above the Capital Gains threshold.

A full list of who needs to complete a tax return is available on GOV.UK.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “Filing your self-assessment early means you can spend more time growing your business and doing the things you love, rather than worrying about your tax return.

“You too can join the thousands of customers who have already done their tax return for the 2024 to 2025 tax year by searching ‘self-assessment’ on GOV.UK and get started today.”

Filing early can help with financial budgeting and spreading the cost of the tax bill over the year if you prefer. You can also set up a budget payment plan to make either weekly or monthly direct debit payments towards your self-assessment tax bill, which will save you from facing a big bill at the end of January, just after the Christmas expense.

If you have overpaid tax, you can claim a refund as soon as the return is processed. If you use the HMRC app, you can check if you’re due a refund. Filing early also means your accountant will have more time to help you make sure your tax return is accurate, resulting in fewer mistakes and potential penalties.

HMRC has updated guidance on filing tax returns early and help around paying tax bills on Gov.uk. Remember, you shouldn’t share your HMRC sign-in details, as someone could use them to steal from you, or claim benefits or a refund in your name.

Let us help you

If you want to file your self-assessment early, then please get in touch and we will do whatever we can to help you maximise the benefits of filing early.

Inheritance tax receipts up £800m in a year – how to beat the bill

Inheritance Tax (IHT) receipts from April 2024 to March 2025 have risen by £800m compared to same period the previous year. This is largely a feature of the nil rate band – the amount you can have in your estate before you must pay IHT – and the residence nil rate band (RNRB) – an extra amount that allows you to pass on at least some of your home to your direct descendants IHT free – failing to rise in line with inflation for many years now.

Currently the nil rate band sits at £325,000, while the RNRB is £175,000 for each of us, meaning a maximum of £500,000 per person can be passed on free of IHT outside of the spousal exemption. There is no IHT between spouses or civil partners, so anything passed between them on death does not face an IHT charge. Also, if one spouse doesn’t use the entirety of their nil rate band or RNRB on death, any remaining amount can be used by the second spouse at the time of their death, which could increase the amount that is passed without an IHT liability in that instance.

Tim Snaith, Partner at law firm Winckworth Sherwood, said: “IHT revenues continue to steadily rise due to the prolonged freeze on IHT thresholds. The nil-rate band (NRB) and the residence nil-rate band (RNRB) have not been adjusted for inflation or rising property values, which means more estates are becoming liable for the tax as asset values increase. It remains a persistent and unavoidable inheritance tax planning issue, and one that should not be ignored.”

Will the IHT thresholds increase soon?

Unfortunately, the IHT thresholds are due to be frozen until at least 2030, which means even more families will find themselves caught in the IHT net at a time when they are facing the grief of losing a loved one. As property prices continue to rise, even more families, especially in London and the south east, will face IHT bills unless the person who is deceased has taken the time to plan ahead and mitigate the number of assets that they leave behind that will face IHT.

This is one of the most disliked taxes, particularly as many people’s estates will face a 40% tax charge for the first time after their death. People often think IHT is something only wealthy people need to think about. But this is no longer the case, and things are about to get worse for those left behind.

Shaun Moore, tax and financial planning expert at Quilter, said: “Property prices have grown rapidly in recent years, particularly in areas such as London and the south east, which in many cases will leave little to no room for additional assets to be left to loved ones before the tax is applied. Additional policy changes, including restrictions on Agricultural Property Relief and Business Relief from April 2026, as well as unused pensions falling within the scope of IHT from 2027, will place additional strain on families.

“Tax bills are becoming increasingly difficult to mitigate, and this will only worsen as the freeze on the various thresholds continues and as policy changes set in. Seeking professional financial advice will be key to ensuring no more of your money goes to the taxman than is absolutely necessary.”

Mitigating your IHT bill

You won’t be the one worrying about paying the IHT bill as you will have left this mortal coil, but for those left behind, a lack of planning to mitigate IHT applied to your estate can create serious problems. They may be forced to sell assets to cover the costs, which might include the family home if there is no other way to pay for any IHT due.

However, there are some ways you can reduce the amount your beneficiaries would need to pay. This includes giving away some assets within your lifetime, providing it doesn’t affect your standard of living. You can also write some assets into trust, which places them outside the IHT net. This is particularly useful if you have a life insurance policy, as writing this into trust enables your family to receive that money much faster after you have died, and it is not subject to IHT. Most insurers can write this kind of policy into a trust for you, and it is definitely worth asking about.

One of the most important things to do is keep your will up to date. This can not only ensure the right people get the things you want them to receive, but it can also reduce the IHT bill on death.

Mr Snaith said: “To avoid unexpected financial burdens, it is crucial for individuals to regularly review their wills and estate planning, with professional legal advice, to manage their wealth efficiently.”

We can help you meet your obligations

If you would like to know more about how to reduce your IHT liability within the rules, then please get in touch and we would be happy to give you the guidance you need.

1.1m missed the January 31 deadline – can you appeal a penalty?

Around 1.1m of us missed the January 31 deadline to file our self-assessment tax returns for the 2023/24 tax year. For each person, this means at least a £100 penalty and potentially additional charges if the return continues to not be filed or the tax due paid for a longer period.

The £100 penalty is levied whether there was any tax to pay or not. It is simply for missing the deadline for filing the self-assessment return itself. If you had tax to pay though, you could also face interest charges if you also haven’t paid the bill on time.

Sole traders and partners in a partnership who contacted HMRC for help with the Basis Reform Period before December 31, 2024, should not receive a penalty as this change will make calculating their tax due more complex.

The ICAEW has been advised by HMRC that anyone in this position would have until February 28 to file their return using provisional figures without incurring a penalty. But the return should be updated when they have the correct figure and any tax due originally by January 31 that remains unpaid would face interest charges from February 1.

What other reasons would HMRC accept for late filing?

If you have a genuine reason for missing the deadline, then you should appeal any penalty. For example, if someone close to you has died – perhaps a partner or parent – then you would benefit from some leniency.

Other reasonable excuses would include:

• You had an unexpected stay in hospital that prevented you from dealing with your tax affairs.
• You had a serious or life-threatening illness.
• Your computer or software failed while you were preparing your online return.
• Issues with HM Revenue and Customs (HMRC) online services.
• A fire, flood or theft prevented you from completing your tax return.
• Postal delays that you could not have predicted.
• Delays related to a disability or mental illness you have.
• You were unaware of or misunderstood your legal obligation.
• You relied on someone elseto send your return, and they did not.

Source: Gov.uk

However, these wouldn’t be considered reasonable excuses, and you wouldn’t be able to challenge the penalty if:

• Your cheque bounced or payment failed because you did not have enough money.
• You found the HMRC online system too difficult to use.
• You did not get a reminder from HMRC.
• You made a mistake on your tax return.

Source: Gov.uk

Let us help you

If you’ve missed the deadline for filing your self-assessment and have received a penalty, then please get in touch as soon as possible and we will do everything we can to help you.

Still time to maximise your end of tax year planning

Now is the time to work towards maximising your end-of-year tax planning before the new tax year starts on April 6. If you haven’t used all your allowances and reliefs for this tax year, then in the coming month, you should make the time to address this.

By using up as many of your tax reliefs and allowances as possible before the end of the tax year, you can be sure you are not paying any more tax than necessary to HMRC. So, you need to think about adding to your savings, pensions and investments in the next few weeks to benefit from the tax relief.

However, you need to make any changes you need before April 5, as the new tax year begins on April 6 in the UK.

Maximising pension contributions

One of the biggest benefits is the tax relief you can receive on pension contributions. Basic rate taxpayers will receive tax relief at 20% on up to £60,000 a year of contributions, but remember, you cannot receive more in tax relief than you pay in tax in a single year.

To make a £100 contribution to your pension, you would need to pay £80 into the pot, and the Government would add £20 in tax relief. But the good news is that the amount of tax relief you receive is paid at your marginal rate. So, if you are a 40% taxpayer, then you would need to put £60 into your pension and the Government would put in £40 to make it up to £100. Additional rate taxpayers, who are paying 45% tax, will pay £55 into their pension with tax relief of £45 from the Government to make up £100.

Anyone earning above £100,000 will see their personal allowance of £12,570 removed at the rate of £1 for every £2 earned above this level. It means that by the time you have earned £125,140, your personal allowance will have reduced to zero. Thanks to a quirk of the system, this means that someone in this position will have an effective contribution of 60% from the Government, as all contributions are paid from gross salary. This can reduce the income level for the calculation of the reduction in the personal allowance.

You should mop up as much of the tax relief as you can before April 5 for the current tax year. But if you didn’t maximise your contributions in the last three years, you can also use something called ‘carry forward’ which allows you to use up any additional tax relief that remains unused in these previous years.

Optimising savings and investments

Each person in the UK can put up to £20,000 a year into an Individual Savings Account (ISA), which is a tax-efficient savings vehicle. Unlike pensions, you don’t get tax relief on the payments you put into an ISA, but you do get tax-free income from an ISA at the other end, whether through generating investment income, or withdrawals of the capital.

If you are between 18 and 40, you can also set up a Lifetime ISA to save for your retirement or your first home. You can put up to £4,000 a year into this type of ISA until you’re 50, but your first payment made into this type of ISA must be made before you are 40 to qualify, and then the Government will add 25% up to a maximum of £1,000. A Lifetime ISA makes up part of your £20,000 allowance for the 2024/25 tax year, so make sure if you invest in another ISA that you don’t breach this overall limit.

Although Capital Gains Tax (CGT) doesn’t apply to ISAs, if you have investments outside of this, then it might be worth considering taking some profit from them to maximise your CGT allowance for this tax year. For the 2024/25 tax year, you can crystallise gains of £3,000 and pay no tax thanks to the CGT annual exemption. You can use this amount before April 5 if you haven’t done this already this tax year.

Tax relief on work expenses not reimbursed by your employer

Many people don’t realise they can benefit from tax relief on work-related expenses, even if they pay PAYE. If you pay some work-related expenses, for example for membership to professional bodies, professional publication subscriptions, travel in your own vehicle for work – but crucially not to or from where your office is – or if your contract designates that you work from home, then you can reclaim these from HMRC. But this is only possible if your employer doesn’t reimburse you for them.

If you file a self-assessment tax return, then this relief is claimed on the ‘employment’ pages. If you don’t already file a self-assessment for another reason, then you can use form P87 if you are claiming less than £2,500 per year, which will need to be posted to HMRC. If it is more than this, then you will need to file a self-assessment return.

You can claim expenses as far back as four tax years, so if you haven’t been using this tax break, then make the most of it now. Remember though, you will need to provide evidence for the expenses being claimed, so make sure you keep any receipts or bank statements to prove your case.

You can currently go back much further than normal to plug any gaps in your National Insurance Contributions (NICs) record. Voluntary Class 3 NICs can usually only be paid for the last six tax years if you have missed any payments for any reason, such as illness or redundancy.

However, you can currently go back as far as 2006 to fill in any gaps in your NICs record, but this will end on April 5. You need 35 ‘qualifying years’ when you retire to get a full State pension, and if you don’t have enough qualifying years, your pension will be lower.

If you have missed contributions due to childcare responsibilities, then you should have received National Insurance Credits after 2010, or Home Responsibilities Protection between 1978 and 2010. You could get a maximum of 22 qualifying years under HRP – which was automatically converted to NI Credits in 2010. But some records were not correctly applied, so if you think you or a family member may not be benefiting from a full HRP or NI Credits record, then you can apply online to make sure that all HRP years you should have received have been applied.

You should have had HRP applied if you were claiming Child Benefit for a child under 16, but it would also apply if you were caring for someone who was receiving other benefits. You can find out more about the eligibility criteria on Gov.uk.

Contact us

If you want to find out how to maximise your tax planning before the end of the tax year, and to ensure you have every qualifying year possible for your State pension, then please get in touch with us and we will do whatever we can to help.

25,000 people filed tax returns on New Year’s Day

While most of us were ringing in the New Year with a chorus of Auld Lang Syne or nursing a hangover from the revelries, nearly 25,000 people filed their tax return on January 1, 2025, according to HMRC figures. Most people – 2,603 – filed their returns between 14:00 and 14:59. A further 38,260 people filed on New Year’s Eve, with the highest number of returns filed between 12:00 and 12:59, by 4,331 people.

At that stage, 5.4m people still needed to file their return, and anyone who misses the January 31 deadline can expect to pay a penalty and could face interest payments on top if they persist in not filing.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “We know completing your tax return isn’t the most exciting item on your New Year to-do list, but it’s important to file and pay on time to avoid penalties or being charged interest.

“The quickest and easiest way to complete your tax return and pay any tax owed is to use HMRC’s online services… Some 97% of customers now file online and one benefit is that they don’t have to complete it all in one go – they can save what they have done and pick it up again later.”

What happens if I miss the deadline?

Anyone who misses the January 31 deadline could face an immediate £100 penalty for late filing, even if there is no tax to pay or any tax due is paid on time. They should file as soon as they can after this to avoid additional penalties racking up.

If the return is still not filed three months later, then additional penalties of £10 per day up to a maximum of £900 could be charged. After six months, a further penalty of £300 or 5% of the tax due, whichever is greater, could be charged. If the return still hasn’t been filed after 12 months, then another £300 or 5% of the tax due, whichever is higher, will be charged.

Extra penalties of 5% of the unpaid tax at 30 days, six months and 12 months will also be applied, and you will face interest payments on any unpaid tax in addition to these penalties. Anyone who is yet to file their tax return can do so online, via gov.uk, or contact your accountant for help.

Let us help you

If you’ve missed the deadline for filing your self-assessment then please get in touch as soon as possible and we will do everything we can to help you.

Scammers hit Self-Assessments – here’s what to look for

HMRC is warning people who are filing Self-Assessment returns to be on the look out for fraudsters, after customers referred nearly 150,000 frauds to the taxman in the last year. As the January 31, 2025, deadline looms, the scammers are targeting people with tax refund offers or demanding customers make tax payments, so these criminals can get hold of your personal and banking details.

Around half (71,832) of all frauds reported in the last year were associated with fake tax rebate claims, but these are not the only things for self-assessment filers to look out for. Plus, the number of frauds being perpetrated are on the rise. There was a 16.7% rise in the number of scams referred to HMRC between November 2023 and October 2024.

How can I tell if it really is HMRC contacting me?

If you are contacted by someone claiming to be HMRC, where you are being asked for your personal information or being offered a tax rebate, then you can look for advice on GOV.UK to help you identify if you are dealing with a scammer. HMRC won’t leave you voicemails threatening legal action or to arrest you, and you won’t get a text from HMRC asking you for your personal or financial information. If you receive any of these, you can assume you are being targeted by a criminal.

Kelly Paterson, Chief Security Officer at HMRC, said: “With millions of people filing their Self-Assessment return before January’s deadline, we’re warning everyone to be wary of emails promising tax refunds.

“Being vigilant helps you spot potential scams. And reporting anything suspicious helps us stop criminal activity and to protect you and others who could have received similar bogus communication.

“Our advice remains unchanged. Don’t rush into anything, take your time and check ‘HMRC scams advice’ on GOV.UK.”

What should I do if I think I have been targeted?

If you think you have been targeted by fraudsters claiming to be HMRC, you can get in touch with the relevant departments in various ways. For example, if you have been contacted by email, a criminal activity known as ‘phishing’ then you can forward the emails to phishing@hmrc.gov.uk.

If you have received a phone call that you think is from a fraudster, you can report this on GOV.UK, and if you have any suspicious texts that claim to be from HMRC, you can forward them to 60599.

You won’t be contacted by email, text or phone by HMRC to let you know you are due a refund, or to ask you to request one. Any refund due can be claimed via your online HMRC account or through the HMRC app which is secure and free to download.

If you think you have had money stolen, then you should contact your bank as soon as you realise, and you can also report it to Action Fraud. In Scotland, contact the police on 101. The more each of us reports suspicious and potentially fraudulent activity, the more likely it is that you can prevent someone else becoming a victim. You can find out more information about stopping fraud at www.gov.uk/stopthinkfraud.

We can help you

If you think you may have been targeted by criminals or have been a victim of fraud, then once you have taken the immediate measures above, please contact us and we will do everything we can to assist you.

HMRC’s new Basis Period Reform could bring higher tax bills this January

A change in the way HMRC is calculating when tax is due to be paid on profits arising for the self-employed or members of a Limited Liability Partnership (LLP) mean they could be facing higher bills in January than they are expecting.

The new Basis Period Reform, which has been introduced as a way to standardise when non-incorporated businesses pay tax, will affect anyone who is self-employed or in an LLP with a tax year end outside of March 31 or April 5 each year. They will be expected to pay the tax due on the actual year of their trading rather than their chosen accounting period, which could increase the amount they need to pay in January 2025.

Does this mean paying more tax overall?

Those affected won’t be paying more tax than they otherwise would, but they may need to pay more than they expect in January, as they will need to bring themselves up to date for the 2023/24 tax year. This bill will need to be paid by January 31, 2025, so the main issue for those affected will most likely be cashflow.

However, given 2023/24 is a transitional year, it is possible to spread the transitional profits over a period of five years, which should improve cashflow by reducing the payment due in January. You may also be able to benefit from overlap profit relief if it is relevant. But reducing any liability for January 2025 would mean acting sooner rather than later and speaking to your accountant ASAP.

Critics claim there hasn’t been enough publicity surrounding this change, which could leave many self-employed people and LLP members in the dark about what their liabilities will be in January 2025, with little time to find the extra cash if they have not prepared correctly. You can find more information on the Basis Period Reform on Gov.uk.

Let us help you

If you’re going to be affected by this change, then please get in touch as soon as possible and we will do everything we can to help you prepare.

Do you need to pay a Simple Assessment tax bill this January?

Most of us have heard about the Self-Assessment tax regime, especially those who are self-employed or who need to declare income outside of their main PAYE job. But some people will have received Simple Assessment letters from HMRC, and they may need to pay a tax bill by January 31, 2025, too.

HMRC has been sending out letters to those it believes need to pay tax but who would not need to fill in a full self-assessment form. Those getting the letters will include people who owe £3,000 or more, who won’t be able to pay the tax they owe out of their PAYE income, or who must pay tax on their State Pension.

Challenging a letter

If you get one of these letters and you believe it has come to you in error, or that there is an error in the calculations you’ve been sent, you will need to get in touch with HMRC within 60 days to challenge it and explain why it is incorrect or doesn’t apply to you. The deadline for paying your final bill will depend on when you get your Simple Assessment letter.

For example, if your letter comes before October 31, 2024 – which covers the April 6, 2023, to April 5, 2024, tax year – then you need to pay what is owed by January 31, 2025.

If you get your letter after October 31, 2024, which again covers the 2023/24 tax year, or perhaps an earlier one if relevant – it should say the period it relates to on the letter – then you must pay what you owe within three months of the date on the letter.

What will be in the letter?

The Simple Assessment letter will outline what your taxable income is – which could be pay from an employer, from your pension, or State benefits – and it will also show any tax you have paid. The important figure is the tax it says you owe.

However, you shouldn’t take these figures at face value. Always check HMRC has its sums right, because it can often make mistakes which could result in you paying tax you didn’t need to pay. You can check your pay on your P60, look at your bank statements, or check the figures on any letters you have received from the Department for Work and Pensions if the tax bill relates to benefits or the State pension. Remember though, if you get State benefits paid once every four weeks, you need to multiply your regular payment by 13, not 12, to find out what the total paid to you in a year is.

You may also be able to use the HMRC tax checker to double check an estimate of how much tax you should have paid in the previous tax year. But if it still doesn’t make sense, then you can always ask HMRC for advice or a speak to your accountant.

What if I don’t agree, or can’t afford to pay the tax I owe?

If you think the figures in your Simple Assessment are wrong, or you think you shouldn’t have been sent one at all, then you must go back to HMRC within the 60 days and explain which figures are wrong and what you think they should be.

If HMRC agrees the Simple Assessment is incorrect, then you will have a new letter sent to you based on new figures and you will need to make the payment outlined in that letter within the relevant period. If HMRC doesn’t agree the figures are incorrect, then you will still have to pay the amount due before the deadline, unless you are told it will delay your payment until a later date.

However, if your deadline is approaching and you have not resolved the problem with HMRC, you will still need to pay the tax HMRC says is due. Then, if you still disagree with its decision, you have the right to appeal. You can find out how to do this in the decision letter, and any appeal must be made within 30 days of receiving the decision letter.

You can pay your bill online, by bank transfer, or by cheque if you prefer. If you can’t pay on time, then you should contact HMRC and explain your position. You may be asked to pay what you owe in instalments over time, but you can only do this once the deadline has passed. You need to have your National Insurance number and your UK bank account details when you contact HMRC about this.

You will be asked:

• if you can pay in full
• if there are other taxes you need to pay
• how much money you earn
• how much you usually spend each month
• what savings or investments you have

If you have savings or assets, HMRC will expect you to use these to reduce your debt as much as possible.

Source: Gov.uk

Contact us

If you receive a Simple Assessment letter and don’t know whether the information in it is correct or not, then please get in touch with us and we will do whatever we can to help.

Tax relief claims on employee expenses changed

Employees on PAYE who need to make expenses claims can no longer currently make their claims online, and instead will have to use a postal system to deal with HMRC. Anyone who has out-of-pocket expenses for their job is entitled to claim tax relief on these from HMRC. Some people will do this on a self-assessment form, if they are self-employed or need to file a return for other reasons, or if they need to claim more than £2,500.

However, if they only have PAYE earnings and no need to file a self-assessment they will now need to file a P87 form and will need to provide supporting evidence for the claim by post. Many expenses will be reimbursed directly by the employer, which cannot then be claimed again with HMRC for tax relief. But if the employer does not reimburse all these expenses, which can include professional memberships or ongoing education, then these would qualify for tax relief.

Prior to October 14, 2024, the claims could be made by PAYE employees online, by phone or by post. But HMRC is currently insisting any claims are made by post, with relevant documentation sent to:

Pay As You Earn and Self-Assessment

HM Revenue and Customs

BX9 1AS

What exactly can you claim for?

There are myriad items that can be claimed for, and HMRC has outlined numerous examples along with the kind of evidence that would need to be included for the tax relief to be considered. These include:

• Subscriptions to professional bodies: copies of receipts, or other evidence, showing how much was paid for each subscription.
• Mileage allowance: a copy of a mileage log for each employment showing the reason for every journey and the postcodes for the start and finishing points.
• Hotel and meal expenses (subsistence): copies of receipts that show the date of the stay or meal, and the name of the hotel or restaurant.
• Expenses for working from home: evidence that the employee must work from home. This could be a copy of their employment contract or something else that explicitly states they must work from home. A claim for relief cannot be made if the employee chooses to work from home.
• Other expenses: a list of each expense showing the employments they are for, plus copies of receipts or other evidence showing the name of the item and the date the expense was incurred.

Source: HMRC

There are also some conditions that apply to making these claims, which include having to pay at least as much in tax as is claimed in the relevant tax year and providing evidence to support the claim. Exceptions to this include claims for uniforms, work clothing and tool flat rate expense claims. Some expenses will also be expected to be reimbursed by the employer.

Why has this change happened?

HMRC said it has “identified a growing tax risk driven by ineligible claims for employment expenses”, and that by changing the way the claims are made, it should “help people get their tax right first time, instead of focusing on correcting issues after they arise”. Employees need to be sure they are eligible to claim as HMRC will check this.

Any employees and agents of employees who currently have claims in process are being informed if these claims are being paused. But HMRC says it is working to reinstate the digital claims process as soon as it can. The process for submitting expense claims through self-assessment is unchanged.

The reinstatement of digital claims for uniform, work clothing and tool flat rate expenses for PAYE employees is expected to happen from the end of October, and for all other expenses by April 2025. If the claimant has more than one job, they must tell HMRC which employment the expense relates to, and whether any part of this was reimbursed by the employer. If it was, then evidence showing how much was reimbursed must also be provided.

We can help you

You should never pay more in tax than you need to, and there are various expenses PAYE employees can legitimately claim for. If you are unsure about what these are, then please get in touch and we would be happy to help you work this out.

Nearly £57m in overpaid pension tax refunded in Q2

HMRC has had to repay a massive £56.9m in overpaid pension tax between April 1 and June 30 this year, as the problems with the emergency tax rate on flexible pension withdrawals continue to bite. HMRC will put you on an emergency tax rate when you first access your pension, but this treats your first payment as if this is what you are going to get in income every month, which leads to significant tax overpayment for new pensioners.

The figures have been laid out in the latest Pension Flexibility data released by HMRC in its newsletter, but it is a complication that people would prefer not to have. You can get a refund, but it would be better if it didn’t happen in the first place.

The problem is that your first payment may include your 25% tax-free lump sum, and the tax applied is as if you are going to be getting this amount every month from then onwards. While this would be nice if it could happen, it means you are going to be paying a lot more tax than you should do and will need to reclaim it.

How do you get a refund?

You can get a refund by filling in an online form and sending this back to HMRC. But there are three different forms you can use, which doesn’t help when it comes to simplifying things. The main one, a P55 is for claiming a refund on a pension that has been accessed flexibly.

The other forms are the P53Z which is to reclaim tax wrongfully paid on a serious ill-heath pension lump sum or if you have taken your whole pension through the flexibility rules, and the last one, the P50Z is for people who have stopped work and flexibly taken their whole pension pot, and also have a P45 from their employer. Complicated? Yes, but that’s why your accountant is best placed to help you if you need it.

In Q2 this year, HMRC says it processed:

• P55 — 11,449 forms
• P53Z — 3,612 forms
• P50Z — 1,018 forms

Total value repaid: £56,925,219

Source: HMRC

This suggests an average of £3,540 per person in overpaid tax, which is not an amount to be sniffed at, especially as this is in just one quarter of the year.

Is there any way to stop this happening?

In an ideal world, it wouldn’t happen at all, but sadly we don’t live in one. So, the best thing you can do to limit the impact this will have on you is to make your first pension withdrawal payment a small one, if you can. This way, the amount of tax taken under the emergency code will be much smaller, and you will have far less, if anything, to reclaim.

The reason the emergency code is applied is because the pension provider – which may be your old employer or a financial services company – won’t know exactly how much income you will be getting in your retirement month-by-month. You may have other sources of income, for example, and this is why HMRC insists that an emergency tax code is used.

The downside of this is that because this is effectively a PAYE system, it doesn’t cope well with one-off payments, like your tax-free lump sum, or the flexible nature of pensions now. So, the best thing you can do is be prepared, and make your refund claim as soon as possible. You can ask for your refund to be paid into your account ASAP, or you can wait until the end of the tax year and filing a tax return if you prefer. But really, why let the taxman have your money for longer than necessary?

We can help you

If you are about to retire and plan to take your pension straightaway, please get in touch with us and we would be happy to help you avoid any costly tax errors that might occur.

MTD to expand to income tax in 2026 – get ready!

The Making Tax Digital (MTD) regime is set to begin applying to income tax soon, and the first people to be brought into the regime will be the self-employed and landlords. Although April 2026, which is when relevant taxpayers must sign up to file digitally, sounds a long time away, it will arrive sooner than you think, and you need to be ready for the changes to avoid the chance of a penalty.

From April 2026, any self-employed person or landlord earning more than £50,000 a year from their self-employed income or property income, will need to sign up to the scheme and file their tax return digitally. Also, instead of filing once a year like you do now, you will instead be asked to send HMRC quarterly updates through compatible software. There are many different brands of software that would be suitable, so finding the right one for you is something you could start working on now in consultation with your accountant.

Even though the first sign-ups for MTD for income tax will be for those earning more than £50,000 a year, anyone earning income of more than £30,000 will also have to sign up to the regime by April 2027.

What if I earn less than £30,000?

If you earn less than £30,000 you can still sign up for the scheme voluntarily, but you will not be forced to join in these early stages. But there might still be some benefits to signing up early. Currently, HMRC is running a testing phase to find out how to make the expansion of MTD work best for the self-employed and landlords. This means if you sign up early, you may have a chance to help shape the outcome.

It will also help you to get to grips with the new system before you are obliged to use it, so you feel more confident in everything you need to do before the April 2026 or deadlines arrive.

You will also have access to a dedicated customer support team as an early adopter, who will help you understand and resolve any issues you have with filing under the new regime. Plus, you and your accountant would be supported through the process for your other tax affairs – including PAYE and self-assessment for the 2024/25 financial year.

How do I join up?

Around 780,000 people are expected to qualify to join the first phase of this round of MTD. The aim for HMRC is to improve record keeping, as you must file quarterly, and everything will be held digitally which should also reduce the number of errors on your taxes.

If you want to join up in this phase, then please contact your accountant and they can help you. They can sign up as many of their eligible clients as they want to, and this is the best way to access the new regime as you then have the backing and help of an expert to guide you through any problems. But if you want to sign up separately, you can do that providing you’re eligible.

To be eligible, there are various rules and regulations, so you need to check if any of them apply to you. These details are outlined on the Gov.uk website:

You can sign up voluntarily if (all the following):

• your personal details are up to date with HMRC
• you’re a UK resident
• you have a National Insurance number
• you have submitted at least one Self-Assessment tax return
• you’re up to date with your tax records — for example, you have no outstanding tax liabilities
• you use an accounting period that runs from 6 April to 5 April

You can also use an accounting period that runs from 1 April to 31 March, if the software you choose supports this. To use this accounting period, you must:

• select calendar update periods in the software before the first update is made
• make an adjustment at the end of your first tax year — so that your income and expenses from 1 April to 5 April are included in your tax return

If you sign up, during testing you will not be able to:

• claim carry back of losses
• change your accounting period
• change your accounting method

You cannot sign up voluntarily if you:

• have a High-Income Child Benefit Charge
• have a payment plan with HMRC
• are a partner in a partnership
• claim Married Couple’s Allowance
• claim Blind Person’s Allowance
• are currently, or are going to be, bankrupt or insolvent
• are an MP, minister of religion or Lloyd’s underwriter
• have income from being a foster carer or being in a shared lives scheme
• have income from a trust
• have income from a jointly owned property
• have income from a furnished holiday let
• are subject to a compliance enquiry
• use ‘averaging’ or other arrangements because your profits vary between years — for example, because you’re a farmer, writer or artist
• are signing up on behalf of someone else (unless you’re an agent) — this includes (but is not limited to) if you’re:
  • an insolvency practitioner
  • a nominee
  • a solicitor

Source: Gov.uk.

What software will I need to use?

There are many different types of software you can use to file digitally online, and some do not charge you to use them. But it isn’t as easy as just signing up to any software as which will suite you best will depend on what data you need to hold, how simple your tax affairs are, and how tech savvy you are.

All of the compatible software options can be found on Gov.uk, and while there are a few that are currently working, many more are being developed by some of the biggest names in online accounting. Again, you can ask your accountant for guidance on which would work best for you if you are unsure.

The new regime will mean more admin for those joining up, and collectively for everyone who is eligible and is earning more than £30,000, the cost of implementing the new regime is expected to be £561m as a one-off. But filing more regularly and keeping better records online is likely to help you with other areas of your finances too. So, there are additional benefits to signing up early.

Contact us

There are many aspects of the changes to the MTD regime that you may not feel comfortable with, but if you have any queries then please get in touch with us and we would be delighted to help you.

Retiring overseas? Then think about your pension

If you are planning to retire overseas, you need to consider what to do with your pension once you leave the UK. There are a few options, including leaving your pension in the same UK pension fund, and just having the income paid to a sterling bank account, and then moving it to a local account wherever you have retired to. This method can incur charges, and you will also be subject to currency exchange fluctuations which can work in your favour if the pound is strong, or against you if it is weak.

One other option is to move your entire pension overseas, so it is being held and paid out in the currency that you are using in the country you have retired to. This removes the problems associated with currency exchange fluctuations, but you need to be sure that any pension you transfer your pension to is recognised by HMRC, otherwise it can prove costly.

How do I know if HMRC recognises my overseas pension scheme?

HMRC releases a list of Recognised Overseas Pension Schemes on the first and the 15^th of the month, or the following workday if these days fall on a weekend, and it is important to check that any scheme you are looking to move your pension to is on this list. The list changes all the time though, so keep a close eye on these changes. You can set up an alert to make this easier.

If your UK pension is not moved to a Qualifying Recognised Overseas Pension Scheme (QROPS) then you could be liable to a tax charge of up to 40% of the money being moved. So, it is vital to take advice to ensure you don’t get this wrong because your entire retirement could be negatively impacted if you do.

Let us help you

Pensions can be complicated, and when you add in the additional complication of moving that pension overseas and making sure you don’t fall foul of the transfer rules, this complication reaches another level. But we are here to help, so please get in touch and we will be happy to offer you the help and guidance you need.

Bona Vacantia – what happens when an estate is unclaimed?

Many people find themselves facing their highest marginal tax rate after they have died, with Inheritance Tax at 40% for any amount over the £325,000 nil rate band, or up to £500,000 if you include the Residence Nil Rate Band and you have children. There are ways to reduce your liability by working with a solicitor or will writer to design your will in the most efficient way.

However, estimates suggest that more than half of UK adults don’t have a will, increasing the likelihood they will die intestate. When this happens, it is the State that decides who gets what from your worldly goods, and there is no guarantee they would go to who you want to have them.

What are the intestacy rules?

The intestacy rules dictate who gets what from someone’s estate if they die without a will. People often think of a will being important to ensure the right person gets their belongings when they die. But it is equally important to ensure the wrong person doesn’t get your belongings by virtue of being a blood relative, if you have someone close that you would want to disinherit.

Under intestacy, if the person who died was married or in a civil partnership and they had no children, then the spouse or civil partner will receive the entire estate, once any IHT liability has been accounted for. If they did have children, then the spouse or civil partner would inherit all property and possessions, the first £325,000 of the estate, and half of anything that remains. Any children will inherit what remains, although this doesn’t apply automatically to stepchildren, and the remainder will be split equally between all other children.

If there is no spouse or civil partner, then the estate will be divided equally among all children including adopted children. If there are no children, then surviving parents will inherit, if there are no surviving parents, then it will go to full siblings. If full siblings have died, then their children will inherit ahead of any half siblings.

If the person who died has no surviving parents, children, siblings or half siblings, then any surviving grandparents will inherit. Without living grandparents, whole aunts or uncles will inherit, or their children if they have already died. When there are no surviving family members, the estate passes to the Crown, and is known as ‘Bona Vacantia’.

Where can I find out about unclaimed estates?

The Government publishes lists of unclaimed estates online, so if you think you may be entitled to an inheritance as the only living relative of someone whose estate is Bona Vacantia, then you have the right to notify the Government and make a claim. First, you would need to check that you are the right person in the order of intestacy rules to make a claim. Then you can apply for a share of the estate.

Some genealogy companies will scan the unclaimed estates lists and then work towards finding claimants, who will then pay them a proportion of their inheritance in return. But you don’t need to use one of these companies to make a claim on an estate you think you are entitled to. You can go to the relevant page on Gov.uk and begin the process yourself for free.

Remember, someone doesn’t only have to die without a will to be intestate, they can have a will that is invalidated for some reason, such as they created it under duress or while they weren’t of sound mind. So, when you make your will, ensure you use a good solicitor or will writer who will do everything you need to do legally to make your will watertight. This will also help to prevent any family squabbles once you’re gone.

We can help you meet your obligations

The sooner you write your will, the sooner your estate will be protected – after all, none of us knows when we will leave this mortal coil. You will need to know the value of all your assets, especially if you have a company. So, please ask us for advice and we can explain everything you need to know.

Inheritance Tax at record levels, but Business Relief can help

Inheritance Tax (IHT) has reached a record level in the UK, with £7.5 billion flowing into Treasury coffers in 2023/24, up from £7.1 billion the previous tax year. One key reason for this growing tax take is rising property prices – the average house price in the UK has reached £288,949 according to Halifax – which, coupled with the lack of increase in the basic IHT thresholds since 2009/10, means more people are being pulled into the IHT net.

Currently your estate will face IHT at 40% if it exceeds £325,000. There is another allowance – the Residential Nil Rate Band – which gives you an additional £175,000 which can be used to pass your home to a direct descendant, such as your child or grandchild. This means you have a maximum of £500,000 that you can have in your estate before IHT is applied if you have children. But you can also use any of your spouse’s allowance that has been left unused if they died before you do.

Aside from this, there are numerous ways you can reduce your IHT liability during your lifetime, including making financial or asset-based gifts to relatives, using trusts effectively, and even surviving a gift you make by at least seven years. But one other way you can reduce your IHT liability is by using Business Relief.

How does Business Relief help to reduce IHT?

Business Relief is available for business owners, and on investments in companies that qualify for it. These shares can be within private companies, or companies listed on Alternative Investment Market (AIM) – the exchange for fledgling companies. Since these companies are smaller and often less established than those on the larger stock exchanges, such as the FTSE100 or the FTSE250, there is a higher risk of losing any investment you make. It may be harder to sell the shares in a private or smaller company if you needed to.

But on the plus side, any investment in a qualifying company is outside of the IHT net after just two years, rather than the seven years required for Potentially Exempt Transfers.

Will the investment always qualify for Business Relief?

You need to be holding the qualifying investment to get Business Relief when you die. But if the company has been successful and is listed on a larger exchange, such as the FTSE100, then it will no longer qualify for Business Relief. So, you need to keep a close eye on these investments if you want to be able to use them for IHT planning. You might need to invest in another company which will then need to be held for a further two years to qualify.

Another major benefit of using Business Relief is that the investment will be in your name, and if you need to have access to that money, then you can get it – if you are able to sell your shares in the company. This way you are not relinquishing control of your own assets while you are still alive.

What about if I am a business owner – what can I do?

If you own a business, then you can benefit from Business Relief on your own business if you die while you still own it. If there is a property associated with the business, there are a range of reliefs you can access. For example:

For deaths and transfers, on or after 6 April 1996, the categories of property which can qualify as relevant business property are broadly as follows with rate of relief:

• Property consisting of a business or interest in a business: 100% relief.
• Control holdings of unquoted securities in a company: 100% relief.
• Unquoted shares in a company: 100% relief.
• Control holdings of quoted shares in a company: 50% relief.
• Land, buildings, machinery or plant used by a company controlled by the transferor or by a partnership of which the transferor was a member: 50% relief.
• Settled land, buildings, machinery or plant in which the transferor had an interest in possession and used in his business (This applies to lifetime transfers only): 50% relief.

Source: M&G Wealth

There are various other ways business owners’ estates can benefit from Business Relief, but it is a complex area. You can find more information on Business Relief and how it works on GOV.UK. But the best way to maximise any benefit is to speak to your accountant, who can explain everything to you to ensure you don’t fall foul of the rules.

Contact us

If you are a business owner, or you want to know how Business Relief could help you with your IHT planning, then please get in touch with us and we would be delighted to help you understand what you can do to reduce your liability.

Tipping Act Code of Practice to bring fairness to employees

Whenever you leave a tip in a restaurant or a hairdressing salon, for example, you would hope that the tip money you left will go directly to the person who provided you the service you are tipping for. But for many restaurants and other industries, that hasn’t always been the case.

So now, the Government is working on draft legislation known as the ‘Tipping Act’ to bring fairness to sectors where tipping is common, to ensure the people who were being paid the tip get it.

What is currently happening?

In some restaurants, the tips paid by card especially, and sometimes those paid in cash, are controlled by the owner. This means the tips may not reach the workers as intended by the people who left them. The Act intends to change this, by ensuring all employers abide by a Code of Practice which will dictate how the tips should be handled.

The list below includes some of the factors considered by employers, but this isn’t an exhaustive list:

1. Type of role or work, for example, distribution between front of house and back-room workers.
2. Basic pay (and how workers are engaged).
3. Individual and/or team performance.
4. Seniority or level of responsibility.
5. Length of time served with the employer.
6. Customer intention.

Source: Gov.uk

There are various elements to the consultation, and any company that deals with customer tips should be considering what might be expected of them.

Are tips taxable?

For those people who begin getting tips where they weren’t before, there will be a tax implication to consider. All tips are subject to tax, even if they are paid to you in cash. So, you will need to declare these tips to HMRC and pay any money that is due.

Remember, if the tip has been paid as an additional amount on a card, for example, there will also be a paper trail that will allow HMRC to investigate how much money has been tipped within each business. So, if you aren’t sure what to do, you are best to seek advice.

We can help you meet your obligations

If you are going to be dealing with tips and the tax implications of them, whether as an employer or employee, then please ask us for advice and we can explain what you need to know.

Employees paid on a Thursday or Friday could face extra tax in 2024/25

Thousands of people in the UK who are paid weekly could find themselves making extra tax payments this year if they are paid on a Thursday or Friday. Employees paid on Thursday 4 April or Friday 5 April may need to pay extra tax as they would have received 53 payments in the 2024/25 tax year rather than 52, the Low Incomes Tax Reform Group (LITRG) has warned.

Even those paid fortnightly or even every four weeks could also be caught in this tax trap, which may result in HMRC looking to clawback unpaid tax.

Why will these people owe more tax?

HMRC allows employers to give an additional amount of Personal Allowance to the people affected, according to the LITRG. But because of this, they will have underpaid tax based on their income for the entire tax year. So, HMRC is likely to clawback this money unless it uses its discretion to not chase smaller amounts.

For those caught who are paid every two weeks or every four weeks, the amount they would need to pay back to HMRC would be larger, which could lead to difficulties if they aren’t planning for the bill.

Meredith McCammond, Technical Officer for LITRG, said: “Where employees are paid weekly, the PAYE system is designed to assume you are paid 52 times a year. Each week, you get a 1/52 proportion of your tax-free personal allowance (£242 a week). By the end of the tax year, this means that normally you would pay the right amount of tax.

“But for years in which 53 paydays fall, as happens this year, if you are paid at the end of the week on a Thursday or Friday, the system gives you an extra £242 chunk of tax-free personal allowance.

“When HMRC later works out how much tax these employees owe for the year compared to how much has been taken off their wages, it may show that not enough tax has been paid overall. For a basic rate taxpayer, the amount would be just under £50. As it is not significant, HMRC may choose not to collect this.

“However, the amount owed could be significantly higher if you are paid fortnightly or four-weekly, with almost £100 being owed by the former and £200 by the latter. In these circumstances, it is likely HMRC will try to collect it.”

How will I know if I owe HMRC money?

At the end of each tax year, HMRC will send out what is known as a P800 which details any tax due. If you are affected by this anomaly in the 2024/25 tax year, then you would receive one of these notifications.

If you receive one, whether for this reason or any other, then you should always check with your accountant if the calculation is correct. HMRC is fallible, and it can make mistakes that cost you money. So, always double check the calculations before you make a payment to be sure that you aren’t overpaying.

If you are still employed, then your PAYE code might be adjusted to take account of the money owed during the next tax year. But if you are no longer working, then you would have to make the payment to HMRC directly. Either way, you should speak to your accountant for guidance.

To be clear, anyone who is paid on any other day of the week either weekly or fortnightly, or who is paid monthly – as opposed to every four-weeks – will not be affected by this.

We can help you

If you think you might be affected by this tax trap, then please get in touch with us and we will be happy to help you.

Everyone should check their tax code now

HMRC will provide new tax codes at the start of every new tax year if the Personal Allowance has changed, if someone has had a change of circumstances, including perhaps had a pay rise, and even to those who are taking their pensions for the first time.

It’s important to check that your tax code is correct, as any mistake early in the year could mean paying too much or too little tax going forwards. Either way, the sooner you get this sorted out, the better, as you don’t want to be owed money by HMRC, and you certainly don’t want to owe unpaid tax.

How can I check my tax code?

There are various ways you can check your tax code, including speaking to your employer or your HR department, if your company has one. You can also look online to see what all the elements of the tax code mean and identify whether you think these have been applied correctly to you.

For example, 1257L is the code that most people will have if they have a job or a pension. This represents the £12,570 Personal Allowance that each person has – unless it is eroded away for those who are in the highest tax bracket. The ‘L’ denotes that you are entitled to the full tax-free Personal Allowance.

The numbers in the tax code indicate the amount of Personal Allowance you have, while the letters represent a variety of things. You can find a full list on Gov.uk. But if you would prefer to get an expert to check it for you, then get in touch with your accountant.

Let us help you

If you need any assistance checking your tax code, please get in touch and we will be happy to offer you the help and guidance you need.

650,000 extra pensioners pay tax for the first time this month

Around 650,000 pensioners are facing the prospect of paying tax on their pensions for the first time from this month thanks to a big boost to the State Pension from April 6, and frozen tax bands that will drag them into the tax net, according to calculations from Lane, Clark and Peacock (LCP).

The 8.5% boost to the State Pension from this month comes thanks to the so-called ‘triple lock’ which raises the State Pension this year by £902.40 to reach £11,502.40 from April 6. The triple lock guarantees that the State Pension will rise each year by the rate of inflation, average earnings growth or 2.5%, whichever is greater.

This is the second year in a row with a major boost to the State Pension’s value, after a previous 10.1% rise in the State Pension between 2022/23 and 2023/24. The tax charge for so many people arises because the Personal Allowance has again been frozen at £12,570, and if they have other pension income then they will be pulled into the tax regime. This is something known as ‘fiscal drag’ and these pensioners will see a cut in the actual amount that goes into their pocket.

Where have these figures come from?

HMRC’s own figures show that the number of people aged over 65 who pay income tax rose by three quarters of a million, up to 8.5m in April 2023 from 7.73m the previous year. The rise of 8.5% would be expected to increase that number still further, to 9.15m, which gives an increase of 650,000 according to LCP.

There was speculation around whether the Government would continue with the triple lock, but with a General Election at some point this year, and a lot of older voters voting Conservative, it wasn’t surprising to see another significant rise. Yet the ‘stealth tax’ achieved by freezing the Personal Allowance will help to clawback some of this largesse.

Steve Webb, former pensions minister and partner at LCP, said: “In terms of the triple lock policy, with a General Election in the offing, it seems quite inconceivable that the government would choose to break the triple lock promise for a second time in three years. Such a decision would be like aiming a laser-guided missile at the core of Conservative support and could fatally undermine the party’s electoral prospects.

“What is far less clear is what each party will do when it comes to their manifesto. In 2017, Theresa May removed the triple lock from her manifesto but was forced to reinstate the policy as part of her post-election deal with the Democratic Unionists. In 2019, Boris Johnson decided it was preferable to reinstate the policy. There is no doubt that the present government and opposition would both like to drop the policy in order to make savings to be spent elsewhere. But both want to avoid a situation where they have moved first by dropping the triple lock only to find that the other party has retained it.”

What should people who are due to pay tax on their pensions do?

As this will be the first time many of these pensioners will be taxed on their pension, it’s important to ensure they are paying the correct amount of tax by checking they have the right tax code. This is something your accountant can help you with.

This is something that should be checked no matter where your pension income is from to make sure you are not paying too much or too little tax. More than £42m in the first quarter of 2024 alone has been repaid by the taxman to pensioners who were taxed more than they should have been when taking flexible benefits from their pension, according to HMRC’s own figures. The average rebate to pensioners in this period was £3,167 according to calculations from Quilter.

Some of this tax overpayment could reflect people taking larger amounts from their pension during the height of the cost-of-living crisis. But this is still a very large amount of money that shouldn’t have been taken from pensioners in the first place.

Ian Cook, chartered financial planner at Quilter, said: “More than 13,000 claim forms were processed in Q1 2024, and those needing access to their funds are faced with an archaic system that over-taxes them and leaves them waiting unnecessarily before they can access the full amount they are owed. This is due to an oddity within the PAYE system which means they are placed on an emergency tax code when they first withdraw from their pension pot. For those who need to access their funds quickly, this can present a significant hurdle.

“This has caused a significant issue for those who are accessing their pension funds for years and has been exacerbated by the strain that the cost-of-living crisis has had on people’s finances over the last year or so. The system is desperately in need of an overhaul as, at present, the process is leaving people facing unnecessary emergency tax and adding additional strain at a time when many are still struggling with the cost of living.”

How can you stop this happening?

As soon as you can, you need to make sure you have the right tax code. This is something your accountant will be able to check for you, and it can save you a lot of heartache waiting for money that is better in your pocket than the taxman’s.

Many people find dealing with HMRC intimidating. But you should only pay the amount of tax due, no more and no less. So, if you think something is wrong, or you have less money in your pocket when you first take your pension that you expect, then challenge it. Your accountant can help you, and it will save you having to wait months to get that money back.

Your accountant can have these conversations with HMRC on your behalf which will make it less likely that you will overpay tax. One tip is to make several smaller withdrawals as you need them, so you don’t face an incorrect tax code on an initial lump sum. This way, there is time to update the tax code so you’re off the emergency code before you withdraw more money.

Contact us

If you want to know how to make sure you don’t pay more in tax than you need to on your pension, then please get in touch with us and we would be delighted to help you understand your tax position.

Furnished Holiday Lettings tax rules set to change in 2025

The tax regime for Furnished Holiday Lettings (FHLs) is set to be abolished from April 6, 2025, with some key tax breaks being removed by the Chancellor in the Spring Budget on March 6 in a move which could raise as much as £300m extra in tax each year. The changes will make it much harder for individuals providing holiday lets to reclaim some of the key costs associated with their letting business, and could make it more difficult to make these types of lettings profitable.

Around 127,000 properties in the UK were reported as FHLs on the 2019/2020 tax returns, but the measure is designed to encourage those offering their properties for rent as FHLs to instead offer them for long-term rent. These measures could have the desired effect, or it could result in some of those landlords affected deciding to sell up instead as it is expected the regime would bring FHLs in line with the tax treatment of long-term rental properties, but the draft legislation surrounding this change hasn’t yet been announced.

Even so, experts predict the changes could make a big dent in an FHLs current profits. At present, interest on mortgages on FHL properties can be deducted from the rental income for individuals. From April 6, 2025, interest on mortgages for businesses operated by individuals could no longer be deducted if the regime is aligned with longer-term rental property. Instead, a 20% tax credit would be given against the owner’s tax liability, which for higher rate taxpayers will reduce the tax relief for interest to 20%, rather than 40%.

What else will change?

FHLs owned by individuals currently enjoy a lower capital gains tax on their sale as they are classified as trading assets which are subject to business asset disposal relief when they are sold. This means that where the FHL qualifies, with gains up to the lifetime limit of £1m, they would be taxed at 10%.

From April 6, 2025, the business asset disposal relief won’t be available on FHLs owned by individuals, so they will face CGT of 18% of profits in the standard rate band, or 24% for profits in the higher rate band once the property is sold.

Also, under the current regime, FHLs would qualify for CGT rollover relief if a “replacement qualifying asset” is bought with the proceeds of the sale. But this benefit will also be removed from April 6, 2025.

Are there other allowances that will be removed?

Other changes that allow the offset of running costs could also impact the profitability of FHLs. Under the current regime, any expenditure on an FHLs can get tax relief as capital allowances. This will also be removed from April 6, 2025, although there may still be a way of reclaiming the cost of replacing domestic items against profits. Landlords can claim tax relief for replacing broken furniture and other domestic items under the Replacement of Domestic Items Relief, but this doesn’t apply to furnishing a property at the start, only for items that need to be replaced.

Toby Tallon, Tax Partner at professional services and wealth management group Evelyn Partners, said: “For second homeowners who like to make extra money out of their holiday home by putting it on AirBnB while they are not using it, it will simply make this a less lucrative ‘side hustle’. If that is a make-or-break issue for them and they don’t want to be long-term private landlords, then we could see some of these properties being sold.

“Recent changes to other areas of tax have benefitted FHL owners, which may have influenced the Government in its decision to withdraw the benefits. FHLs qualified for capital allowances, so the full expensing change last year increased tax deductions available to owners. During the pandemic, FHLs that paid business rates became eligible for grants targeted at small businesses. The rules to qualify for business rates rather than council tax were tightened in 2023. For those registered for VAT, they were also eligible for the temporary reduced rate of VAT for hospitality businesses.”

None of these changes will apply to FHLs owned through a company structure, so these properties would not be affected. We will have to wait to see the draft legislation until we know exactly what the impact of the changes will be on individuals running FHLs.

We can help you

If you own an FHL and want to find out what your options are before the rules change, then please get in touch with us and we will be happy to help you.

Cryptocurrency gains must be reported on self-assessments

If you hold or invest in cryptocurrency, or even if your employer pays you in a cryptocurrency such as Bitcoin, you may need to declare this on your self-assessment form. For anyone who didn’t in the 2022/23 form which should have been filed before January 31, it would be wise to get advice quickly on how to amend this error.

HMRC has urged anyone with crypto assets to declare any income or gains above the tax-free allowance on their tax return and they should have already paid any tax due. If you haven’t, you should address this as soon as you can.

When would I pay tax on cryptocurrency?

Someone may need to pay tax on cryptocurrency if a person:

• Receives crypto assets from employment, if they’re held as part of a trade, or are involved in crypto-related activities that generate an income.
• Sells or exchanges crypto assets, including:
  • Selling crypto assets for money.
  • Exchanging one type of crypto asset for another.
  • Using crypto assets to make purchases.
  • Gifting crypto assets to another person.
  • Donating crypto assets to charity.

Source: Gov.uk

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “People sometimes forget that information about crypto-related income and gains needs to be included in their tax return. Some people affected may not have had to do a tax return before, so it is important people check.”

How are cryptocurrencies taxed?

The way cryptocurrency is taxed will depend on how you have acquired or sold them, or whether you have given them away. For example, to check if you need to pay capital gains tax (CGT) you need to consider how much gain you have made on each transaction. The way you calculate your gain is different if you sell your tokens within 30 days of buying them.

If you got your cryptocurrency for free, then you would need to work out the gain from the market value of the asset. CGT doesn’t need to be paid on the cryptocurrency if you have paid income tax on it, but if you have made gains after receiving it, you would still need to pay CGT on any gain arising afterwards. You can find out more about how your cryptocurrency is taxed on Gov.uk.

Although the value of cryptocurrency is very volatile, there is an event coming up in the next few weeks which in the past has resulted in Bitcoin increasing significantly in value. This event is known as the ‘halving’ which is when the reward for mining Bitcoins is cut in half. It has happened on average every four years, and results in a reduced rate at which Bitcoins are created which has in the past increased the price.

Bitcoin last halved on May 11, 2020, and the next halving is expected to happen around mid-April at the current rate of mining. If the price of Bitcoin goes up after the halving in April this time, then anyone holding Bitcoin before this may see a gain that they would need to include in the tax return.

We can help you meet your obligations

If you forgot to include cryptocurrency gains in your most recent tax return, or you want to find out more about how your cryptocurrency holdings might need to be declared to HMRC, then please get in touch with us and we can explain what you need to know.

The end of the P11D is expected in 2026

The P11D form which has been used to process ‘benefits-in-kind’ such as loans for season tickets and company cars will no longer be used after April 2026, as HMRC will ask businesses to deal with all these benefits through the payroll instead.

HMRC announced earlier this year that the regime for dealing with the taxation of benefits-in-kind would change as it works to simplify the tax system. HMRC plans to automate the processing of these claims through the payroll instead, which should mean these claims are processed more quickly for employees.

What changes have been decided?

Even though HMRC is planning much further ahead than has happened in the past, it still needs to produce guidance after working with industry experts. There are still some complexities that will need to be resolved before all benefits can be dealt with through the payroll. But once this is complete, it should simplify the tax affairs of 3m people and reduce the need for them to contact HMRC.

The administrative burden should also be reduced for thousands of employers, according to HMRC, as it will remove the need for 4m end-of-year returns to be submitted. The guidance “will be made available in advance of 2026,” HMRC said.

Employers will need to be ready to change their systems to deal with these changes and should keep a close eye on the employer bulletins from HMRC as they appear, and stay in close contact with their accountants so they are ready.

Let us help you

If you need any help with changing your payroll systems to get ready for the P11D changes in 2026, please get in touch and we will be happy to offer you the help and guidance you need.

Budget changes and what they mean for you

The Chancellor, Jeremy Hunt, delivered his Budget statement to Parliament on March 6, and there were various changes that should benefit individual taxpayers and businesses.

One of the biggest announcements, which takes effect from April 6, is a further reduction in the rate of National Insurance Contributions (NICs). From this date, Class 1 employee NICs will fall from 10% to 8%, while NICs for the self-employed will be cut by an additional 2p on top of the 1p announced in the Autumn Statement. This means that from April 6, 2024, the rate of Class 4 NICs will fall from 9% to 6%.

Companies will need to begin updating their payroll software soon if they haven’t already done so, to accommodate these changes.

High Income Child Benefit Charge threshold raised

The Chancellor also raised the threshold at which Child Benefit is removed for higher earners. The High Income Child Benefit Charge will rise to £60,000 from April 6, and will taper up to £80,000. So, for every £200 of income that exceeds this £60,000 limit, the charge will be 1% of Child Benefit, and when your income exceeds £80,000, the charge will equal the Child Benefit payment.

Any new Child Benefit claims made after April 6 this year and before July 8 this year will have the payments backdated, but they will be subject to the charge in the 2024/25 tax year if your income is above £60,000. A claim made in May, for example, would be backdated to February, but you would only pay the charge on this if your income is above the new £60,000 threshold.

Any business owner with employees interested in claiming Child Benefit, or who want to restart Child Benefit payments if they have opted out in the past, can share this new guidance on the charge with them.

Child Benefit claims will automatically be backdated for three months, or to the date of birth of the child if later. Anyone wanting to make a claim for Child Benefit who isn’t currently receiving it can make the claim in the HMRC app or online.

If you want more information about either the NICs changes and/or the High Income Child Benefit Charge, you can find this on Gov.uk.

New £5,000 extra ISA allowance to boost UK businesses

The Individual Savings Account (ISA) allowance was kept at £20,000 once again in the Budget – it hasn’t changed since the 2017/18 tax year – but the Chancellor did add to the ISA stable for those who are interested in investing solely in UK companies. The UK ISA – which is also being called the ‘British ISA’ or ‘Great British ISA’ allows investors to put an extra £5,000 into an ISA that supports UK businesses.

The aim is to help boost the London Stock Exchange, according to some commentators, but whether this will be effective remains to be seen.

Jason Hollands, Managing Director of Bestinvest, the online investment service owned by wealth manager Evelyn Partners, said: “The ‘British ISA’ is undoubtedly a victory for the City stockbrokers and bankers who have lobbied hard for it amid a drought in IPO and deal fees and a worrying sapping of companies listed in London to New York.

“However, I am doubtful it will drive anything like the increased flows into UK equities being talked about. Proponents claim it might drive £200 billion extra cash into UK equities over five years, but it is hard to reconcile such a figure with the fact that the existing, larger ISA £20,000 allowance attracted a lesser amount into Stocks & Shares over the last five years according to data disclosed by HMRC.”

Mr Hollands added that a relatively modest number of people currently fully use their existing £20,000 allowance and a logical step for those who will be in a position to do so and also make use of the ‘British ISA’ “will be to commit less to UK equities in their main allowance to compensate”.

What else was announced in the Budget?

Other announcements made by the Chancellor included an increase in the VAT threshold for companies from the current £85,000 to £90,000 from April. This is the point at which a company needs to formally register for VAT.

The Chancellor also removed the ‘non-dom’ status which allows people living in the UK but who consider their permanent home to be overseas, to benefit from tax exemptions, especially on foreign investments. Foreign workers and students have benefited from these, but it has been particularly useful for the wealthiest individuals who have been able to use this status to not pay tax on their worldwide income, said Rachael Griffin, tax and financial planning expert at Quilter.

She added: “People who use the remittance basis of tax, i.e. only pay UK tax on the income or gains that are brought to the UK, typically are well advised and therefore with the help of their adviser will be able to find creative ways to mitigate their UK tax liabilities regardless of the change in rules.”

The expected boost to tax revenue from this change is around £3.8 billion. But there is a chance that the rule change could discourage some wealthy people from living in or investing in the UK, even though other reasons for living here, such as political stability and the UK legal system, may encourage some of those affected to remain, said Ms Griffin.

Contact us

If you want to know how any of these or other measures announced in the Budget might affect you, then please get in touch with us and we would be delighted to help you understand your tax position.

End of tax year planning starts now – use up any allowances

Now is the time to start thinking about your end-of-year tax planning while there is still time to maximise the benefit of any allowances you haven’t used yet this tax year. The end of the current tax year is April 5, 2024, and there are various tax breaks you want to make the most of before that date.

However, there is another date to bear in mind too – March 6, which is when Chancellor Jeremy Hunt will deliver his Budget to the House of Commons. There is some expectation that he will announce tax cuts on this date, which is customary in a General Election year. The question is whether it will be possible with an economy that is currently in recession.

Even so, there are plenty of things you can already do to help yourself legitimately save tax without waiting on a politician’s promise, so read on to find out more.

Maximise your pension contributions

Pensions is one of the most advantageous areas to maximise your tax relief. Most of us can put as much as £60,000 into a pension in the 2023/24 tax year and get tax relief on the contributions. But the actual amount you can put in and receive tax relief on is determined by how much tax you will pay in this tax year. You can’t receive more in tax relief than the tax you have paid in a single tax year.

Anyone who is a 40% or 45% taxpayer may need to reclaim their pension tax relief above 20% – which is the basic rate of income tax relief – directly from HMRC via their self-assessment return. If you have made all of the contributions you can for this tax year, then you can look to add some more to your pension by using up unused allowances from previous tax years.

This is something called Carry Forward. You can go back three years to mop up unused pension tax relief, and you must have also used up all of your allowance in the current tax year before you use Carry Forward. You must also have been a member of a UK pension scheme – not just the State Pension – for each of the previous three years you want to carry forwards.

If you earn more than £260,000, then your annual allowance which qualifies for tax relief will be reduced by £1 for every £2 above this amount you earn. The taper stops at £360,000, giving everyone a minimum of at least £10,000 annual allowance.

To make sure you don’t fall foul of any HMRC rules, you should speak to your accountant before you make your pension contributions to ensure you maximise the benefits and limit any issues.

Use up your Capital Gains Tax and ISA allowances

Each of us has a Capital Gains Tax (CGT) allowance each tax year, which for the 2023/24 tax year is just £6,000 – down from £12,300 in the 2022/23 tax year – and it is expected to fall to £3,000 for the 2024/25 tax year, unless there is a change announced in the March 6 Budget.

This amount can be used to reduce the amount of tax on any investment you may have crystallised a gain on in the relevant tax year. For example, if you invested, say, £100,000 in a fund and you made £6,000 on the investment in this tax year, you could crystallise that return between now and April 5, and you would not pay any CGT on it as it is under the CGT allowance. This is assuming you haven’t crystallised other gains elsewhere.

Remember though, CGT applies to many types of investments, including property investments that are not your own home. So, any buy-to-let property that you sell would also face CGT if you had made a gain above the £6,000 for this tax year.

Any amount of gain over this threshold in a residential property investment that isn’t your home, is taxed at 18% and 28% respectively for basic rate and higher rate taxpayers. For other investments, the rates are 8% and 20%.

To remove the threat of CGT, you can make your investments through an Individual Savings Account (ISA). For this tax year, you have a limit of £20,000 that you can invest through an ISA, and if you haven’t used your full allowance yet, you still have time to top it up before April 5. Using an ISA means your investment is excluded from CGT and Income Tax charges, so there is a real benefit to using as much of your ISA allowance as you can each tax year.

What else should I consider before the end of the tax year?

There are various other things to consider before the end of the tax year, and your accountant is best placed to advise you on your specific financial position. But other things to consider include reclaiming any tax you may have overpaid in this tax year if, for example, you were made redundant or left a job for another reason, such as moving overseas.

A Pay-As-You-Earn (PAYE) tax basis means the amount of tax you are due to pay in a whole year will be split into 12 even payments. If you are employed for the full 12 months, then you will have paid the correct amount of tax.

However, if you are made redundant or leave your job before the 12 months is up, then you will have overpaid tax as you will have not earnt the full amount expected. Any statutory redundancy pay, up to £30,000, will be tax free. But if you have other types of payments as part of your termination pay, such as unpaid wages, holiday pay and so on, then this part may be subject to tax and National Insurance. If you need to reclaim overpaid tax, or you need advice after getting a payout from the company you are made redundant from, your accountant can help.

Contact us

If you are unsure about how to maximise your tax relief or you have questions about a redundancy payment, then please get in touch with us and we would be delighted to help you understand your tax position.

Rumours circulate over HMRC crackdown on eBay and Etsy sales

Rumours have been circulating online that HMRC is set to crack down on tax avoidance on sales of goods on the likes of eBay and Etsy, but the basic rules haven’t changed, and anyone who was trading on one of these sites should always have been declaring their earnings to the taxman.

What has changed is that from January 1, 2024, these sites are obliged to provide information to HMRC on sellers operating through the site before January 2025. So, if you have been using these sites to sell items and generating income that should have been taxed, you should get in touch with your accountant to find out what you need to do as soon as possible.

Confusion arises because many people will sell items they no longer want or need on eBay, for example, and in most of these cases there is no tax to be paid. But if you buy goods with the intention of selling them, or you make a capital gain on what you’re selling, then there could be tax to pay.

When would you need to pay tax?

In a useful update, HMRC has outlined the various scenarios that you may find yourself in if you are selling items on one of these sites, and when you would be most likely to need to pay tax. For example, if you are selling items that you own – perhaps because you are clearing out a shed or an attic – then this is likely to be a one-off activity, and you will most probably sell the items for the same or less than you bought them for. In this case, you wouldn’t need to pay tax.

However, let’s say you sold some unwanted clothes or other items you had in the house online to either raise money or simply reduce clutter in your home. You find that you are quite good at getting a good price for these items and decide to start buying items at car boot sales or elsewhere, and then sell them online for a profit. The original sale wouldn’t be considered trading, but the later sales would as you’re deliberately buying goods to sell. In this case, you could be liable to pay tax.

You would also be considered trading if you buy and then sell model cars – another HMRC example – or other items, or you import goods to sell online for a profit. You would even be trading if you make homemade gift cards that you sell online regularly with the intention of making a profit from them.

What other ways might you be liable to tax online?

There are other ways you might be selling that could leave you open to a tax charge. One would be if you are selling online services, such as teaching a language over Zoom or Teams, for instance, or if you generate revenue by offering other services online, such as proofreading. This may not be a service you offer through the likes of eBay or Etsy, but you would be liable to pay tax on income you generate from it just the same.

In fact, any online marketplace – which includes a website or a mobile phone app – would be considered as such by HMRC if any kind of transactional trading takes place on it. These online marketplaces will soon be generating copies of your transaction history that you can get hold of to check your liabilities yourself, but that will also be sent to HMRC directly under a wide-ranging set of internationally agreed guidelines. So, make sure you know if you are expected to pay tax on these transactions, and prepare for it accordingly so you don’t have any nasty surprises.

Are there any allowances?

One thing to consider is that there are certain allowances you might be able to benefit from if you are selling goods online. For example, if your total income from selling goods or services online was less than £1,000 before you take off any costs or expenses, then you wouldn’t need to tell HMRC about it or pay any tax on this.

This is because that amount comes under the Trading and Miscellaneous Income Allowance – which also gives you a £1,000 allowance for any property income under the same legislation. But if the amount you generate is above this, then you would need to inform HMRC and pay any tax due.

Remember though, you also have the Personal Allowance, which for the 2023/24 tax year is £12,570 per year. If you don’t have a full-time job, or you earn less than this across all the ways you generate income each year, then you would still have no tax to pay. But you must still register with HMRC and file a self-assessment return each year.

If you don’t know how to do this, or need to register and file a self-assessment return, you can find more information on Gov.uk

Contact us

If you are unsure whether any of your activities could generate a tax liability, then please get in touch with us and we would be delighted to help you understand your tax position.

Could you be better off by claiming Marriage Allowance?

HMRC is encouraging those who are either married or in a civil partnership to check whether they could be up to £252 a year better off by claiming Marriage Allowance. It has launched a Marriage Allowance Calculator to help those who are unsure double check what they might be due.

Couples could be eligible where one partner is working and the other has income of less than their personal allowance of £12,570, which would include those who have retired, are not working because they are caring for children or elderly relatives, can’t work because of a long-term health condition, have a part-time job, or are low paid.

Around 68% of people in their 60s are either married or in Civil Partnerships, the Government said, and may not realise they can claim the Marriage Allowance if one of them has retired while the other is still working.

Charlie Bethel, Chief Officer, UK Men’s Sheds, a charity which brings retired men together to meet at community workshops, said: “If you have retired and your partner is still working, you may not realise that you could apply for Marriage Allowance. As a charity that brings retired men together, we are urging our members throughout the UK to invest the 30 seconds of time it takes to find out if they can claim.”

How does it work?

Marriage Allowance gives couples the chance to reduce their tax liabilities by allowing the lower or non-earning spouse to reduce the amount of tax their partner or spouse pays. This is due to the way the Personal Allowance, which is normally £12,570, and is the amount that someone can earn before they need to begin paying tax, can be dealt with.

If the couple is eligible for Marriage Allowance, then the lower or non-earning spouse or partner can transfer £1,260 of their Personal Allowance to the higher earner in the partnership. This can reduce their tax liability by as much as £252 a year.

Even better, if the couple has been eligible but hasn’t previously claimed the Marriage Allowance, then they can backdate their claim for the previous four tax year and receive a lump-sum payment of more than £1,000.

How to find out if you’re eligible

HMRC is currently promoting its Marriage Allowance Calculator, which will allow you to find out if you are eligible for the allowance or not.

Angela MacDonald, HMRC’s Deputy Chief Executive and Second Permanent Secretary, said: “The Marriage Allowance calculator helps couples to find out in seconds how much they stand to benefit. Check today and claim right away. It’s a quick and easy process that’s worth up to £252 a year.”

To benefit from the tax relief, one partner must have income less than £12,570 and the higher earning partner’s income must be between £12,571 and £50,270 or £43,662 in Scotland. HMRC has produced a YouTube video to explain who is eligible and how to apply called Marriage Allowance – who is eligible and how to apply which gives more information.

We can help you meet your obligations

Marriage Allowance is one tax benefit you might be eligible for, but there could be others. If you want to be sure you are claiming everything you can, then please get in touch and we will explain what you need to know.