Introduction

Chancellor of the Exchequer Rachel Reeves set out tax-raising measures worth up to £26 billion in the Autumn Budget on 26 November 2025.

The increases will be achieved through a range of measures, including extending the freeze on Income Tax thresholds for a further three years.

Tax increases

In addition to maintaining Income Tax thresholds, taxes on property, dividend and saving income will be increased.

The Budget also announced employee and employer National Insurance contributions (NICs) on salary sacrifice pension contributions above £2,000 a year and introduced a tax on homes valued at £2 million or more.

That is my choice

On spending, Ms Reeves took action to cut energy bills, freeze rail fares and end the two-child benefit cap.

Ms Reeves said: ‘I can tell you today that, for every family we are keeping our promise to get energy bills down and cut the cost of living with £150 taken off the average household energy bill from April.
‘Money off bills, and in the pockets of working people. That is my choice.’

Personal Tax

Tax bands and rates

The basic rate band remains at £37,700, with the higher rate threshold remaining at £50,270. The additional rate threshold remains at £125,140. The freeze of these thresholds will continue until April 2031. The NICs Primary Threshold and Lower Profits Limit remain at £12,570. The NICs Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 up to April 2031 as well. Other employer NICs relief thresholds aligned to the Upper Earnings Limit will also be maintained at this level.

The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.

Scottish residents

The tax on income (other than savings and dividend income) is different for taxpayers who are resident in Scotland from that paid by taxpayers resident elsewhere in the UK. The Scottish Income Tax rates and bands apply to income such as employment income, self-employed trade profits and property income.

The rates and bands for 2026/27 will be announced in the Scottish Budget. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK.

Welsh residents

Since April 2019 the Welsh Government has had the right to vary the rates of Income Tax payable by Welsh taxpayers (other than tax on savings and dividend income). For 2025/26 the tax payable by Welsh taxpayers is the same as that payable by English and Northern Irish taxpayers. This will continue for 2026/27.

The personal allowance

The Income Tax personal allowance is fixed at the current level of £12,570 and will remain frozen until April 2031.

There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. This means that there is no personal allowance where adjusted net income exceeds £125,140.

The government will increase the married couple’s allowance and blind person’s allowance from 6 April 2026 by the CPI rate for September 2025 of 3.8%.

Tax on property income

Property income is any income from letting land and buildings.
Individuals have a Property Allowance. This exempts property income of £1,000 or less. Property income over £1,000 can be offset either by the £1,000 Property Allowance or by deducting relevant expenses.

The government is introducing the following separate tax rates for property income from 2027/28:

• 22% for basic rate taxpayers
• 42% for higher rate taxpayers
• 47% for additional rate taxpayers.

Tax on savings income

Savings income is income such as bank and building society interest.
The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of Income Tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.

Savings income within the allowance still counts towards an individual’s basic or higher rate band and so may affect the rate of tax paid on savings above the Savings Allowance.
Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. This will remain at £5,000 until 5 April 2031. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income, less allocated allowances and reliefs) exceeds £5,000.

The current tax rates on savings income will be maintained for 2026/27. From 6 April 2027, there will be a 2% increase in the applicable tax rates. The basic rate will increase to 22%, the higher rate will increase to 42% and the additional rate will increase to 47%.

Tax on dividends

Currently, the first £500 of dividends is chargeable to tax at 0% (the Dividend Allowance). This £500 is retained for 2026/27.
These rules apply to the whole of the UK.
From 6 April 2026, there will be a 2% increase in the ordinary and upper rates of Income Tax applicable to dividends. The additional rate will remain unchanged at 39.35%
Dividends received above the Dividend Allowance will be taxed at the following rates for 2026/27:

• 10.75% for basic rate taxpayers
• 35.75% for higher rate taxpayers
• 39.35% for additional rate taxpayers.

Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.

To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.

Income Tax ordering rules

The Income Tax ordering rules will change from 6 April 2027. The personal allowance will be deducted from employment, trading or pension income first. Currently, individuals can choose which income the allowance is offset against.

Pension tax limits

For 2026/27:

• The Annual Allowance (AA) is £60,000.
• Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000, to a minimum AA of £10,000.
• The Lump Sum Allowance, which relates to the general maximum that may be able to be taken as a tax-free lump sum, is £268,275.
• The Lump Sum and Death Benefit Allowance, which relates to the general maximum that may be able to be taken as a tax-free lump sum in certain circumstances, is £1,073,100.

Individual Savings Accounts

For 2026/27, the limits are as follows:

• Individual Savings Accounts (ISAs) £20,000
• Junior ISAs £9,000
• Lifetime ISAs £4,000 (excluding government bonus)
• Child Trust Funds £9,000.

These limits will remain frozen until 5 April 2031.

From 6 April 2027, the annual ISA cash limit will be set at £12,000. The remaining £8,000 will be designated for stocks and shares ISA investment. This restriction will not apply for those over the age of 65, where the cash ISA limit will remain at £20,000.

Employment

National Insurance contributions

Employees

For 2025/26 the rates of Class 1 employee NICs are 8% and 2%. The employer rate is 15%.

The Secondary Threshold is the point at which employers become liable to pay NICs on an individual employee’s earnings and is currently set at £5,000 a year from 6 April 2025. The government announced that this will be maintained at this level until April 2031.

The Employment Allowance allows eligible businesses with employer NICs bills to deduct £10,500 from their employer NICs bill.

The self-employed

For 2025/26 the rates of Class 4 self-employed NICs are 6% and 2%. These rates remain the same for 2026/27.

For Class 2 NICs from 6 April 2025:

• Self-employed people with profits of £6,845 and above get access to contributory benefits, including the State Pension, through a National Insurance Credit, without paying Class 2 NICs.
• Those with profits under £6,845 who pay Class 2 NICs voluntarily to get access to contributory benefits, including the State Pension, will continue to be able to do so.

Changes for 2026/27

The government will increase the Lower Earnings Limit (LEL) and the Small Profits Threshold (SPT) from 2026/27. For those paying voluntarily, the government will also increase Class 2 and Class 3 NICs for 2026/27.

The LEL will be £6,708 per annum (£129 per week) and the SPT will be £7,105 per annum. The main Class 2 rate will be £3.65 per week and the Class 3 rate will be £18.40 per week.

Employer NICs relief for veterans

The government will extend the employer NICs relief for employers hiring qualifying veterans to April 2028.

This means that businesses continue to pay no employer NICs up to annual earnings of the Veterans Upper Secondary Threshold of £50,270 for the first year of a veteran’s employment in a civilian role.

National Living Wage and National Minimum Wage

The government has announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2026. The rates which will apply are as follows: 

	NLW	18-20	16-17	Apprentices
From 1 April 2026	£12.71	£10.85	£8.00	£8.00

The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.

Taxable benefits for company cars

The rates of tax for company cars are amended for 2026/27:

• the charge for zero emission cars rises from 3% to 4%
• the charge for other cars with emissions below 75g/km increases by 1%
• the maximum benefit of 37% remains.

The government has confirmed increases to the benefit in kind rates for company cars for tax years up to and including 2029/30.

The government announced that it is introducing a temporary easement to mitigate the increasing benefit in kind tax liabilities of plug-in hybrid electric vehicle (PHEV) company cars due to new emission standards. The easement will apply retrospectively from 1 January 2025 to 5 April 2028. Transitional arrangements will apply to certain PHEVs until 5 April 2031.

Car fuel benefit charge

The government will increase the car fuel benefit charge from 6 April 2026.

Company vans

The government will increase the Van Benefit Charge and the Van Fuel Benefit Charges from 6 April 2026.  

Mandating the reporting of benefits in kind via payroll software

The government confirms that the use of payroll software to report and pay tax on benefits in kind will become mandatory, in phases, from April 2027. This will apply to income tax and Class 1A NICs.

Tackling tax non-compliance in the umbrella company market

To tackle the significant levels of tax avoidance and fraud in the umbrella company market, the government will make recruitment agencies responsible for accounting for PAYE and Class 1 NICs on payments made to workers that are supplied via umbrella companies.

Legislation will be introduced to make employment agencies or end clients joint and severally liable for any amount required to be accounted for under the PAYE provisions, where an umbrella company forms part of a labour supply chain. Further legislation will be introduced which will impose an equivalent joint and several liability for NICs purposes.

This will allow HMRC to pursue an agency in the first instance for any payroll taxes that a non-compliant umbrella company fails to remit to HMRC on their behalf.  The end client will be liable if contracting directly with an umbrella company.

Where there is no agency, the responsibility will fall to the end client business.

This will take effect from 6 April 2026. The measure will protect workers from large, unexpected tax bills caused by unscrupulous behaviour from non-compliant umbrella companies.

Ending contrived car ownership schemes

The government is amending the benefit in kind rules so that vehicles provided through employee car ownership arrangements will be deemed to be taxable benefits when made available on restricted terms.

Under these arrangements an employer or a third party sells a car to an employee, often via a loan with no repayment terms and negligible interest, then buys it back after a short period.

These arrangements mean those benefiting don’t pay company car tax, which other employees pay, and so this measure will seek to level the playing field.

Arrangements existing prior to commencement will continue without a change in treatment until the earlier of the arrangement being varied, renewed, or 6 April 2032.

There will also be an exemption from the benefit in kind rules for vehicles provided on arm’s length terms within the motor industry.

The government has confirmed its intention to delay the operative date to 6 April 2030.

Changes to salary sacrifice for pensions from April 2029

The government is changing how salary sacrifice for pension contributions works.
Salary sacrifice is when you agree to reduce your gross salary or sacrifice a bonus and, in return, your employer pays the same amount into your pension.

From April 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from NICs. Contributions through salary sacrifice, like all pension contributions, will still be exempt from Income Tax (subject to the usual limits).
Employers and employees can still make contributions above £2,000 through salary sacrifice arrangements. However, employee contributions above this amount will be subject to employer and employee NICs like other employee workplace pension contributions.
Employers will need to report the total amount sacrificed through their existing payroll. All employer pension contributions will continue to be free of NICs.

Employees, as well as employers, will pay NICs on the amount above £2,000 for employee contributions through salary sacrifice.

Employees who choose to salary sacrifice to receive Tax Free Childcare or Child Benefit can keep doing so.

Expanding workplace benefits relief

This measure will introduce new legislative exemptions for the reimbursement of eye tests, flu vaccines and home working equipment.

Under current law, the exemption only applies where the employer provides the benefit directly. This change will ensure that reimbursements are treated in the same way.

This will have effect on or after 6 April 2026.

Removal of tax relief on non-reimbursed homeworking expenses

This measure will remove the tax relief available to employees who have incurred additional household costs if they are required to work from home. These costs include increased household utility costs and business telephone calls.

It will only apply to those employees who have not had these costs reimbursed by their employer.

This will not impact the existing ability for employers that reimburse employees for costs relating to homeworking where eligible without deducting Income Tax and NICs.

This will take effect from 6 April 2026.

Business

Corporation Tax

The government has confirmed that the rates of Corporation Tax will remain unchanged, which means that, from April 2026, the rate will stay at 25% for companies with profits over £250,000. The 19% small profits rate will be payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.

Comment
The government has committed to capping the main rate of Corporation Tax at 25% for the duration of the Parliament.

The penalty for taxpayers submitting a Corporation Tax return late will double for returns for which the filing date is on or after 1 April 2026.

Capital allowances

The Full Expensing rules for companies allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is new and unused. Similar rules apply to integral features and long-life assets at a rate of 50%.

The government will reduce the main rate Writing Down Allowance (WDA) from 18% to 14% per year from 1 April 2026 for Corporation Tax purposes and 6 April 2026 for Income Tax purposes. For businesses with chargeable periods which span 1 April (Corporation Tax) or 6 April (Income Tax), a hybrid rate will apply. The WDA on the special rate pool remains at 6% per year.

For expenditure incurred on or after 1 January 2026, the government will introduce a new first year allowance (FYA) of 40% for all businesses on main rate assets, including most expenditure on assets for leasing. Cars, second-hand assets and assets for leasing overseas will not be eligible.

The Annual Investment Allowance is available to both incorporated and unincorporated businesses. It gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit remains at £1 million.

The 100% FYA for qualifying expenditure on zero-emission cars and the 100% FYA for qualifying expenditure on plant or machinery for electric vehicle chargepoints have been extended to 31 March 2027 for Corporation Tax purposes and 5 April 2027 for Income Tax purposes.

Targeted Research and Development Advance Assurance Service

The government will pilot a targeted advance assurance service from spring 2026. This will enable small and medium-sized enterprises to gain clarity on key aspects of their Research and Development (R&D) tax relief claims before submission to HMRC. A summary of responses to the advance clearance consultation will also be published.

Advance Tax Certainty Service

A new Advance Tax Certainty Service will be launched in July 2026. This will provide major investment projects in the UK with certainty on the application of tax law to their specific circumstances. Qualifying project expenditure must be at least £1 billion. Subject to full initial disclosure of all material facts, a clearance will bind HMRC for five years, and may be renewed for a further five years.

Enterprise Investment Scheme and Venture Capital Trusts investment limit increase and restructure

The government has announced significant changes to the limits applying to the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) from 6 April 2026. The gross assets requirement that a company must not exceed for EIS and VCTs will increase from £15 million to £30 million immediately before the issue of the shares, and from £16 million to £35 million immediately after the issue. The annual investment limit that companies can raise will increase from £5 million to £10 million. For Knowledge-Intensive Companies (KICs), the annual investment limit will increase from £10 million to £20 million. The company’s lifetime investment limit will increase to £24 million and for KICs to £40 million. The Income Tax relief that can be claimed by an individual investing in VCTs will decrease from 30% to 20%.

Expanding the eligibility limits of the Enterprise Management Incentives scheme

The government is also increasing certain limits relating to the Enterprise Management Incentives (EMI) scheme. For EMI contracts granted on or after 6 April 2026, the employee limit will increase from 250 employees to 500 employees, the gross assets test will be increased from £30 million to £120 million, and the company share option limit will be increased from £3 million to £6 million. The limit on the exercise period will increase to 15 years, and will also apply retrospectively to existing EMI contracts which have not already expired or been exercised.

UK Listing Relief

The government has announced an exemption from the 0.5% Stamp Duty Reserve Tax (SDRT) charge on agreements to transfer securities of a company whose shares are newly listed on a UK regulated market. This measure will have effect for agreements to transfer made on or after 27 November 2025. The exemption will apply for a three-year period from the listing of the company’s shares. The exemption will not apply to the 1.5% SDRT charge, or where the transfer forms part of a merger or takeover where there is a change of control.

Capital Taxes

Capital Gains Tax

Capital Gains Tax rates

The Capital Gains Tax rates remain unchanged for 2026/27.

Capital Gains Tax annual exemption

The annual exempt amount will remain at £3,000 for 2026/27.

Employee Ownership Trusts

The current relief available for qualifying disposals by business owners selling their shares to Employee Ownership Trusts (EOTs) is a 100% exemption of any gain. From 26 November 2025, the relief will only exempt 50% of the gain. Business Asset Disposal Relief and Investors’ Relief will not be available where the 50% exemption has been claimed. The remaining 50% of the gain on disposal will not form part of the disposer’s chargeable gain. Instead, 50% of the gain will be held over and deducted from the trustees’ acquisition cost. This will mean that it will come into charge on any subsequent disposal or deemed disposal of the shares by the trustees of the EOT.

Incorporation Relief

The government will introduce a requirement for taxpayers to actively claim incorporation relief for transfers of a business to a company on or after 6 April 2026. The relief previously applied automatically.

Business Asset Disposal Relief

The rate applying for individuals claiming Business Asset Disposal Relief and Investors’ Relief will increase to 18% for disposals made on or after 6 April 2026.

Carried interest rates and reform

From April 2026, all carried interest will be taxed within the income tax framework. A multiplier of 72.5% will be applied to any qualifying interest brought within the charge.

Inheritance Tax

Inheritance Tax nil rate bands

The nil rate band has been frozen at £325,000 since 2009 and will continue to be frozen until 5 April 2031. An additional nil rate band, called the ‘residence nil rate band’ is also frozen until 5 April 2031 at the current £175,000 level, as is the residence nil rate band taper starting at £2 million.

Unused pension funds and death benefits

The government will bring unused pension funds and death benefits payable from a pension into a person’s estate for Inheritance Tax (IHT) purposes from 6 April 2027.

All death in service benefits payable from registered pension schemes will be excluded from the value of an individual’s estate for IHT purposes.

The personal representatives will be responsible for paying any IHT due on unused pension funds and death benefits in a person’s estate. However, pension beneficiaries of registered pension schemes will be able to request the pension scheme administrator pay their IHT liability directly to HMRC in specific circumstances. They may also direct scheme administrators to withhold 50% of taxable benefits for up to 15 months.

Comment

The rules may potentially have significant effects for those with pension funds.

For example, John made contributions to his private pension scheme. At the date of his death, aged 90, the pension fund is valued at £400,000. The remainder of his estate is valued at £1,000,000.

Currently, the IHT bill is £270,000. This will rise to £430,000 under the new rules.

Agricultural Property Relief & Business Property Relief

From 6 April 2026, agricultural and business property will continue to benefit from the 100% IHT relief up to a limit of £1 million. The limit is a combined limit for both agricultural and business property. Such property in excess of the limit will benefit from a 50% relief.
The £1 million limit applies per person and is refreshed every seven years. From 6 April 2026, this allowance will be transferable between married couples or civil partners. This will include where the first death was before 6 April 2026.

There may be a further £1 million allowance for trusts in certain situations but the rules are complex.

The £1 million limits for both individuals and trusts will be frozen until 6 April 2031.

Comment

There has been a great deal of press reflecting the unhappiness of farmers with these changes. However, the changes are much broader and potentially affect the owners of many SMEs in the UK. Early IHT planning becomes critical under the new rules.

The transferability of the allowance between spouses/civil partners seems to be recognition of taxpayer concerns.

Cap for excluded property in trusts

With effect from 6 April 2025, the government has retrospectively put in place a cap of £5 million for excluded property held in trust as at 30 October 2024. This cap applies to settled property which was excluded property situated outside the UK at the time of the relevant charge. The £5 million cap applies to each ten-year cycle.

Other Matters

The VAT registration threshold

From 1 April 2026 the VAT registration threshold remains at £90,000 and the deregistration threshold at £88,000.

Making Tax Digital for Income Tax Self Assessment

The government is committed to delivering Making Tax Digital for Income Tax Self Assessment, which starts in April 2026 for those with qualifying income over £50,000. The government will expand the rollout of the programme to those with incomes over £30,000 in April 2027 and £20,000 in April 2028. However, the government will not proceed with Making Tax Digital for Corporation Tax.

Enforcement and tax collection

The government has announced a variety of compliance initiatives, which include the following:

• investing further in HMRC’s debt management work and publishing a new tax debt strategy which outlines plans to deliver year-on-year reductions to the overall tax debt balance as a percentage of tax receipts
• requiring Income Tax Self Assessment taxpayers with Pay As You Earn (PAYE) income to pay more of their Self Assessment liabilities in-year via PAYE from April 2029
• investing in HMRC to modernise the tax system and help taxpayers get their taxes right first time through greater digitalisation. This investment will improve how HMRC uses information from third parties, and to build new technology to increase the use of data-driven prompts to help taxpayers avoid errors when submitting tax returns
• investing £64 million over the next five years in HMRC’s existing partnerships with private sector debt collection agencies to collect more tax debt.

In addition, from April 2029 businesses will be required to issue all VAT invoices as e-invoices, with a roadmap on implementation to be published next year.

Comment

The government is attempting to close the tax gap by pursuing those who try to bend or break the rules, collecting more unpaid taxes and modernising the tax system. This is designed to take the total additional revenue raised by closing the tax gap this Parliament to £10 billion in 2029/30.

High Value Council Tax Surcharge

The current Council Tax system uses property values from 1991. From April 2028, properties valued at £2 million or more will be liable to a new High Value Council Tax Surcharge (HVCTS).

The HVCTS will be staggered depending on the value of the property. For property over £2 million, the annual charge will be £2,500. For property valued between £2.5 – £3.5 million, the annual charge will be £3,500 and for those properties valued between £3.5 – £5 million, the annual charge will be £5,000. Properties valued in excess of £5 million will have an annual charge of £7,500.

The surcharge will be collected alongside the existing Council Tax due for the property.

Employment

The government is working to extend right to work checks to cover businesses hiring gig economy and zero-hours workers. This will restrict the ability of employers to take advantage of illegal workers and ensure that legitimate businesses acting lawfully will not be undercut on labour costs by those who exploit the system.

The government will set up a dedicated ‘hidden economy’ team within the new Fair Work Agency from April 2026 to take action in sectors known to have breaches of employment rights legislation alongside illegal working and tax issues. The team will initially target hand car washes but will then move onto other high‑risk areas.

Electric Vehicle Excise Duty

The government is introducing Electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug-in hybrid cars, which will come into effect from April 2028. Drivers will pay for their mileage alongside their existing VED.

The government will work closely with industry and motoring representative groups on the delivery of the new tax.

The tax paid by EV drivers will be around half the fuel duty rate paid by the average petrol/diesel driver, with a reduced rate for plug-in hybrid drivers. When eVED takes effect in April 2028, an average EV driver will pay around £240 per year or £20 per month.

Other vehicle types, such as vans, buses, motorcycles, coaches and HGVs, will be out of scope of eVED when it is introduced, with the transition to electric power for these vehicle types being currently less advanced than for cars.

Other points

Other announcements made by the government include:

• the £35,000 threshold for Winter Fuel Payments will be maintained for this Parliament
• the government is seeking views on the effectiveness of existing tax incentives, and the wider tax system, for business founders and scaling firms, and how the UK can better support these companies to start, scale and stay in the UK.

If you were hoping to get Entrepreneurs’ Tax Relief when you make a Capital Gain on business assets there are new rules coming in if you make a disposal after 5 April 2019. These could make a substantial difference to what you take home after a successful share sale.

The Ownership Period Lengthens

The ownership period to qualify, will rise from one to two years. So at present, a disposal of shares in a company trading from say 1 January 2018 could qualify if sold. From 6 April 2019 to 31 December 2019, they will not.

One key trigger here is when the business actually started to trade. This can be before any income is received, but it can’t start until mere preparations to trade have ended. If you are in a dilemma about this, contact us but it is essential to keep records of everything you do leading up to getting that first payment at your bank.

Not only that, the October 29th, 2018 Budget adds two new conditions immediately to change the definition of a “personal company”. This restricts relief to shareholders to those who have a genuine material stake (at least 5%) in the company.

To get back to basics, a claim to the relief on shares or business asset gains needs the company to be the taxpayer’s “personal company”. They must be an employee or officer of that company, or of another company in the same trading group.

So, what is a “Personal Company”, Then?

Under the old rules you must hold at least 5% of the ordinary share capital and you must hold at least 5% of the voting rights which are exercisable by virtue of that shareholding.

These rules will stay but now you must also have a right to at least 5% interest in the distributable profits and you must have a right to at least 5% of the net assets due to the equity holders on a winding-up of the company.

Unfortunately the people responsible for writing this in to law have caused confusion that will be very difficult to match with what the Chancellor said in his statement. This is important because what the Chancellor intended needs also to be what the law actually says. The law trumps the Chancellor!

A New Government Amendment on Entrepreneur’s Relief

The Government has now made an amendment and this adds a much clearer alternative test for a “personal company” based on the shareholder’s entitlement to proceeds. In the event of a hypothetical sale of the whole company by asking if the shareholder is entitled to at least 5% of the proceeds in the event of the disposal of the whole company.

It assumes that the entire company is sold for its market value on the date of disposal of the shares/ assets which are the subject of the claim. This is important because in reality this is not what happens, quite often. This new test can be used instead of asking if you have a right to at least 5% interest in the distributable profits and a right to at least 5% of the net assets due to the equity holders on a winding-up of the company.

This Already Applies to Disposals

Unfortunately if you made a disposal between 29 October 2018 and 20 December 2018 you must still apply the criteria: “Do I have a right to at least 5% interest in the distributable profits and a right to at least 5% of the net assets due to the equity holders on a winding-up of the company?”

Those who have built up their own company by way of ordinary shares with full voting rights and full rights on a winding-up should not be affected.

Employees who have acquired shares through employee share schemes, particularly EMI shares, may find they have suddenly lost their right to entrepreneurs’ relief, as employee shares tend to be issued with restricted rights, though not always.

Restricted rights often apply to directors and managers taking shares from a management buyout because often the financiers of the deal will have a different class of shares.

If uncertainty remains, then let’s talk about it. Simply pick up the phone and speak to the Maven Team on 023 8061 4404 or contact us via the website and we can help you navigate any uncertainty.

Check Your PAYE Code, Now!

Now is the time to check your PAYE code if you are an employee or a private pensioner because there’s only a short time to get any mistakes corrected.

There is some confusion. A lot of people don’t actually know what PAYE, is even though they know what the letters mean. How many times do you hear people say: “I’ve paid my tax under PAYE.” But, it isn’t is a tax.

At best, PAYE is a relatively crude method of collecting “some tax”. Mainly the tax that people pay under PAYE is what they should pay. But also, fairly often, it isn’t. The minute that you add complications to the mix, problems can occur and you either pay too little or too much tax. Which is why HMRC are increasingly reviewing PAYE tax deducted and sending out tax bills or tax refunds.

Sometimes both of these can be wrong because people do not check their tax calculation sent to them. It wrong to think “HMRC have sent this to me so it must be right”, but thousands of people do just that.

Here’s a list of common situations that can make your “PAYE”go wrong:

• Employment benefits in kind not being reported or reported too late
• Not telling your employer if you have a Student Loan
• Not following up a P45 when you change jobs
• Getting a bonus – HMRC may then restrict your tax allowance if they think it’s a pay rise
• Not claiming fixed rate expenses like uniform allowances or professional subscriptions
• Changing a company car, especially when you “upgrade”
• HMRC including other income in your tax code, like bank interest and rental profits.
•  Having more than one job-some tax allowances can go unused or are duplicated!

Act on PAYE Now to Avoid Disappointment

For 2018-19, there is still time to get the tax code adjusted in time for the next payday but as we move closer to March, the opportunity may recede especially if your employer runs their payroll in the middle of March.

For 2019-2020 HMRC will soon be issuing tax codes starting from the new tax year 6 April 2019 and the best option is to get it right from the outset.
If you get a private pension, check the PAYE Code for that too. If you have a job but are already getting State Pension, check that the restriction in your PAYE code is as per your State Pension for 2019-2020.

Read the Notes on the Coding Notice, called a “P2”.

So, There’s a Problem, What Next?

Once you’ve discovered an error it is advisable to phone the tax office. Have your National Insurance number and Employer PAYE reference ready because you will be asked for this.

The number is 0300 200 3300. Be prepared to wait, because one wait is far better than writing in, as it will take far too long to get a reply assuming you even receive one. If you do speak to HMRC, make sure you take a detailed note of what is said, and make sure the code is changed as promised.

What if HMRC or the Employer didn’t handle PAYE properly? If this has happened, the tax year may have already ended. You might get a tax demand or an unexpected bit of tax to pay when you do your “Self-Assessment” tax return.

In those circumstances, by concession, it may be possible to get out of paying, but the rules are pretty complex and it may be prudent to get advice from your accountant or give us a call if you don’t have an adviser yet.

“The hurrier I go, the behinder I get!”
Alice In Wonderland, Lewis Carroll

HMRC is currently piloting Making Tax Digital (MTD) for VAT but this is by invitation only. Once HMRC is satisfied that things are working as expected, it proposes to allow business to join the pilot without invitation. It will be interesting to see when this happens, which will be the true litmus test.

There are now less than six months before MTD proper is supposed to go “live” on the 1st April 2019. When will piloting be opened up to everyone?

If your business turns over more than £85,000 and is required to register for VAT, you’re going to be in the MTD club. Once you’re in this position, you can’t leave if your turnover drops below £85,000.

All this means that right now, if you think you will soon be a member of the MTD club, you should be looking round for a suitable provider of software to get you over the MTD line.

So, how do you find a supplier?

We’re not talking about the person, firm or company preparing or reviewing your VAT return. The MTD provider’s software will submit your VAT return. Initially it’ll be every quarter or year, as it is now. But, the preparation and reviewing of your VAT business is no longer going to be separate. It will be an inseparable part of the whole VAT submission process. The MTD software must be used to record and reflect your transaction from the outset.

We don’t think many people have cottoned on to this yet. This is why MTD is such a monumental big deal. We think Lewis Carroll got it right, it’s important to not rush.

The HMRC Notice 700/22 Making Tax Digital highlights some important issues. Data transfer between VAT software or applications must use “digital links”. In other words, electronically. This, thankfully, does provide for spreadsheets. But it does not allow you to print a spreadsheet, then re-input the details manually to MTD.

There will be a “soft landing” period for digital links. This means you can “copy and paste” (the best way of describing it) up until 31 March 2020.

Is this because the technology for digital links is not proven as yet?

You must use software that records and preserves digital records and provides HMRC with the data via HMRC’s Application Programme Interface (“API”). API is something you will hear a lot more of, if you are joining the MTD club.

HMRC has published a list of software suppliers offering product that is now developed, at: https://www.gov.uk/guidance/software-for-sending-income-tax-updates#VAT. This list will show you whether they service Business or Tax Agents too, and what the software does.

The ideal situation is to find a supplier that supports Agents as well as the business itself. That’s just our opinion, but we think this is advisable for small and many medium business enterprises. These businesses are not staffed by hundreds and very often the owner is also the manager of everything that happens. Or indeed doesn’t happen.

With agent access, your agent can log in to your records, review your VAT entries, or help in making them. Next? Choose the range of functions that you want. The full range of functions are:

• Digital record keeping
• Submit the VAT Return
• View the VAT Return
• View the VAT liabilities
• View VAT payments

Not all of the existing suppliers are offering all of these functions. You don’t have to have all of the functions, but if you use spreadsheets you’ll need Digital Records to go with the Submit Vat Return.

Changes You Will Miss (If You’re Not Careful)

Remember, the HMRC VAT screens will disappear from our view for returns that commence from 1 April 2019. If you are a user of the Flat Rate or Capital Goods Schemes, or Partially Exempt calculations, manual adjustments also will be required.

Maven Accountants Ltd are Certified Advisors for Xero and Quickbooks. But this isn’t a sales pitch. We can work with any HMRC approved software provider of MTD for VAT.

Has your accountant or tax agent spoken to you yet about MTD for VAT? If not, then you’re welcome to talk to us.

 

Brexit: Deal or No Deal?

The dreaded ‘B’ word,  hasn’t been mentioned by us until now. That’ll be “Brexit”, then. Up to now, we have resisted temptation to even utter the word. But we are getting a bit close now to what  may happen: Deal? No deal? No Brexit post Referendum #2? Don’t laugh at No Brexit, it could happen. We cover all potential political angles here.

VAT’s NO DEAL

The government has announced through guidance dated in August 2018 that if there is a No Deal Brexit, businesses importing goods from the EU or from outside the EU will not have to pay import VAT as soon as the goods arrive in the UK. This will allow importers to account for the VAT later on their VAT returns and would give positive help because it will aid help cash flow. For example if you bring goods in on 30th June 2019 you’ll have at least until 10th August 2019 to pay, if you use direct debit with a June VAT quarter date. If you imported on 1st April 2019 you’d have until 10th August 2019. HMRC is saying though that customs declarations and other duties will still be required for imports from the EU, in the same way as currently applies when importing goods from outside the EU. An import declaration will be needed and customs duties must be paid. Customs checks may also be performed at the place of importation. All goods entering the UK as parcels sent by overseas businesses will be liable for VAT unless they are zero-rated or exempt from VAT. For parcels valued at £135 or less, a so called “technology-based solution” will collect VAT from the overseas business selling the goods into the UK. How this would work is not clear, yet.

What future Techie Tax Breaks?

Small and medium businesses involved in research and development get very generous tax relief at the moment in the UK. Up to one third of qualifying costs can be recovered through the tax system. The No Deal prospect is leaving some business owners pretty concerned about the future of tax relief. On the basis of not having that crystal ball, no one knows how the ‘B’ word will affect tax relief. This type of tax relief like many other tax issues, will need to be resolved. This is because the tax relief for small and medium business is treated as notified state aid. It is “notified” to the European Commission as it is considered generous enough to have the potential to distort competition amongst member states. If Brexit happens, the UK will no longer need to consider state aid rules, leaving the Treasury free to dictate the availability and extent of the relief. In the 2017 Autumn Statement there were indications of an ongoing commitment by Government to support the relief. It appears that this tax relief would be a central component of the UK’s policy to encourage this research and development activity. The two current schemes for this (including the one for small and medium business) may need to be harmonised and this may lead to more simplicity for small enterprises that receive grant funding. In the meantime, tax relief for research and development is very much available. If you carry out such activity, it may qualify for generous tax breaks. If you would like guidance and support, including the preparation of tax claims, please contact us.