Autumn 2025 Newsletter

Advisory fuel rates

If you reimburse fuel or charging costs for employees using a company car for business travel there will be no taxable profit and no Class 1A national insurance, provided the mileage amount paid does not exceed the advisory rates

From 1 September 2025 the advisory rates per mile for non-electric vehicles are:

The new rates can be applied to journeys taken from 1 September, however you can continue to use the previous rates until 30 September 2025.

Previously, the advisory rate for electric vehicle charging was the same no matter where charging occurred. As of 1 September, using a public charger will attract a higher reimbursement rate than charging at home or another private charging location. This change reflects the additional cost of charging in a public location, such as a motorway service station or hotel, when travelling for business.

From 1 September 2025 the advisory electric rates for fully electric cars are:

Hybrid cars may be treated as petrol or electric for these purposes.

Class 2 NIC error update

The issue affecting many self-employed taxpayers in relation to Class 2 national insurance contributions (NICs) is unlikely to be resolved before the end of September

From the 2024-25 tax year, self-employed individuals with profits in excess of £6,725 no longer need to pay Class 2 NICs. Instead those taxpayers will receive a national insurance credit to secure their access to contributory benefits such as the state pension.

Earlier this year it was reported that several taxpayers had been sent letters by HMRC telling them that their tax return for 2024-25 had been amended to add a Class 2 NIC liability. This was an error by HMRC and the department has been working to put it right.

In the latest update, HMRC says that it has already corrected the Class 2 NIC position of taxpayers where the information it holds allows. It will correct the remaining records when the issue has been resolved, which is unlikely to be before the end of September, and those individuals will be notified. Some taxpayers will then be sent a new SA302 tax calculation which they will have 30 days to query.

If you receive a letter from HMRC ‘correcting’ your NICs to the original (correct) figure, no further action will be needed and you will not be sent a new SA302.

HMRC has also confirmed that until the issue has been fixed, erroneous Class 2 NIC letters will continue to be sent to taxpayers, but any incorrect adjustments will be reversed before they affect the 2024-25 tax liability. These letters can also be ignored.

Any individuals who have made a payment for the additional NICs incorrectly charged by HMRC will receive a refund or a credit added to their self assessment account.

If you have received a letter from HMRC in relation to your 2024-25 Class 2 NIC liability, we can help you decide what action – if any – you need to take.

Winter fuel payment clawback

Thousands of eligible pensioners will receive a Winter Fuel Payment this winter. Whether or not you can keep the money will depend on your taxable income

If you were born before 22 September 1959 and you live in England, Wales or Northern Ireland you could get up to £300 to help with the cost of heating your home this winter. This is known as the Winter Fuel Payment. If you live in Scotland you may be able to claim the Pension Age Winter Heating Payment instead.

Eligible individuals in England and Wales will receive a letter from HMRC in October or November telling them how much Winter Fuel Payment they will receive and which account the money will be transferred into. This will usually be the same account as your state pension or other benefits. The amount is based on when you were born and your circumstances between 15 and 21 September 2025. Other benefits will not be affected by the Winter Fuel Payment.

If you do not receive a letter and you think you should be eligible, you need to make a claim. We can help you with this.

Don’t spend it all at once

You will only be entitled to keep your Winter Fuel Payment if your total taxable income will be less than £35,000 for the tax year ending in April 2026. This includes income from pensions but not income that is not taxed, such as interest from an ISA. There is a tool to check whether your income is over the threshold on the HMRC website. Where an individual’s income exceeds the threshold, HMRC will take the Winter Fuel Payment back either by changing their tax code for the 2026-27 tax year or adding it to the self assessment tax return for 2025-26.

The clawback is all or nothing, meaning that if taxable income is even £1 over the £35,000 threshold, all of the Winter Fuel Payment will be lost. It is possible to opt out of receiving the payment but deadline to opt out for this winter was 15 September 2025.

Making Tax Digital for income tax – exemptions

In just over six months the first group of taxpayers will be required to join HMRC’s Making Tax Digital for income tax (MTD IT) programme

Some individuals may be able to avoid this by claiming an exemption.

Self-employed taxpayers and landlords with qualifying income of £50,000 or more on the 2024-25 tax return will be required to comply with MTD IT from April 2026. This means they will have to maintain digital records; send quarterly updates to HMRC; and submit an annual tax return via MTD-compatible software.

Some types of income are exempt from MTD. These include partnership income and qualifying care income. This does not mean that partners and carers are automatically exempt, as any other qualifying income, for example if you are also a landlord, could bring you into the scope of MTD IT.

It may be possible in some circumstances to apply for an exemption from MTD IT on the grounds of ‘digital exclusion’. This applies to practising members of a religion whose beliefs are incompatible with using electronic communications or keeping electronic records; or those for whom it is not ‘reasonably practicable’ to comply with MTD IT due to age, disability, location or any other reason.

An application will need to be made to HMRC for digital exclusion from MTD IT, even where the taxpayer already has a digital exclusion exemption from MTD VAT. Further details on who might qualify for digital exclusion and how and when to apply are expected in due course. HMRC has said that it expects the number of digitally excluded taxpayers to be low. If you think you might be eligible, contact us to discuss your situation and, if appropriate, we can help you with your application when the information is available.

We have been preparing to help clients navigate MTD IT for some time. If you are self-employed or a landlord and your total gross income from trading and/or property is £50,000 or more on your 2024-25 tax return, we can help you get your business MTD-ready.

Companies spared from Making Tax Digital

HMRC has confirmed that companies will not have to comply with the requirements of Making Tax Digital (MTD) for corporation tax (CT) purposes

No start date had been set for MTD for CT, under which companies would have been required to maintain digital records; send quarterly updates to HMRC; and submit an annual corporation tax return via MTD-compatible software. According to HMRC’s latest transformation roadmap the plans to bring companies into the scope of MTD have now been officially abandoned.

Instead, a range of new digital services will be introduced during 2025-26 and HMRC is ‘developing an approach to the future administration of CT that is suited to the varying needs of the diverse CT population’.

Although offering a temporary reprieve for companies, HMRC remains committed to digitalisation across the tax system. It is still a good idea to keep digital records where possible to improve efficiency and ensure that your company is prepared for future compliance needs.

This does not affect MTD for income tax, which is still due to go ahead from April 2026 for self-employed individuals and landlords with qualifying income above £50,000.

Companies that are required to comply with the digital requirements of MTD for VAT will still be expected do so.

Tackling non-compliance in umbrella companies

HMRC has published draft legislation aimed at tightening rules around umbrella companies in a bid to increase accountability, protect workers and ensure the correct tax is paid across the labour supply chain

Umbrella companies are often used by temporary or contract workers who are paid through them, rather than directly by recruitment agencies or end clients.

The new rules are designed to target tax avoidance practices sometimes used by non-compliant umbrella companies, such as paying workers partly in ‘loans’ or non-taxable allowances to reduce or avoid income tax and national insurance. The legislation, which is still in draft form, clarifies that these arrangements are not legal and workers in such roles should be taxed as if they were regular employees.

A major change is the introduction of joint and several liability. From April 2026 recruitment agencies will be responsible for ensuring the correct tax is paid on workers’ income. Where no agency is involved the end client will be liable. This means that if an umbrella company fails to pay the correct taxes HMRC can pursue any other parties in the labour supply chain for the unpaid amount. This change is intended to make all parties take greater care in who they work with.

If you or your business regularly interact with umbrella companies as a worker, an intermediary or the end client, contact us to discuss how these changes will affect you.

Cryptoasset reporting framework

From January 2026 UK businesses facilitating cryptoasset exchanges must collect user and transaction data and report it to HMRC under the new cryptoasset reporting framework (CARF)

The first report, which will cover the period from 1 January to 31 December 2026, must be submitted to HMRC by 31 May 2027.

If you hold cryptoassets (such as bitcoin; stablecoins; and non-fungible tokens) you will need to give certain personal details to every cryptoasset service provider you use, to make sure you are paying the right tax.

The information includes:

• name, address, and date of birth;
• tax residence;
• national insurance number or tax reference; and
• summary of crypto transactions.

Failure to provide this information may result in a fine of up to £300. Service providers face fines of up to £300 per user for incomplete or inaccurate reporting.

The self assessment tax return for 2024-25 includes new boxes for reporting gains and losses from cryptoassets separately from other assets. The CARF will allow HMRC to reconcile taxpayers’ records with information received from service providers to ensure the correct amount of tax is paid.

If you own (or have owned) cryptoassets, contact us to discuss what you need to report to whom and confirm you are meeting your tax obligations.

Business and agricultural property reliefs

Draft legislation has been published giving more insight into how and when proposed restrictions to two major inheritance tax (IHT) reliefs will be implemented

At Autumn Budget 2024 the Chancellor announced plans to reform business property relief (BPR) and agricultural property relief (APR). Draft legislation published on 21 July 2025 gives more detail on how the restrictions will operate.

From 6 April 2026, the first £1m of combined business and agricultural assets will continue to attract IHT relief at 100%. For assets over £1m, the relief will be halved to 50%. This means that assets qualifying for BPR and/or APR will suffer IHT at an effective rate of 20% on what used to be tax-free. The BPR for qualifying Alternative Investment Market shares will be reduced from 100% to 50% with no £1m allowance.

According to the draft legislation the £1m limit will gradually increase over time to keep up with inflation, beginning in 2029-30 when the current 20-year freeze on the nil-rate band (NRB) is due to end.

The NRB is the amount you can pass on when you die without suffering IHT. Any unused NRB can be inherited by your spouse and added to their own NRB. Crucially, the £1m allowance for BPR and APR is not transferrable between spouses in the same way. This means that existing wills may need to be rewritten and/or assets transferred between spouses to make optimal use of the allowance. We can help you with this.

The new rules will apply to deaths from 6 April 2026, but transitional rules could affect gifts from 30 October 2024. The legislation is still in draft form and an update is anticipated in the Autumn Budget on 26 November 2025.

Summer 2025 Tax Briefing Newsletter

Tax update: Summer 2025

Mandatory payrolling of benefits delayed

HMRC has confirmed that the mandatory payrolling of benefits in kind (BIKs) will be delayed to April 2027, giving businesses more time to get to grips with the process.

Previously planned for April 2026, the change will require businesses to report and process income tax and Class 1A national insurance contributions on BIKs in real time, rather than declaring them annually via the P11D. Currently most BIKs can be processed via the payroll on a voluntary basis.

To report BIKs via the payroll, the payslip should be populated each pay period with an amount equivalent to what would be shown on the P11D divided by the number of pay periods in a year. For example, on a monthly payroll an annual dental insurance benefit of £3,000 would be declared as £250 per pay period. This should be pro-rated if the employee starts or leaves mid-month or the value of the benefit changes during the year.

Individuals such as non-executive directors who do not receive a salary but do enjoy BIKs will need to be added to the payroll for those BIKs to be taxed.

The P11D will still be available for two specific BIKs which will be excluded from mandatory payrolling: beneficial loans and employer-provided accommodation. However, these will be eligible for voluntary payrolling for the first time from April 2027.

If you outsource your payroll, you will need to send timely and accurate details of all BIKs to the provider. We can help you collate the necessary information in preparation for the change.

Class 2 NI calculation error

From the 2024-25 tax year, self-employed individuals with profits in excess of £6,725 no longer need to pay Class 2 national insurance contributions (NIC).

Instead those taxpayers will receive a national insurance credit to secure their access to contributory benefits such as the state pension.

Several of the professional bodies have received reports from their members that Class 2 national insurance is being incorrectly included in SA302 tax calculations for 2024-25. Following submission of their tax return affected taxpayers have received letters from HMRC informing them that their return has been amended in one of three ways. HMRC has either:

• added £179.40 to the computation which should not have been added and needs to be removed;
• added £179.40 to the computation which needs to be removed and wrongly increased the tax liability by double this amount; or
• amended the Class 2 NIC amount to zero, which is in line with the original submission. In this instance no further action is required and the letter can be ignored.

This issue has been reported to HMRC and the department is investigating it as a matter of urgency.

If you have profits from self-employment above £6,725 and have submitted your self assessment tax return for 2024-25, we can help you check whether your tax liability and/or Class 2 NIC have been amended incorrectly by HMRC.

Multi-agent access for MTD IT

Making Tax Digital for Income Tax (MTD IT) is fast approaching, with the mandation date for sole traders and landlords with qualifying income of £50,000 and above set firmly at 6.4.26.

In addition to the annual tax return, those mandated to comply with the MTD IT requirements will need to submit cumulative quarterly updates of their income and expenses to HMRC and maintain digital records of their transactions using HMRC-approved software. Multi-agent access will allow taxpayers to appoint a main agent to deal with their tax return at the year end and one or more supporting agents to deal with the record keeping and quarterly updates.

The supporting agent, for example a bookkeeper or letting agent, will be more restricted in the tasks they can carry out on your behalf. The main agent will be able to do almost everything that you, the taxpayer, can do. Where a taxpayer has income from property and separate trading income they may choose to appoint different supporting agents for each. It will be possible to appoint multiple supporting agents but only one main agent to oversee your tax affairs and deal with your annual tax return.

When appointing a supporting agent, be careful not to designate them as the main agent as doing so will automatically remove the existing agent’s access. This may lead to delays in your year end tax return and potential penalties for late submission.

We have been preparing for some time to help clients navigate the MTD IT requirements. We can lead you through the process of deciding where best to use (or not use) supporting agents to optimise your MTD processes.

Check Employment Status for Tax tool

The Check Employment Status for Tax (CEST) tool allows contractors and other individuals providing services – or businesses engaging workers to perform services for them – to determine whether the work should be treated as employment or self-employment for tax purposes.

The responsibility for determining the employment status will fall on the business if it is a medium or large-sized entity and on the contractor if the business is small. The CEST tool helps with this determination by asking a series of questions about the contract, the worker and the work performed and returning one of the following responses:

• self-employed for tax purposes for this work;
• employed for tax purposes for this work;
• unable to make a determination (for employed or self-employed for tax purposes);
• off-payroll working rules (IR35) do not apply;
• off-payroll working rules (IR35) apply; and
• unable to make a determination (for whether the off-payroll working rules apply).

The changes have been designed to simplify the language and make the tool easier to use. Updates to the questions themselves are relatively minor cosmetic tweaks, however the accompanying guidance has been revised to reflect recent case law. Links to the guidance have also been added within the questions making it easier for the user to find the relevant information.

Although HMRC says it will honour the outcome of the CEST tool, subject to the user answering the questions correctly and not omitting information, its use is not mandatory in determining employment status. We recommend reviewing the guidance closely in all cases, not just where the tool returns an inconclusive result.

If you are a contractor or your business regularly engages workers on a freelance basis, we can help you determine the employment status of each engagement for tax purposes.

Guidance for non-doms

With effect from 6.4.25 the preferential tax treatment enjoyed by UK resident individuals whose permanent home is outside the UK (‘non-doms’) has been withdrawn.

Before this date, non-doms could benefit from the remittance basis of taxation for up to fifteen years, essentially exempting their offshore income and gains from UK tax unless remitted to the UK.

In its place a new residence-based system has been introduced whereby qualifying new arrivals to the UK can apply for foreign income and gains (‘FIG’) relief, meaning they will not be taxed on their FIG – regardless of whether remitted to the UK – for the first four consecutive years of UK tax residence. After this period they will be taxed on their FIG as UK income or gains. To qualify for FIG relief the individual must not have been resident in the UK in any of the ten years prior to their arrival.

Claiming FIG relief is optional and you can choose to claim it on some or all of your FIG. A separate claim must be made for each source of income and/or gain on the self assessment tax return. Your entitlement to certain other reliefs and allowances may be affected, for example the tax-free personal allowance for income tax and annual exempt amount for capital gains tax (CGT) will be lost if FIG relief is claimed. The relief will also be included in the adjusted net income calculation for tax-free childcare benefits and the high-income child benefit charge.

We can help you decide whether to claim FIG relief and help you submit the claim(s).

Individuals who are not eligible for relief under the new system or who decide not to apply for FIG relief will be subject to tax on their foreign income in the same way as any UK taxpayer.

Transitional arrangements are in place for CGT on foreign capital assets. Individuals who have claimed the remittance basis in any of the years from 2017-18 to 2024-25 can rebase those assets to their market value at 5.4.17. Foreign assets held in trusts are generally not eligible for rebasing.

A temporary repatriation facility will allow existing non-doms to remit previously accrued foreign income and gains to the UK after 6.4.25 at a reduced rate. This will be a flat rate of 12% for 2025-26 and 2026-27 and 15% for 2027-28.

A new residence-based system has been introduced to replace the domicile basis for inheritance tax from 6.4.25.

If you have received income or gains outside the UK and are not sure where you stand under the new rules, contact us.

Small employers’ relief

Small employers can usually recover 100% of most of the statutory payments they make to employees plus compensation from HMRC.

If your business qualifies for small employers’ relief you can claim 103% of almost all statutory payments made to employees until 5.4.25. From 6.4.25 this was increased to 108.5% in line with changes to employer’s national insurance.

The payments covered by the relief include statutory maternity; paternity; adoption; parental bereavement; neonatal care (from April 2025); and shared parental leave pay. The relief does not apply to statutory sick pay.

An employer is eligible for small employers’ relief if the total Class 1 national insurance contributions paid by the business in the last complete tax year were £45,000 or less before any reductions such as the employment allowance. Employers that do not qualify can usually claim relief at a lower rate of 92%.

Relief is generally claimed on a monthly basis through payroll software using the employer payment summary and can be offset against other tax liabilities. It is possible to make a claim to HMRC for payment in advance if an employer is unable to meet the cost of statutory payments to its employees.

If you have made statutory payments other than sick pay to employees, we can help you ensure that you are claiming the full amount of compensation you are entitled to.

Childcare costs – don’t miss out!

Tax-free childcare

Many working families will now be arranging childcare for the school summer holidays and the start and end of the school day from September. The Government’s tax-free childcare scheme could provide up to £2,000 a year per child, or £4,000 if the child is disabled, towards the cost of wraparound childcare and holiday clubs.

For every £8 deposited in a tax-free childcare account the Government will top it up by £2 up to a maximum of £500 (or £1,000 if the child is disabled) every three months.

To qualify for the scheme the parent and their partner (if they have one) must earn, or expect to earn, at least the national minimum wage or living wage for 16 hours a week on average; each earn no more than £100,000 per annum; and must not receive universal credit or childcare vouchers.

Parents can use the scheme to pay for childcare for children aged 11 or under, or up to 16 if the child has a disability.

Extend child benefit

HMRC has reminded parents of the deadline to extend child benefit for 16 to 19-year-olds who are continuing in full time education from September. For 2025-26 child benefit is worth up to £1,355 a year for the first or only child, and up to £897 a year for each additional child.

Payments will automatically stop on 31 August on or after the child has turned 16 unless parents renew their claim by that date. The claim can be extended using the HMRC app or on GOV.UK.

If you or your partner earn £60,000 or more, the higher earner will be liable to repay some or all of the child benefit via the high-income child benefit charge (HICBC). Where the child is under the age of 16 and one of the parents is not working it is often worth claiming child benefit and either paying the HICBC or opting not to receive the child benefit payment to protect the non-working parent’s entitlement to contributory benefits. However, once the child turns 16 they will be registered for national insurance so the qualifying contributory years are no longer available to the parent.

We can help you ensure you are claiming all of the child related support you are entitled to.

Salaried members of LLPs

The salaried members rules are an anti-avoidance measure designed to prevent limited liability partnerships (LLPs) from disguising remuneration paid to members as profit share instead of employment income.

If the rules are triggered, the member’s earnings are subject to PAYE and national insurance as though they were an employee. A member of an LLP is deemed to be an employee under these rules if the following three conditions are all met:

Condition A: it is reasonable to expect that at least 80% of their remuneration will be a fixed or variable salary that is not dependant on the profits or losses of the LLP;

Condition B: they do not have significant influence over the affairs of the LLP; and

Condition C: their capital contribution to the LLP is less than 25% of their expected salary.

In February 2024 HMRC updated its guidance in regard to Condition C to suggest that the anti-avoidance rules could be invoked if a main purpose of the capital contribution was to keep the member outside of the salaried members rules.

Reversing this somewhat controversial amendment, HMRC has changed the guidance again, accepting that a genuine contribution made by a member, intended to be enduring and giving rise to real risk, will not trigger the anti-avoidance rules. As long as the member puts in at least 25% of the amount they plan to take out, they can continue to be taxed as self-employed on their profit share if their capital contribution is genuine.

We would advise all LLPs to review their profit share and capital contribution arrangements to ensure compliance with the salaried members rules. We can help you with this.

Spring 2025 Newsletter

Side-hustle reporting threshold increased

The Government has announced plans to increase the threshold above which income from self-employment must be reported via self assessment.

Currently, if you earn over £1,000 from self-employment, or a so-called ‘side hustle’ such as babysitting or dog walking, you need to report this income to HMRC by filing a self assessment tax return, even if you do not owe any tax.

To save time and reduce the administrative burden for some 300,000 taxpayers, the Government intends to increase this threshold to earnings of £3,000 a year by the end of the current Parliament (April 2029 at the latest).

This is only a change to the reporting requirements – you will still need to let HMRC know about and pay any tax due on income between £1,000 and £3,000. This will be done via an alternative online service which the Government says will be simpler than self assessment.

The threshold is based on gross income, before any expenses are deducted. Taxpayers with income above £1,000 per year should continue to report this via self assessment until an implementation date for the change has been announced.

If you are earning between £1,000 and £3,000 per year from a ‘side hustle’ contact us to discuss what this change is likely to mean for you.

Salary vs dividends: NIC changes

With changes to employer’s National Insurance and the Employment Allowance, now is the time for businesses to review the most tax efficient mix of salary and dividends for directors.

From 6 April 2025 the secondary Class 1 National Insurance threshold reduces from £9,100 to £5,000. At the same time the rate of employer’s National Insurance Contributions (NIC) rises from 13.8% to 15%.

Cushioning the impact for some smaller employers the Employment Allowance (EA), previously up to £5,000 per year, more than doubles to a maximum of £10,500. The restriction that applies to the EA where employers have incurred a secondary Class 1 NIC liability of more than £100,000 in the tax year immediately prior to the year of the claim will be removed.

These two changes have the potential to significantly alter any existing calculations on the optimal remuneration structure for directors. In some cases it is more tax efficient to keep your salary as low as possible and take the rest as dividends due to the lower tax rates on dividends. However, following the increase to the EA, a director whose salary is eligible for the allowance and who has no other sources of income could, in certain circumstances, enjoy substantial tax savings by taking well over the personal allowance (£12,570) in salary.

The optimal mix will depend on various factors and differ from business to business. There may be other considerations such as ensuring that the amount paid to directors will be sufficient to cover any planned pension contributions. We can help you decide on the most tax efficient amounts of salary and dividends to pay yourself from your business.

Making Tax Digital – time to prepare!

In just over a year the first tranche of sole traders and landlords will be required by law to keep digital records to comply with the requirements of Making Tax Digital for Income Tax (MTD IT)

From April 2026, taxpayers with qualifying trading and property income of £50,000 or more on the 2024-25 tax return will be mandated to join MTD IT. The start date for incomes between £30,000 and £50,000 is April 2027. The Chancellor confirmed in the Spring Statement that MTD IT will be extended to those with income of £20,000 or more from April 2028.

This is a fundamental change to the way sole traders and landlords report their results to HMRC and will eventually apply to almost everyone who receives income from self-employment and/or property.

To comply with the requirements, mandated taxpayers must:

• Use approved software, apps or spreadsheets to record income and expenditure;
• Submit cumulative quarterly updates to HMRC by 7^th August, 7^th November, 7^th February and 7^th May each year; and
• Complete a final annual submission of taxable profit for the accounting period at the end of the year. This will replace the current self assessment tax return.

If you do not currently keep digital accounting records, do not worry, as we will be able to help you with the process. HMRC is not providing its own record-keeping software or platform. We will be able to recommend the right commercial software solutions that meet the MTD IT requirements for you.

An exemption from MTD IT will be available for taxpayers who are digitally excluded on practical or religious grounds. Some of the reporting rules for quarterly updates have been relaxed to simplify the process for certain categories of taxpayer.

Three-line accounts

Digital records can simply be tagged as either ‘income’ or ‘expense’ rather than specific categories, except for mortgage interest for landlords of residential properties.

Retailers

A single record of daily gross takings can be entered into the digital records, rather than each individual sale.

Jointly-let property

The individual owner can record a single total amount for each category of:

• Property income received during a quarter; and
• Property expenses incurred during the tax year.

We have been preparing to help our clients navigate the changes for some time, so contact us without delay to discuss what you need to do to get your business MTD-ready.

HMRC to close online filing service

HMRC has announced that it will close the online service for filing company accounts and corporation tax returns on 31 March 2026

Companies with an accounting period ending after 31 March 2025 will no longer be able to use HMRC’s free online service (unless they file before 1 April 2026) and will need to use commercial software to file their accounts and tax return instead.

The free online filing service is restricted to smaller, relatively simple companies with turnover not exceeding £632,000, subject to a number of exclusions. It allows the company to submit the annual corporation tax return to HMRC and send the accounts to Companies House at the same time.

Following its closure those companies, which could be a local residents’ association or a small incorporated charity, will need to use commercial software to comply with their online filing regulations. The software will need to allow the taxpayer to digitally file a corporation tax return (CT600) as well as the corporation tax computation and the company accounts for the same period in the specified ‘iXBRL’ format.

If you or someone you know currently uses the online filing service to submit the annual accounts and tax return to HMRC for a small company, such as a local amateur sports club, we can help you choose a suitable software product.

R&D relief for subcontractors

HMRC has updated its guidance to clarify the treatment of subcontracted research and development (R&D) expenditure under the SME scheme

When R&D work undertaken by a subcontractor is subsidised, tax relief is not available to the subcontractor under the SME R&D scheme. Following two recent taxpayer wins at the First-tier Tribunal, HMRC has updated its guidance to clarify its definition of ‘subsidised’ for R&D purposes.

Generally, where R&D is contracted out to the subcontractor and reimbursed by the client company, the subcontractor cannot claim R&D relief. However the guidance has been updated to advise that the terms of the contract are not the only factor to consider.

Examples of other factors include:

• Whether the R&D is incidental to the supply of a product or service;
• The degree of autonomy over the R&D work;
• The level of financial risk involved; and
• Who retains the intellectual property.

Where R&D occurs as part of an overall contract, for example a builder who encounters an unexpected problem on a job might develop a new process to address that problem, the guidance confirms that expenditure is not considered to be subsidised unless there is a clear link between the amount paid by the customer and the R&D expenditure. This is a significant shift from HMRC’s previous view that expenditure was subsidised even where the costs were indirectly met by the client through project payments.

This change to the guidance means that if a subcontractor develops a new process during one project that has the potential to generate economic benefits for them on future projects, the subcontractor will likely be entitled to claim the R&D relief.

If you undertake R&D work on behalf of clients, or engage third parties to carry out such work on your behalf, we can help you decide whether you are eligible to claim R&D relief.

Self Assessment and student loan repayment

From April 2026 most benefits in kind (BIKs) will have to be processed through the payroll and included on monthly payslips, with a potential knock-on effect for student loan repayments

The mandatory payrolling of BIKs will be implemented in phases, starting from April 2026.

The earnings threshold above which student and postgraduate loan repayments are due depends on the type of loan and when you started your course. Many people will never be required to repay their loan in full, or even at all, if their earnings do not exceed the threshold for the life of the loan.

To determine whether repayments are due for taxpayers within self assessment HMRC will look at the total income declared on the self assessment tax return (SATR). From 2024-25 a new box has been added to the SATR for taxpayers to enter payrolled BIKs that are subject to Class 1A NIC only separately to the total PAYE income. This is because student or postgraduate loan repayments are not due on those BIKs. If the total PAYE income figure on the SATR includes payrolled BIKs, the repayments calculated by the system will be too high.

If you have two or more separate employments and your earnings from each are below the repayment threshold, those earnings will not be added together for the purpose of calculating your student loan repayments if both are paid via PAYE. However, if you report your earnings using self assessment, your total PAYE income from all employments will be added together which could result in student loan repayments being due.

It may therefore be beneficial to stay out of the self assessment system where possible to avoid making unnecessary student loan repayments, particularly if you do not anticipate earning enough from each separate income source to be required to repay the loan in full before its expiry date.

Certain recent changes, including the increase in the income reporting threshold from £1,000 to £3,000 and the ability to pay the high-income child benefit charge via PAYE, will remove the need for many taxpayers to file self assessment. Contact us to discuss whether this could apply to you.

High-income child benefit charge via PAYE

From August 2025 employed taxpayers will no longer be required to complete a self assessment tax return (SATR) to declare and pay the high-income child benefit charge (HICBC)

The HICBC is a tax charge paid by the higher earning parent which claws back up to 100% of the child benefit claimed by either parent. For the tax year 2024-25 the HICBC is payable at 1% for every £200 of adjusted net income between £60,000 and £80,000 when the charge reaches 100% of the child benefit received.

Currently, even where the higher earner receives all of their income from employment, they need to complete a SATR in order to declare and pay the HICBC. The Government has confirmed that it will no longer be necessary to complete a SATR purely for the purposes of the HICBC. Those individuals with no other income outside their PAYE earnings will instead need to use a new online service to report their family’s child benefit payments and opt to have the HICBC collected from their payslip.

Taxpayers with income from other sources such as property or self-employment income will still be required to file a SATR.

IR35: small company exemption

Changes to the company size thresholds from April 2025 will also apply for the purposes of the off-payroll working (OPW) rules

The primary aim of the changes to the company size thresholds was to simplify regulatory requirements and alleviate the administrative burden for smaller businesses. HMRC has now confirmed that the new thresholds will also apply when deciding whether the OPW rules apply where companies engage workers via an intermediary.

For micro and small companies, the onus is on the contractor to determine its own status in relation to IR35. When a company breaches the threshold for medium sized entities, it is required to carry out the assessment for each contractor under the OPW rules.

To qualify as small from 6 April 2025 a company will need to satisfy two or more of the following criteria:

• Turnover not more than £15m (currently £10.2m)
• Balance sheet total not more than £7.5m (currently £5.1m)
• No more than 50 employees (currently 50)

Following the change many companies that are currently classed as medium will become small and will no longer be required to perform OPW assessments. If you are a contractor and provide services to medium-sized companies, you may be required to assess your own employment status if your client falls into the small company category when they thresholds change. We can help you with this.

It is currently unclear from the legislation when exactly the changes will take effect, although it is unlikely that they will be operational before April 2026. We are seeking clarification from HMRC on this and will update affected clients in due course.

National Minimum Wage Increase April 2025

As you may be aware the minimum wage increases from 1 April 2025.

The Changes are as follows:

We will change the rates for any applicable employees from this date.

As an employer it is your duty to inform us of any changes in age during the year which requires us to update their rate of pay.

There will be no changes to the auto-enrolment contributions.

Your Accounts² Ltd

New Tax Year 06/04/2022 – Important Information

Important Information relating to new Tax Year starting on Wednesday, 6th of April 2022

HOSPITALITY and CATERING REDUCED RATE VAT

As of 1st April 2022, this has now reverted up to the full Standard Rate of 20% VAT on all sales made.

MARRIAGE ALLOWANCE:

A reminder that if you are married or in a civil partnership you can transfer up to £1,260 of your personal allowance to each other. This can be worth up to £252 in the current Tax Year which ends on Tuesday.

This can also be backdated to 2017/18, so long as you claim by Tuesday.

These are the links to the guidance on the scheme and how to apply for it, about a 2-minute read.

https://www.gov.uk/marriage-allowance

https://www.gov.uk/marriage-allowance/how-to-apply

This can be claimed if one partner is a basic rate taxpayer and the other earns less than their Personal Allowance, currently £12,570 per year.

You must claim this relief yourself and let us know if you do so.

Please note you also need to stop your claim should your circumstances or earnings change.

CLASS 2 NATIONAL INSURANCE (NIC):

This is a tax that provides self-employed people with their entitlement to benefits and State Pension.

Historically, NIC was paid separately but is now merged with your Self-Assessment Income Tax payments.

There is an earnings limit under which you do not need to pay this tax (£6,515 in the current Tax Year to 05/04/2022), but we will ask for NIC to be paid voluntarily, if required, as this is in your best interests and keeps your NI contributions current as cheaply as possible.

Unfortunately, HMRC are removing these payments from your Tax Return without authority if you have earnings under £6,515. Ignore HMRC if they send a tax demand not including this amount and contact us. We will deal with the paperwork for you to have the Class 2 National Insurance reinstated.

If we say you are to pay only Class 2 National Insurance, the amount will be £158.60 for this Tax Year.

Pay it, and do so by 31^st January 2023, otherwise you will lose an entire year of contributions.

We believe this will become a major issue and are trying to protect you with this advice.

NUISANCE PHONECALLS

I know many of you suffer from endless nuisance calls from telesales operations, so here is a service you may wish to register for. https://www.tpsonline.org.uk/register/corporate_tps

It is free, called the Corporate Telephone Preference Service (CTPS). We use it and it helped us.

National Minimum Wage Increase April 2022

As you may be aware the minimum wage increases from 1 April 2022.  The changes are as follows:-

Please follow this link to the government website which details minimum wage information: https://www.gov.uk/government/publications/minimum-wage-rates-for-2022

Reduced VAT rate increase

This is a reminder the reduced VAT rate of 5% is due to increase to 12.5% with effect from 1st October 2021.

Please keep your relevant business records to 30th September, and from 1st October separate so that we can identify sales and expenses affected either side of this date.

This applies if you charge VAT or incur business expenses which you reclaim VAT on, in relation to:

• Hospitality
• Provision of Hot Food
• Hotel/holiday accommodation in relation to business trips

For full guidance please follows these links:

• Main rules in relation to reduction of VAT rate

https://www.gov.uk/guidance/vat-reduced-rate-for-hospitality-holiday-accommodation-and-attractions

• Rules specifically in relation to hot food

https://www.gov.uk/guidance/catering-takeaway-food-and-vat-notice-7091