Updated guidance on mandatory payrolling of benefits in kind
Updated guidance on mandatory payrolling of benefits in kind Much like the rollout of mandatory payrolling of benefits in kind, HMRC guidance on the matter is coming in dribs and drabs. What’s the latest? Check here for more help with your Payroll HMRC’s latest update includes two points on mandatory payrolling of benefits in kind. Mandatory payrolling is being phased in from 6 April 2027 and 6 April 2028, but employers can payroll benefits voluntarily if they wish. Currently, employers who voluntarily payroll benefits for income tax can continue to report and pay the employers’ Class 1A NI liability after the end of the tax year. That will no longer be the case from 6 April 2027. Even where non-mandated benefits are payrolled voluntarily, the associated Class 1A NI contributions need to be made in real time through payroll. It is tempting to payroll all benefits from 6 April 2027 for simplicity but doing so doubles your NI costs for 2027/28. This is because you must pay Class 1A NI for 2026/27 benefits by 6 July 2027, and on 2027/28 benefits through the payroll each month. The second update is that the list of exemptions has been extended to include globally mobile employees. It can be difficult to calculate and report benefits in real time when an employee is working overseas so such benefits can continue to be reported on form P11D after the end of the tax year. You must inform HMRC which employees are globally mobile if you want to use the exemption, and a dedicated form will be made available in November 2026. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
MONTHLY FOCUS: STARTING TO THINK ABOUT VAT
MONTHLY FOCUS: STARTING TO THINK ABOUT VAT The VAT registration threshold has barely changed over the last decade. As a result, more businesses are having to register. In this Focus, we look at the key considerations for a business that needs to register, or one that may be considering doing so on a voluntary basis. Page Contents: Vat registration process Making Tax Digital: Record Keeping Output Tax: What should you charge? Input Tax: What can you reclaim? Make the most of Our Accounting Services REGISTRATION In this section we give an overview of the VAT registration process, including when your business must register, as well as situations where you don’t have to register, but may wish to anyway. What is VAT registration? VAT registration is simply the term given to the process by which a business informs HMRC of its requirement (or voluntary wish) to obtain a VAT number. Registration can be compulsory or voluntary. When does a business need to register? The main VAT registration test for an unregistered business is based on checking historic sales on a rolling twelve-month basis to ensure they have not exceeded £90,000. Where this is exceeded, your business must register within 30 days of the month end. HMRC will send you a VAT Registration Number and you will need to start charging VAT on your sales from the first of the next month. But there is also a second test to consider, namely that registration is required if taxable sales are expected to be more than £90,000 in the next 30 days alone. The registration date is the beginning of the 30-day period, i.e. immediately. This test ensures that large businesses have to register as soon as they start trading in the UK, e.g. a major overseas retailer opening a UK branch. Example French Perfume, a major retailer based in Paris, is opening its first UK store in London on 1 October 2026. Monthly sales are expected to be £200,000. The business will need to be VAT registered in the UK by 1 October 2023 because it knows its taxable sales in the 30 days thereafter will exceed £85,000. Can I register early? Your business can apply to be VAT registered as soon as there is an intention to make taxable sales in the future – there is no time limit regarding the date of the first sale. This is known as an intending trader application. HMRC might want proof of business intentions before accepting the registration, e.g. business plans, contracts with potential suppliers and customers etc. What income counts for the purposes of the tests? The key phrase is “taxable” sales and not “total” sales as far as VAT registration is concerned. This means that any sales made by your business which are exempt or outside the scope of VAT are excluded from the calculations. It is important to be clear about the difference between exempt, outside the scope and zero-rated sales because the latter are included in the calculations. However, in a bizarre twist to the rules, most services purchased from abroad by your business are also included as taxable sales as far as the threshold is concerned. These are known as “deemed supplies”. For example, if a firm of accountants has annual income of £80,000 from UK clients and uses the services of an India-based bookkeeper to help with its work, paying the Indian firm £11,000 each year, then its total taxable sales are £91,000, triggering compulsory registration. Additionally, if your business takes over a business as a going concern, you must take into account the annual taxable sales of the seller by treating them as your own sales for the previous twelve months. It may be possible to avoid registration if you can convince HMRC that exceeding the threshold was a “one-off” event, perhaps due to an unusually large order. However, in this Special Report we are assuming you are already registered (or wish to be). Why would I register voluntarily? Perhaps the most common reason for registering before hitting the threshold is where you are about to start spending money on a property, or incur other large expenditure in the setting up of the business and want to recover the input tax. In the absence of registration, the VAT would be an additional cost to your business. Being VAT registered may also give your business an air of respectability. You may want to register for VAT if you sell to other registered businesses which are fully taxable. They can recover the VAT which is charged to them. The costs of the business are reduced by the input tax, which it can recover. However, you probably won’t want to register for VAT if you sell mostly to the public, and charging VAT means that you either must increase your retail prices or reduce your profits. The same applies if you mainly sell to businesses that mainly make exempt supplies, or unregistered businesses. What VAT planning is possible when registering? It is possible for you to reclaim some of the VAT you incur before you register on the first VAT return (when you eventually do). VAT can be reclaimed on pre-registration purchases of both goods and services, but there are restrictions. VAT can be reclaimed: on goods if the purchase was incurred during the four years prior to registration on services if the purchase was made during the six months prior to registration. In both instances, there is a further condition that the goods or services must not have been fully “consumed” before the registration date. This might prove tricky with services, for example rent, which apply to specific periods. Stock items that have been sold will also be excluded. Can I backdate a registration to maximise recovery? HMRC’s VAT Notice 700/1 says “We may allow you to backdate your registration voluntarily by up to four years when you apply to register. This will allow you to claim back VAT as per the time limits
Loan Charge settlement offers begin to land
Loan Charge settlement offers begin to land HMRC has begun sending formal settlement offers to individuals and employers with outstanding Loan Charge liabilities, alongside detailed new guidance explaining how offers will be calculated and how long recipients have to respond. What’s the full story? Get more Accounting assistance with our Accounting Services HMRC’s new Loan Charge settlement guidance confirms that eligible taxpayers are now being contacted. Everyone will have at least 90 days to accept an offer, although many people with open enquiries or unresolved appeals will have longer. The settlement terms can substantially reduce what is payable. Subject to an overall maximum reduction of £70,000, HMRC recalculates the liability by reference to the years in which the disguised remuneration income was originally received, gives a reduction for promoter fees and then deducts a further £5,000. Late-payment interest, relevant IHT liabilities and most penalties attached to the original Loan Charge liability are generally excluded from the settlement amount. Where an employer should have accounted for PAYE and still exists, HMRC will normally try to recover the tax and NI from the employer first. The employee will also receive an offer but can generally wait while HMRC pursues the employer without losing the opportunity to settle. Anyone unable to pay the settlement amount immediately should contact their HMRC caseworker before accepting the offer. Payment plans of up to five years are available under the new terms, with longer arrangements possible depending on individual circumstances, although interest will be charged on instalments. The deadline in the settlement letter should not be ignored. In particular, some taxpayers whose Loan Charge liability is already final will have only 90 days to accept the new terms. If they do not, HMRC says it will pursue the full liability instead. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
Old IHT forms will be rejected
Old IHT forms will be rejected HMRC has stopped processing old versions of the Inheritance Tax IHT100 forms from 31 August 2026. Anyone reporting an IHT chargeable event involving a gift or trust will need to make sure they are using the correct forms. What do you need to know? Protect more of Your future with our Accounting Services HMRC confirmed in Agent Update 144 that any previous versions submitted after 31 August will not be accepted. The form will have to be resubmitted using the correct version, potentially delaying the reporting and payment process. The IHT100 is now a collection of separate forms for different types of chargeable event, rather than a single form. HMRC’s current IHT100 guidance explains which of the IHT100a to IHT100h forms should be used depending on the event being reported. The forms can apply to matters such as lifetime transfers, ten-year charges on relevant property trusts and property leaving a trust. Only the form relating to the particular chargeable event should be completed. Trustees and others responsible for reporting an IHT charge should therefore avoid using saved or previously downloaded copies without checking that they are the current version. From 1 September, using an outdated form will mean starting the submission again. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
Unused sales suppression tools can still trigger penalties
Unused sales suppression tools can still trigger penalties HMRC has published a new compliance factsheet explaining the penalties that can apply where a business possesses an electronic sales suppression (ESS) tool, even if it has never actually been used to suppress a sale. What do you need to know? Get More Help with Business Tax The new compliance factsheet explains that ESS broadly involves software, hardware or other tools capable of hiding or reducing transactions recorded by an electronic till or point-of-sale system. HMRC says that “possession” is not limited to owning such a tool. It can also include having access to it, or attempting to access it. Where HMRC suspects that a business is in possession of an ESS tool, it will normally require the business to remove it or stop using it and satisfy HMRC that this has been done. Failure to comply can result in an initial penalty of up to £1,000, followed by daily penalties of up to £75 until HMRC is satisfied that the tool is no longer available. Where an ESS penalty has already been charged within the previous five years, HMRC says the full £1,000 penalty will be imposed immediately, and the daily penalty will normally be £75. Separate penalties may also arise where the tool has actually been used to suppress sales and tax has been understated. The important point is that HMRC does not need to establish that sales have actually been hidden before a possession penalty can arise. This makes the rules particularly relevant to businesses using electronic till or point-of-sale systems where suppression functionality may be available even if it has never been used. Businesses that receive an HMRC approach concerning their till software should therefore establish exactly what functionality is available and act quickly to remove any ESS capability. Being able to demonstrate that the tool has been removed may also be important in preventing daily penalties from continuing. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
MONTHLY FOCUS: TAX CONSIDERATIONS FOR BUY-TO-LET PROPERTY
MONTHLY FOCUS: TAX CONSIDERATIONS FOR BUY-TO-LET PROPERTY Running a letting business is a very popular option. However, there have been a number of changes over the way that profits from property businesses are taxed in recent years. In this month’s focus, we consider the tax considerations you need to keep in mind when buying property to let, and look at how the rental profits are calculated for tax purposes. Page content:- TAX IMPLICATIONS WHEN BUYING PROPERTY CALCULATING THE TAXABLE PROFIT RELIEF FOR MORTGAGE INTEREST AND OTHER COSTS OF FINANCING Get more help with our Accounting Services TAX IMPLICATIONS WHEN BUYING PROPERTY I am thinking of buying a property to let out – what do I need to know? To give you a starting point, you’ll need to ask yourself several questions, including: Will I buy with cash or do I need a mortgage? How much will it cost? How much rent will I charge? Am I letting solely or jointly? Am I going to let residential or commercial property? Do I want to be a hands-on landlord or will I use an agent? Will the property be let furnished or unfurnished? Is it located in an area which is likely to see a general increase in house prices?; and Do I want to let the property to long-term tenants, or will it mainly be short-term holiday lettings? This may seem like a lot to consider at the outset, but as you will see, different answers will make a great deal of difference to your tax position one way or another. The first tax that you will encounter when buying a rental property is stamp duty land tax (SDLT) or, if the property is in Scotland, land and buildings transaction tax (LBTT). Since 6 April 2018, Welsh land transaction tax applies to purchases of property located in Wales. What is land tax? SDLT is a tax on value charged to you (the buyer) when you purchase a property. It is therefore a real additional cost of purchase. You need to consider what the SDLT charge will be when budgeting for a purchase and you’ll need to have the amount ready upfront along with your solicitor’s fees for conveyancing. Make sure you keep the paperwork for both the solicitor’s fees and the SDLT charge for later on – as they are incidental costs of acquisition, you are allowed to add them to the purchase price when working out what your taxable gain is on a later sale. Despite the name, SDLT, and the Scottish and Welsh equivalent, can also apply to lump sums paid for leases and rental contracts – you don’t actually have to be purchasing land. The current SDLT bands and rates for residential property are: Rate bands that apply to purchase price Rate payable on part of price within each band First-time buyers (on properties costing no more than £500,000) First £300,000 Nil Between £300,001 and £500,000 5% Other buyers First £250,000 Nil Between £125,001 and £250,000 2% Between £250,001 and £925,000 5% Between £925,001 and £1,500,000 10% Over £1,500,000 12% Over £500,000 (where purchase is made by corporate body) 17% There is a 5% surcharge applicable to “additional properties”. This applies whenever the buyer has an existing legal interest in residential property, so will almost always apply to a buy-to-let landlord. Properties costing less than £40,000 are exempt from this charge – but obviously this means that properties that don’t attract SDLT at the main rates can be caught. It’s hard to see how any property, other than a serious fixer-upper bought perhaps at auction, will fall below this value. Note. We are using SDLT to illustrate the land tax here. The devolved equivalents in Scotland and Wales operate in an almost identical way, but have differing bands and rates. I heard it’s really tax efficient to take in lodgers. Is this true? It can be, yes. If you let a room to a tenant in your own home, rent-a-room relief is available. The house does not have to be owned by you. You could rent it and then sublet a room to a lodger, subject to the terms and conditions of your tenancy agreement. The rent-a-room limit is currently £7,500 per year. Any gross rent up to this limit is tax free. If your gross rent (rental income before deducting costs) is less than the limit, then you will have no tax to pay. If your tax-deductible expenses exceed the gross rent, i.e. you make a loss, you can elect for rent-a-room relief not to apply. That way, the loss can be carried forward and deducted from rental profits in later years. If the rent-a-room receipts exceed the limit then by default you will be taxed under the normal rental income rules, with income less expenses. You can, however, elect for the rent-a-room relief to apply as a flat rate deduction, so that the gross rent in excess of the limit is taxable. The time limit for both elections is twelve months from 31 January following the end of the tax year in which the election applies. When your gross rent does not exceed the limit, then the relief applies automatically as it is the best option for you. However, if the rent from the lodger exceeds the limit, then the election to claim rent-a-room relief, mentioned in the tip above, can be made. This can be done by ticking a box on your tax return or sending a standalone claim to HMRC within the time limit. This relief applies to each property and not each tenant. So should you have two tenants, the rent-a-room limit is still £7,500 in total. If your property is jointly owned by two or more people, then half of this amount, i.e. £3,750, is given to each owner. This is irrespective of the actual rent apportionment. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 CALCULATING THE TAXABLE PROFIT How is my rental income taxed? Your rental income is basically a specialised type of business activity. As such it is charged to income tax on a profits rather than turnover basis. This means that you are entitled to deduct allowable
Treatment of distributions under review
Treatment of distributions under review The government has launched a consultation on modernising the tax treatment of distributions and repayments of capital by companies. The proposals could affect the distinction between dividends taxed as income and capital payments subject to CGT. What changes are being considered? Find more Help with our Accounting Services The current rules determine whether value extracted from a company is treated as an income distribution or a repayment of capital. This distinction can make a significant difference to the tax payable by shareholders, particularly where a payment qualifies for CGT treatment rather than being taxed as dividend income. The government says the legislation has developed over many years and can be difficult to navigate. The consultation therefore considers whether the rules can be simplified and made more consistent, while preventing arrangements designed to convert what is effectively income into more favourably taxed capital receipts. One area under review is the treatment of share capital reductions and repayments. The government is considering whether clearer rules are needed to determine when these should be taxed as distributions. The consultation also looks at distributions made during company reorganisations and other transactions involving changes to share capital. Another issue is the interaction between the distributions legislation and the transactions in securities rules. These anti-avoidance provisions can apply where shareholders obtain a tax advantage by receiving capital rather than income, and the government is considering whether the two sets of rules could be better aligned. There are no immediate changes, and the consultation is seeking views before detailed proposals are developed. However, any reform could be particularly important for owner-managed companies where extracting accumulated profits, reorganising share capital or preparing a company for sale can involve the boundary between income and capital treatment. The consultation closes on 14 September 2026. Anyone contemplating a significant capital distribution or company reconstruction should keep an eye on how the proposals develop, as the eventual reforms could materially change the tax treatment of extracting value from a company. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
First MTD quarterly deadline arrives
First MTD quarterly deadline arrives The first quarterly reporting deadline under Making Tax Digital for Income Tax (MTD IT) is 7 August 2026. HMRC has now confirmed what will happen to those who miss it, including when it will start sending reminder letters. What do you need to know? Get more Help with our Accounting Services Those who joined MTD IT from April 2026 and use standard quarterly reporting must submit their first quarterly update by 7 August. The submission covers the first quarter of the 2026/27 tax year and is made through compatible software. HMRC’s latest software developer newsletter confirms that taxpayers who miss the deadline will receive a reminder letter, although these will not start to arrive until October 2026. Those who have opted for digital communications may also receive up to two reminder messages through HMRC’s online services. Importantly, taxpayers in the first mandatory wave of MTD IT will not receive penalty points for late quarterly updates during 2026/27. However, the obligation to submit remains, so anyone missing the 7 August deadline should bring their quarterly reporting up to date rather than waiting for HMRC’s letter. The newsletter also highlights some teething problems with the new system. HMRC has identified cases where quarterly obligations have remained open because software submissions did not cover the entire quarterly period. A small number of taxpayers have also been unable to submit because their quarterly obligations were not created correctly when they signed up. If you are required to use MTD IT and have not yet submitted your first quarterly update, the deadline is now here. Missing it may not result in a penalty point this year, but the outstanding submission will not simply disappear and HMRC intends to follow up with those who fail to file. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
HMRC targets landlords using third-party data
HMRC targets landlords using third-party data HMRC has confirmed that it is using information received from third parties to identify landlords who may not have declared all of their rental income. The latest compliance campaign highlights the department’s increasing use of data matching to tackle errors and omissions. What should landlords do? Get more Help with Our Accounting Services According to HMRC, information obtained from a range of third-party sources is being used to identify landlords whose tax returns may not accurately reflect their property income. The data can include details provided by letting agents, local authorities and other organisations, allowing HMRC to compare information against tax returns already submitted. Where discrepancies are identified, HMRC may write to landlords asking them to review their tax affairs or explain apparent differences. Although these letters do not constitute a formal enquiry, they are often the first step in a wider compliance exercise and should not be ignored. The campaign reflects HMRC’s continued investment in data analytics and follows a series of “one-to-many” letter campaigns aimed at encouraging taxpayers to correct errors voluntarily before formal compliance action is considered. Landlords who discover that rental income has been omitted or reported incorrectly should consider making a voluntary disclosure before HMRC opens an enquiry. Prompt action can reduce potential penalties and demonstrate a willingness to correct the position. The use of third-party information is likely to become increasingly common as HMRC expands its digital compliance capabilities. Landlords should therefore ensure that rental income, allowable expenses and property ownership records are complete and accurately reflected in their tax returns. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
Self-employed taxpayers warned over missing Class 2 NI credits
Self-employed taxpayers warned over missing Class 2 NI credits HMRC is warning some self-employed taxpayers to check their National Insurance (NI) records after an issue affecting Class 2 NI credits came to light. The problem could leave some individuals with gaps in their contribution record, potentially affecting their entitlement to the State Pension and other contributory benefits. What should you do? Find more Help with Your Personal Tax From 6 April 2024, most self-employed individuals no longer pay Class 2 NI. Instead, those with profits above the small profits threshold receive Class 2 NI credits automatically, preserving their entitlement to contributory benefits without the need to pay contributions. HMRC has identified an issue affecting some taxpayers whose records have not been updated correctly. As a result, they may not have received the Class 2 NI credits they were expecting, even though they satisfy the qualifying conditions. The department is advising affected taxpayers to check their National Insurance record to ensure the relevant tax year has been credited correctly. Where a discrepancy is identified, it should be raised with HMRC so that the record can be amended. Although the issue will not affect every self-employed individual, missing NI credits could reduce entitlement to the new State Pension if left uncorrected. Checking your NI record now may avoid more complicated issues when pension entitlement is calculated in the future. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk