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 From 1 September, using an outdated form will mean starting the submission again.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
VAT on electricity to be cut
VAT on electricity to be cut The new Prime Minister has announced a cut to the rate of VAT on electricity from 1 October. What’s the full story? Find more help with our Accounting Services Andy Burnham’s first tax policy has been announced. From 1 October to 31 March 2027, VAT will be cut from household electricity bills. The policy is supposed to help with the cost of living, but in reality, will save an average household just £45. The rate of VAT will be cut from 5% to zero for six months, and any further changes will be announced in the next Budget. The VAT rate should be passed on to customers in England, Wales and Scotland, with similar support being rolled out in Northern Ireland. The cut applies even if you’re on a fixed tariff, but note it only applies to electricity bills, not gas 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: PROVIDING FURTHER TAX-FREE BENEFITS TO EMPLOYEES
MONTHLY FOCUS: PROVIDING FURTHER TAX-FREE BENEFITS TO EMPLOYEES In this further examination of tax and NI free benefits. Providing benefits that are exempt from income tax is a great way to reward employees in a tax-efficient way. Which benefits qualify for tax-free treatment? Page Contents: Home-to-work travel Employer-provided equipment and Homeworkers Incidental overnight expenses Living accommodation Long service awards Medical check-ups and treatment Meals Mileage allowance payments and passenger payments See our full range of Accounting Services Home-to-work travel Can employers provide free bus travel for employees to get to and from work? Yes, there are two ways to do this: set up a works transport service; or if this is not an option, contribute to a local bus service which provides free travel to employees. Provided certain conditions are met, both options enable the employer to meet the cost of employees’ travel to work without triggering a taxable benefit. What’s a works transport service? This is a service that is provided by means of a bus or minibus for conveying employees on a qualifying journey. A qualifying journey is one between the employee’s home and workplace or between two workplaces. Provided the following conditions are met, the benefit can be provided tax free: the service is available generally to employees of the employer, or each employer, concerned the main use of the service is for qualifying journeys by those employees; and the service is used only by the employees for whom it is provided or is substantially used only by those employees or children (aged under 18). What sort of vehicle qualifies? The exemption only applies if the service is provided by means of a bus or a minibus. For these purposes, a bus is defined as a road passenger vehicle that has a seating capacity of twelve or more passengers, and a minibus is defined as a vehicle constructed or adapted for the carriage of passengers that has a seating capacity of nine, ten or eleven. The exemption does not apply if the transport is provided by means of a people carrier or similar modified vehicle to carry nine passengers or more. It must be a bus or a minibus. Can the bus be used for other purposes? The exemption applies to the use of the bus for qualifying journeys rather than to the vehicle itself. Consequently, if an employer uses the bus, say, to take staff on a night out this will not be covered by the exemption. However, a separate exemption allows the bus to be used for certain short journeys without a problem. Allowable journeys are those of not more than ten miles between the workplace and shops or other amenities which are made on a working day. This would allow the bus to be used, for example, to take people into town at lunchtime without a problem. If an employer can justify the expense of providing transport, e.g. a minibus, to ferry employees to and from work, they could consider clubbing together with nearby businesses to share the arrangement and the cost. The exemption will still apply. What about subsidising a local bus service to provide transport for employees? If it’s not viable for the employer to operate their own works bus service, they can still provide tax-free home-to-work travel for employees. This involves making a payment or some other support to a local bus company in exchange for it providing cheap or free home-to-work travel to employees. HMRC refers to this arrangement as “subsidising” a local bus company in exchange for travel services. Where an employer is to subsidise a local bus service, both conditions A and B below must be met for the tax and NI exemption to apply to the cheap or free bus travel. In any other case, the exemption is conditional on A to C being met. What are the conditions? The conditions are as follows: Condition A The service is used by employees of one or more employers for qualifying journeys. A qualifying journey is one between the employee’s home and workplace or between two workplaces. Condition B The service is generally available to employees of the employer, or each employer, concerned. Condition C The terms on which the service is available to the employees of the employer, or each employer, concerned are not more favourable than those available to the other passengers. Where the travel is provided by means of a supported local bus service, Condition C does not apply. This means that the employees are able to travel on terms that are more favourable than those available to other passengers without losing the benefit of the exemption. Can employees use an employer-provided voucher to use the service? As long as the underlying benefit is exempt, it can be obtained by means of a voucher, e.g. a season ticket, without triggering a tax liability. Employer-provided equipment and Homeworkers Can an employer provide employees with equipment without triggering a taxable benefit ? It’s usual to have a business premises where employees will work, such as an office or a factory. The employer will also usually provide equipment that they need to perform the duties of their job. But sometimes they may work at home or a location of their own choice. Whichever of these applies, if the employee derives some personal benefit from use of the equipment etc., this will be exempt from tax and NI as long as conditions A and B apply. Condition A Any use of the accommodation, supplies or services for private purposes by the employee or members of the employee’s family or household is not significant. Condition B Where the equipment is provided at a location other than the business premises, e.g. the employee’s home, its sole purpose is to enable them to perform the duties of the employment. The exemption from tax and NI doesn’t apply to the use of: a motor vehicle, boat or aircraft; or a benefit that involves the extension, conversion or alteration of living accommodation or the construction, extension, conversion or alteration of a building or other structure on land
HMRC urges agents to review excepted estates
HMRC urges agents to review excepted estates HMRC is reminding tax agents to review inheritance tax (IHT) returns submitted for excepted estates following changes introduced from 1 January 2025. The warning follows concerns that some estates may have been incorrectly treated under the new rules. What should you check? Get the Accounting Services to Enhance Your Business The changes introduced from 1 January 2025 significantly widened the circumstances in which an estate can qualify as an excepted estate. As a result, many estates no longer require a full inheritance tax account to be submitted to HMRC. Instead, personal representatives can provide the relevant information as part of the probate application. HMRC has now advised agents to review estates that have been administered under the revised rules to ensure they were correctly classified. An estate that is incorrectly treated as excepted could result in the wrong information being provided to HMRC or delays in the administration of the estate. The reminder is particularly relevant where an estate includes overseas assets, lifetime transfers or more complex ownership arrangements, as these factors may affect whether the estate satisfies the conditions for excepted status. Agents should also ensure that the correct inheritance tax forms have been completed where an estate falls outside the simplified reporting regime. The expansion of the excepted estate rules has reduced the administrative burden for many families, but determining whether an estate qualifies still requires careful consideration of the underlying conditions. Reviewing files now may help identify any errors before they become more difficult to correct. 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