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Author: Femi Ogunshakin

Latest tax gap sets another record

Written by Femi Ogunshakin on . Posted in Advice. No Comments on Latest tax gap sets another record

The tax gap for 2024/25 sets another record at £59.2 billion, with small businesses accounting for some 62% of the taxes not collected.

The tax gap is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid.

Upward trend

The tax gap for 2024/25 represents around 6.4% of the total tax due. Although the tax gap has been higher historically, it has generally increased throughout recent years; for example, for 2021/22, it was 5.7%.

HMRC, as is normally the case, has revised figures for previous years. When figures were released for 2023/24, the tax gap was shown as generally declining. However, the latest figures show the tax gap for 2023/24 at 6.0%, rather than the previous 5.3%, an increase of £6 billion.

Small businesses under scrutiny

In 2024/25, small businesses accounted for 62% of the tax gap, an increase of four percentage points since 2020/21. Such firms are the main culprits here, with HMRC estimating that around 45% of the corporation tax owed was not collected. No surprise then that identity verification has recently been introduced for company directors and persons with significant control.

Behaviour

The largest proportion of the tax gap comes from failure to take reasonable care. This is currently 35% – nearly £21 billion – increasing from 30% of the tax gap in 2020/21:

  • HMRC blames failure to take reasonable care on a taxpayer’s carelessness, negligence, or poor record-keeping, but the increasing complexity of the tax system and the deterioration in HMRC customer service also play a part.
  • Add in taxpayer errors and more than half of the tax gap is now down to taxpayers who probably regard themselves as tax-compliant.

Actual evasion of tax only accounts for 12% of the tax gap, with tax avoidance standing at just 1% of the total. HMRC’s summary details of the latest tax gap figures can be found here.

Photo by Katja Ano on Unsplash

Writing your will? Remember to choose your executors with care

Written by Femi Ogunshakin on . Posted in Inheritance Tax, Budget, Pensions, Probate. No Comments on Writing your will? Remember to choose your executors with care

HMRC has published fresh information on the mechanics of collecting inheritance tax (IHT) on pensions.

In the October 2024 Budget, the Chancellor announced that most pension death benefits would become potentially liable for IHT from 6 April 2027. However, it was not until March 2026 that the relevant primary legislation was passed into law. Even that is not the end of the story, as HMRC now must pass regulations to make the new rules work, then consult on and produce “detailed guidance and other supporting materials”. The final elements are not due until next spring, uncomfortably close to the April 2027 start date.

The protracted process reflects the complexities in developing a system that works for:

  • The personal representatives (PRs) – normally the will-appointed executors,
  • The pension scheme’s administrators and trustees,
  • The beneficiaries of the pension death benefits, lump sum and/or income, and
  • HMRC, which could be demanding both IHT and income tax on the pension benefits.

At the end of May, HMRC issued an extensive ‘technical note’ setting out its view of the current state of play. This highlighted the significant new responsibilities placed on PRs:

IHT liability: The PRs will be primarily responsible for reporting on and paying any IHT due on pension benefits. However, once the pension scheme determines that an individual is entitled to a lump sum or a pension, that beneficiary also becomes jointly and severally liable. This means that if the PRs do not pay any IHT due, the beneficiary will have to.

Withholding funds: As anyone who has experienced estate administration will know, it takes time to track down the deceased’s assets and their value at the date of death. To help cover this inevitable delay, PRs will be able to request that a pension scheme withholds up to 50% of a beneficiary’s entitlement as a reserve against a potential IHT liability. The maximum withholding period is 15 months. However, a withholding notice cannot apply to beneficiaries classed as exempt (mainly surviving spouses and civil partners) nor to a limited range of excluded benefits (such as dependants’ scheme pensions, joint life annuities and death in service payments).

The new duties for PRs mean that you might wish to review who you have appointed as your executors. If you have no will, then the changes to IHT have given you another reason for making one.

HMRC technical note on IHT on pensions is available here.

Photo by Melinda Gimpel on Unsplash

Profit and loss filing changes for micro-entities and small companies

Written by Femi Ogunshakin on . Posted in Companies House. No Comments on Profit and loss filing changes for micro-entities and small companies

The government has confirmed that micro-entities and small companies will have to file profit and loss (P&L) accounts with Companies House from 2028, but can then choose whether these accounts are made public.

The original intention was that changes would come in from April 2027, but, following stakeholder concerns, reform has been put back to April 2028.

Filing requirements

Both micro-entities and small companies will have to file a P&L account with Companies House from April 2028. However, there will be the option to opt out of publishing this information on the public register:

  • Details of the opt out have not yet been published.
  • Even if a company opts out of publishing its P&L account, HMRC (as is currently the case) and law enforcement will still have access to help identify fraud and tax evasion.
  • All companies will have to file their annual accounts using commercial software, which is already the case for HMRC filings. The existing Companies House web and paper-based accounts filing routes are to be closed.

With HMRC already receiving a full set of accounts, the general response to the profit and loss option to opt out is that it is somewhat pointless; it will just mean more time and costs.

Given the existing HMRC filing requirement, companies should ensure that the filing software they use can also support the Companies House requirements.

Other changes

Some other reforms will also be brought in from April 2028:

  • The option for companies to prepare and file abridged accounts is to be removed.
  • The number of times a company can shorten its accounting reference period will be reduced; there are currently no restrictions on how often this can be done.

Companies House will contact all companies through their registered email address to tell them about the upcoming changes. 

The government’s report explaining the changes to accounts filing from April 2028 can be found here.

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Enterprise management incentives grow in popularity

Written by Femi Ogunshakin on . Posted in Advice. No Comments on Enterprise management incentives grow in popularity

The April 2026 enterprise management incentive (EMI) reforms have pushed this perk towards mainstream acceptance. Higher qualifying limits mean that EMI tax-advantaged share options can now continue to be granted even as a company grows and matures.

EMIs help to retain and reward key people. They can be granted options at a price agreed at the outset, and which can be exercised at a set time or if a performance target is hit. The maximum market value of unexercised EMI share options that an employee can hold in a three-year period is £250,000.

Tax advantages

There is generally no tax charge when EMI share options are granted to an employee or when options are exercised. A capital gains tax liability can arise when the shares are sold, but the gain will potentially qualify for a flat rate of 18%.

Qualifying limits

The following limits apply to EMI contracts granted since 6 April 2026:

  • The maximum market value of unexercised EMI options granted by a company cannot exceed £6 million (previously £3 million).
  • Gross assets must be less than £120 million, with fewer than 500 full-time equivalent employees (previously £30 million and 250 employees).
  • The maximum exercise period for EMI options is 15 years (previously 10 years).

Companies can retrospectively apply the 15-year exercise period to EMI share option contracts previously granted.

Company considerations:

  • Companies which have not previously qualified for EMI should review whether they now qualify, and whether EMI options are the right choice for future employee equity incentives.
  • Similar considerations apply if a company has previously qualified, but then exceeded the gross assets or employee limits as the company has grown; or the company has hit the old £3 million limit for unexercised EMI options.
  • Companies with existing EMI options should decide whether they want to extend the exercise period to 15 years.

Details on EMIs (along with other employee share schemes) can be found here.

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Deprivation of assets under watch

Written by Femi Ogunshakin on . Posted in Inheritance Tax, Income Tax, Pensions, Wealth. No Comments on Deprivation of assets under watch

People are updating their tax-planning strategies to take account of inheritance tax (IHT) being charged on unused pension pots from April 2027. An unintended consequence of such planning, however, is the impact on long-term care costs.

The problem

If capital and savings are above £23,250, then in England a person has to fund all of their long-term residential care. This might seem a low threshold, but remember the value of your home will be disregarded if your partner (or a relative aged 60 or over, or a dependent child) continues to live there. Therefore:

  • Deprivation of assets rules mean that a person cannot obtain care cost funding by gifting assets to their family.
  • This is where the new pension tax rules can be an issue: many older people are attempting to reduce future IHT bills by withdrawing large sums from their pensions, and then gifting the money to children and grandchildren.
  • A local authority might well treat such gifts as a deliberate deprivation of assets.

There is no time limit on how far back local authorities can look. If a person is found to have deprived themselves of assets, they will be treated as still owning the money or assets that were given away.

Given longer life expectancy, the financial impact of unexpectedly having to fund care costs can be substantial.

The right balance

A substantial gift may well meet the IHT objective, but could create future difficulties when care costs come into play.

Local authorities will look at whether care needs were foreseeable at the time a gift was made, so earlier gifts when made in good health will be much easier to justify. Detailed record keeping is essential. The records should show that the purpose of a gift is genuine estate planning or family support, as opposed to avoiding care costs.

Age UK’s detailed factsheet on deprivation of assets can be found here.

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Recovering the winter fuel payment

Written by Femi Ogunshakin on . Posted in Advice. No Comments on Recovering the winter fuel payment

Unless opted out, pensioners will have received the winter fuel payment for 2025/26, but it is recoverable by HMRC if income exceeds £35,000. HMRC guidance on the recovery process has recently been updated.

The threshold

The winter fuel payment (the pension age winter heating payment in Scotland) has to be paid back if a pensioner’s income is more than £35,000. The payment is retained in full if income is £35,000 or less.

Where two or more people living in the same household have received a payment, HMRC looks at each person’s income separately. For example, if one partner has income of £36,000 and the other £34,000, only the first partner will repay their winter fuel payment.

The income

For the winter fuel payment received during November or December 2025, the relevant income is that for the 2025/26 tax year:

  • All sources of taxable income are included before any deductions.
  • The figures for any savings and dividend income are before taking account of the personal savings allowance or dividend allowance. Income from individual savings accounts (ISAs) and any other tax-exempt savings is excluded.

Your share of the income is only included when the income is from a joint source, such as a joint savings account.

The recovery

Pensioners who complete a self-assessment tax return will have to include details of the winter fuel payment on the return, and, if repayable, the repayment should automatically be included in the self-assessment tax bill. For everyone else, HMRC will normally retrieve the payment through their tax code. The payment received in November or December 2025 will be recovered by amending the tax code for the 2026/27 tax year, with a higher tax than paid for each month of the year. With a winter fuel payment of £200, a tax coding adjustment means around £17 more tax will be paid each month.

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ISA reform means changes for savers

Written by Femi Ogunshakin on . Posted in Income Tax, ISA. No Comments on ISA reform means changes for savers

From 6 April 2027, anyone aged under 65 will only be able to save a maximum of £12,000 into cash individual savings accounts (ISAs) each tax year. The overall ISA limit will, however, remain at £20,000, with new rules introduced to minimise the opportunity for the lower cash ISA limit to be circumvented.

Aim of the new rules

The new rules are being introduced to prevent a saver from subscribing up to £20,000:

  • In cash into a non-cash ISA and leaving the cash there long-term, earning tax-free interest.
  • In a non-cash ISA and then transferring those funds to a cash ISA.
  • To a non-cash ISA and then using the funds to purchase cash-like investments.

A non-cash ISA means a stocks and shares ISA or an innovative finance ISA.

What this means

There will be a 22% charge on any interest paid on cash held within a non-cash ISA. This rate applies even if a saver is a higher or additional rate taxpayer. The personal savings allowance cannot be used to mitigate the charge.

The transfer restriction means surplus cash cannot be moved to a cash ISA to escape the 22% charge. To avoid the charge, cash will have to be invested or withdrawn from the ISA.

A non-cash ISA portfolio made up of 100% cash-like investments will not be permitted:

  • Only money market funds (these are low risk, investing in highly liquid, short-term debt securities) will be treated as a cash-like investment.
  • The existing ISA investment rules are unchanged, so investments such as short-dated UK gilts will not be treated as cash-like investments.

The 100% requirement does appear to present an easy loophole, since holding just a penny’s worth of shares should circumvent the restriction.

65 and over

Savers aged 65 and over will continue to benefit from the current cash ISA limit of £20,000. Entitlement will apply from the start of the tax year in which a saver reaches 65.

From that point, the transfer restriction will no longer apply. The charge on interest earned on cash held in a non-cash ISA and the prohibition on 100% cash-like investments will, however, remain in place.

The government’s factsheet on the ISA anti-circumvention rules is available here.

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No deadline extension for weekends or bank holidays

Written by Femi Ogunshakin on . Posted in VAT, Time To Pay Arrangements. No Comments on No deadline extension for weekends or bank holidays

HMRC are having to remind taxpayers that there is no deadline extension if a VAT return submission date falls on a weekend or a bank holiday.

Due date reminder

The due date for submitting quarterly VAT returns is one month plus seven days after the end of the quarter. So, for the quarter ending 30 June, that’s 7 August:

  • It is the same deadline for paying HMRC, although you need to allow time for a payment to clear HMRC’s account.
  • If you use the annual accounting scheme, the VAT return is normally due two months after the end of the accounting period.

HMRC has responded to a growing trend of late VAT return submissions and VAT payments based on incorrect information provided by artificial intelligence (AI) and third-party websites. VAT returns can be submitted over the weekend or on a bank holiday, and, if this is not possible, a return should be submitted on the last working day prior to the due date.

Penalty warning

Despite HMRC’s warning, taxpayers who are occasionally late should avoid any penalty except for late payment interest:

  • Late payment penalty: HMRC only charges a penalty if a VAT payment is made more than 15 days late, so this will not be an issue if a taxpayer simply waits until the first working day after the payment deadline.
  • Late submission penalty: Being a day late will mean a penalty point is incurred, but there is no £200 penalty until a threshold of four points is reached (two points if submitted annually), and points expire after 24 months, provided the taxpayer remains below the threshold.
  • Late payment interest: This is charged – currently at a rate of 7.75% – from the due date to the date of payment. For instance, being ten days late on a VAT payment of £40,000 will see interest of just under £85 being charged.

Submitting one late quarterly VAT return each year should not lead to a late submission penalty being charged.

HMRC guidance on penalty points and penalties if you submit your VAT Return late can be found here.

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Pension scams warning

Written by Femi Ogunshakin on . Posted in Inheritance Tax, Pensions. No Comments on Pension scams warning

Anyone confused or anxious about the inheritance tax (IHT) changes being introduced for pensions needs to be aware that scammers might try to target their savings.

Changes to pensions

From 6 April 2027, inherited pension funds will be subject to IHT unless inherited by a spouse or civil partner. Not surprisingly, scammers are using the change as an opportunity to target your pension savings. The scam works by offering a ‘safe haven’ overseas for your pension savings. Two problems here: one is quite important, but the second is more serious:

  • First problem: For anyone who is a long-term resident in the UK, moving a pension fund overseas will not affect the IHT position because worldwide assets – including overseas pension funds – are included as chargeable assets for UK IHT purposes.
  • Major problem: Whether the tax planning works or not is irrelevant as the fraudster will simply plunder your pension fund.

The scams you need to know

Pension scams are becoming increasingly sophisticated, with scammers using artificial intelligence (AI) and deepfake technology to make the scam appear more convincing. There are several red flags to watch out for:

  • The first warning should be if the initial email, call or message comes unexpectedly. Cold calling about pensions is illegal, so you should treat any unsolicited approach with suspicion.
  • Along with the ‘IHT saving’, the scammer will tempt you with the higher returns available if funds are moved.
  • The scammer will want to apply pressure by saying you only have a limited amount of time to accept their offer.

A scammer wants their victim to act impulsively and alone; they definitely don’t want them to obtain professional advice.

Should you agree to transfer your funds, the scammer will often provide coaching on how to circumvent your pension provider’s safety rules: for example, by providing an answer as to why funds are being moved.

The old adage of ‘it sounds too good to be true’ is invariably true in these cases, so any approach should be treated with extra caution.

The Financial Conduct Authority’s online tool to check whether a company is authorised or not is available here.

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Approved mileage rate hike – backdated to 6 April 2026

Written by Femi Ogunshakin on . Posted in Advisory Fuel Rates, Employment Law, Employment Tax, Self Assessment, Self-Employed. No Comments on Approved mileage rate hike – backdated to 6 April 2026

The Chancellor has announced a 10p per mile increase for the tax-free mileage rates, which can be paid to employees using their own cars for business purposes, with the increase backdated to 6 April 2026.

Mileage rates

The 10p per mile increase only applies to the first 10,000 business miles driven each tax year. This means that the rates to be reimbursed by employers to employees using their own vehicles for business mileage are now:

  VehicleFirst 10,000 business miles each tax yearSubsequent business miles each tax year
Cars and vans55p25p
Motorcycles24p24p
Bicycles20p20p

For car and van trips, an employee can also be reimbursed an additional 5p per mile per passenger, so 70p per mile in total if three passengers are carried.

E-bike riders should be paid the bicycle rate for an electrically assisted pedal cycle, and the motorcycle rate for any other electric bike:

  • Where an employee uses more than one car for business mileage during the tax year, the 10,000 limit applies across all cars used; it is not per car. So, if 4,000 business miles are driven in one car for the first three months of 2026/27, with 9,000 driven in another car for the other nine months, the maximum tax-free reimbursement is 10,000 miles at 55p, plus 3,000 miles at 25p, which is £6,250.
  • Any reimbursement in excess of the approved rates for the tax year overall is treated as earnings and subject to tax.

When it comes to National Insurance contributions (NIC), the NIC-free rates are similar, except that 55p per mile can be paid for every business mile driven in a car or van; there is no 10,000-mile cut-off.

Other uses

Employees who are not reimbursed with the maximum mileage rate can claim tax relief on the difference between the rate and what they were reimbursed. An employee can therefore claim the full 55p/25p per mile car rates if the employer makes no reimbursement at all.

Sole traders and partnerships can use the mileage rates for cars, vans and motorcycles when working out their vehicle expenses to be deducted in calculating trading profits. The same applies to unincorporated landlords when calculating property income. However, in both cases, there is no additional allowance for passengers carried.

HMRC guidance on business travel mileage for employees’ own vehicles can be found here.

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What exactly goes into the tax cocktail?

Written by Femi Ogunshakin on . Posted in Capital Gains Tax, Corporation Tax, Income Tax, National Insurance Contributions, PAYE, VAT. No Comments on What exactly goes into the tax cocktail?

New data from HMRC shows how much the government relies on just four taxes.

image
What exactly goes into the tax cocktail? 2

Source: HMRC

The Labour Party went into the 2024 general election with pledges on four major taxes in its manifesto:

  • “Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”
  • “Labour will cap corporation tax at the current level of 25 per cent, the lowest in the G7, for the entire parliament…”

At the time, the tax promises were seen as politically necessary to counter suggestions that a Keir Starmer government would operate tax-and-spend policies. However, the quadruple tax lock was widely criticised by many economists for the half decade constraint that it placed on the Chancellor in uncertain times.

Fast forward about two years from the publication of that manifesto, and the economists have been vindicated. New data from HMRC, published at the end of April, showed that in the past tax year, income tax, national insurance (NI), VAT and corporation tax accounted for 86% of all tax receipts. That is not surprising – as the graph shows, over the past ten years, the quartet account for more than £4 out of every £5 tax collected.

Despite the manifesto promise, income tax receipts rose by 9% in 2025/26 from the previous year – faster than the growth in prices or the UK economy. That outpacing is due to the freezing of the personal allowance and tax thresholds, dragging more people into tax and more existing taxpayers into higher tax bands.

NI receipts grew even faster – 16.3% up – thanks to the manifesto-challenging changes to the level of employer’s NI contributions. Together, NI and income tax – the two taxes on earnings – accounted for 56.5% of all that flowed into HMRC’s coffers.

The jumps in taxes on earnings contrasted with the growth in the third largest source of tax, VAT, which grew by 5.7%. Corporation tax had even slower growth (4.6%), but that might be because employers claimed more tax relief on those higher NI contributions.

The dominance of the big four manifesto-locked taxes explains why the Chancellor has made so many tweaks to the overall system to raise additional revenue. Be prepared: it is beginning to look like that process will be repeated at the next Budget.

For HMRC’s latest bulletin on tax receipts and NI contributions, visit here.

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The ‘mansion tax’ and property prices – what’s to come?

Written by Femi Ogunshakin on . Posted in Capital Gains Tax, Budget, Inheritance Tax, VAT. No Comments on The ‘mansion tax’ and property prices – what’s to come?

Further details have emerged about the potential impact of the ‘mansion tax’ announced in the last Budget.

Rachel Reeves’ first two Budgets have so far featured announcements of tax-raising measures with delayed starting dates. For example, the controversial changes to inheritance tax (IHT) business and agricultural relief emerged in October 2024, but have only just taken effect. Similarly, bringing pensions within the scope of IHT was announced at the same time, but will not commence until 6 April 2027.

In her Autumn 2025 Budget, she set out plans for a High Value Council Tax Surcharge (HVCTS – aka ‘mansion tax’) on homes valued at £2 million and above, to start in April 2028. There was little detail about the measure, but a consultation was promised “in the New Year”. So far, nothing has been published by the Treasury, but just before Easter, the Office for Budget Responsibility (OBR) set out its assessment of the new tax’s impact. These included some interesting nuggets:

  • By 2028, the OBR thought the full value of the future HVCTS liability would be reflected in property prices. Although the OBR did not spell out the numbers, what this means in practice is that for every £1,000 of consumer price index (CPI)-linked HVCTS annual charge, the OBR expects a property’s value to drop by about £35,000. For the lowest £2,500 charge covering properties valued at £2–2.5 million, their value would drop by about £87,500, according to OBR theory.
  • The OBR forecasts that there will be a bunching of prices just below each threshold, which would further lower prices for properties that would otherwise be just above a threshold. The OBR is on solid ground with this assumption, as it is exactly what happened when a single stamp duty rate was based on a house’s price.
Property value in 2026HVCTS in 2028/29
£2m to £2.5m£2,500
£2.5m to £3.5m£3,500
£3.5m to £5m£5,000
£5m +£7,500
  • One-in-five property owners (who are liable to the tax, rather than the occupiers) are expected to lodge an appeal, with a 40% success rate.

Perhaps the most telling point is that the new tax would initially raise only £400 million in 2028/29, hardly even a rounding error in Treasury accounting terms. Almost the same sum could have been generated by raising the standard rate of VAT from 20% to 20.04%, although the politics would have been much trickier.

We’ll have to wait and see if the OBR’s expectations pan out. Read more on HVCTS here.

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When Even HMRC Has to Play by the Rules. Why a recent tax tribunal decision matters to every tax adviser, accountant, and lawyer in practice.

Written by Femi Ogunshakin on . Posted in Advice. No Comments on When Even HMRC Has to Play by the Rules. Why a recent tax tribunal decision matters to every tax adviser, accountant, and lawyer in practice.

Why a recent tax tribunal decision matters to every tax adviser, accountant, and lawyer in practice.

There is a principle that sits at the heart of the British legal system: when a court or tribunal issues directions, everyone must follow them. That binds individuals, businesses, and government departments alike, HMRC included.

A tax case decided on 15 May 2026 has put that principle firmly back in the spotlight, and every tax adviser, accountant, and tax lawyer in practice should take note.

What Happened

In Coates & Anor (t/a Ross Coates Solicitors) v Revenue and Customs [2026] UKFTT 723 (TC), the First-tier Tribunal (Tax Chamber) was managing a long-running appeal. On 2 November 2025, Tribunal Judge Nicholas Aleksander issued formal directions. One of them, Direction No. 5, required both parties to send listing information to the Tribunal and to each other by 30 January 2026.

Listing information is routine administrative detail: who will attend, how long the hearing will take, available dates. Unremarkable in itself. But HMRC sent the information to the Tribunal on 26 January 2026 and deliberately did not send it to the other party.

When the appellants, Ross Coates Solicitors (“RCS”), discovered this, they applied to have HMRC barred from the proceedings entirely.

HMRC’s Response: “A Deliberate and Proportionate Case Management Decision”

Rather than apologising, HMRC’s legal team described the non-compliance as “a deliberate and proportionate case management decision, taken in light of the procedural history of this appeal.”

Their reasoning was that the appeal had suffered repeated delays caused by RCS over several years, and HMRC feared that sharing the listing dates might allow RCS to avoid being listed for a hearing. So HMRC simply decided, unilaterally, without asking the Tribunal, not to comply with the direction.

In short

HMRC decided it knew better than the court.

What the Judge Said

Tribunal Judge Blackwell was unsparing. The judgment describes HMRC’s conduct as “contumelious” (ouch), a legal term denoting wilful, deliberate, and contemptuous disregard of the court’s authority. It is not a word judges reach for lightly.

The judge was direct on the question of justification:

“If they considered the direction open to abuse, by ‘enabling [RCS] to avoid listing’, they should have applied to vary the directions so that the listing information was provided directly to the Tribunal only.”

The message could not be clearer. If HMRC had a genuine concern, the correct and only course was to apply to the Tribunal for a variation. What it could not do was simply choose not to comply.

The judge further noted that HMRC’s suggestion that RCS, a firm of solicitors and therefore officers of the court, would deliberately abuse the process was an “extraordinary allegation” unsupported by any particularised evidence.

HMRC had also, in the judge’s words, “brought about (at least in a but for sense) the circumstances giving rise to this hearing — incurring unnecessary expense and diverting the resources of the Tribunal.”

At the hearing itself, HMRC apologised and conceded that the conduct of its previous litigator “could lead to disciplinary sanctions” if engaged in by a regulated individual. The judge acknowledged the apology, but gave it little weight, because it came only at the hearing after HMRC had maintained its position as justified right up until that point.

The Outcome: HMRC Escaped, But Only Just

The judge applied the Denton test, the three-stage framework governing relief from sanctions, confirmed as applicable in tax tribunal proceedings by BPP Holdings v HMRC [2016] EWCA Civ 121. The breach was assessed as follows:

01 Seriousness Serious and deliberate.But not significant to theproceedings: the hearing waslisted exactly as it wouldhave been on compliance. SERIOUS, NOT SIGNIFICANT 02 Reason for default HMRC deliberately chose todisregard the direction.No application to vary.No permission sought. NO GOOD REASON 03 All the circumstances RCS suffered no realprejudice to its ability topresent its case. BarringHMRC entirely would havebeen disproportionate. BAR REFUSED
How the Denton test applied in Coates v Revenue and Customs.

The application to bar HMRC was dismissed. HMRC escaped the most severe sanction, but the judgment is an unambiguous public rebuke.

Why This Case Matters, and What Advisers Must Keep in Mind

1. HMRC Is Not Above the Rules of the Tribunal

The most striking feature of this case is who broke the rules: HMRC itself. The authority that rigorously pursues taxpayers and advisers for missed deadlines and procedural failures was found to have deliberately flouted a court direction.

For advisers representing clients in HMRC disputes, this case is a practical tool. It confirms that the Tribunal will scrutinise HMRC’s conduct just as it scrutinises everyone else’s, and will not defer to HMRC simply because of who it is. Do not be intimidated. Hold HMRC to the same standards it holds your clients.

2. You Cannot Unilaterally Ignore Directions. Ever.

This is the golden rule for every adviser: if a direction is problematic, apply to vary it. Do not ignore it. However rational the reasoning, however frustrating the procedural history, a unilateral decision to depart from a tribunal direction is indefensible. Advise your clients accordingly, and hold yourself to the same standard.

3. Understand the Denton Framework

The Denton test governs how any breach of directions will be assessed in tribunal proceedings, irrespective of whether the defaulting party is your client, the other side, or HMRC.

The key points to carry into practice are:

  • A deliberate breach will always be characterised as serious.
  • Seriousness alone does not automatically produce the most severe sanction.
  • Prejudice to the other party and proportionality remain decisive at Stage 3.
  • The framework applies equally to all parties. There is no special treatment for government departments.

4. Procedural Compliance Is a Professional Conduct Issue

HMRC’s own concession that its litigator’s conduct “could lead to disciplinary sanctions” if engaged in by a regulated individual is a pointed reminder that procedural compliance in tribunal proceedings is a professional conduct obligation in its own right.

Solicitors and barristers advising on tax disputes are officers of the court. Deliberately ignoring directions, even with a seemingly rational justification, can attract regulatory scrutiny. For accountants and unregulated tax advisers assisting clients in tribunal proceedings, the lesson is the same: shortcuts in litigation carry real risk, both to the client’s case and to your professional reputation.

5. Apologise Early, or Not at All

The judge’s finding that HMRC’s apology was given “little weight” because it came so late carries a clear practical lesson.

If a breach of directions occurs, whether by your client or by the other side, early acknowledgement matters. Maintaining an untenable position until the day of the hearing and then apologising is unlikely to move a tribunal. If you or your client have made a mistake, address it promptly and transparently.

The Broader Message for Tax Practice

This case is a reminder that the First-tier Tribunal is a genuinely independent forum where the rules apply equally to all parties.

Taxpayers and their advisers should approach HMRC disputes with confidence rather than deference. The Tribunal will call out misconduct, whoever is responsible.

For those advising clients on tax affairs and disputes, the practical checklist is straightforward:

  • Always comply with tribunal directions, and ensure your clients do too.
  • If a direction causes concern, apply to vary it. Never ignore it.
  • Know the Denton framework. It applies to everyone, including HMRC.
  • Act promptly if a breach occurs. A late apology carries little weight.
  • Hold HMRC to the same procedural standards. The Tribunal will.

Coates v Revenue and Customs [2026] UKFTT 723 (TC) is a small case with a large message: the rule of law applies to everyone, and this judgment proves it.

Facing an HMRC dispute or tribunal proceedings?

Femi Ogunshakin is a solicitor, tax adviser, and former HMRC Inspector. Book a free, no-obligation call to talk it through.

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This article is written for general information purposes and does not constitute legal advice. If you are involved in a tax dispute or tribunal proceedings and require specialist advice, please get in touch.

More caught in the net of IHT property valuations

Written by Femi Ogunshakin on . Posted in Inheritance Tax. No Comments on More caught in the net of IHT property valuations

The number of property valuations challenged by HMRC has risen by more than a fifth over the past year. No surprise given that frozen inheritance tax (IHT) thresholds and higher property prices have pushed more people into the IHT net.

With residential property accounting for not far off 50% of the net value of estates, challenging valuations is an easy way for HMRC to boost tax revenues, especially as AI can now be used to identify inconsistencies.

Advice from experts

There can be significant financial consequences if an executor understates the value of property in an IHT return:

  • Apart from the additional IHT payable, late payment interest – currently set at 7.75% – will be due on the underpayment.
  • A penalty can also be charged if the underpayment results from a return containing an inaccuracy due to reasonable care not being taken.

Best advice is for executors to instruct a professional valuer, rather than just relying on an estimate from a high street estate agent. However, taking the average from three estate agent valuations will mean reasonable care has been taken.

What the future holds

Unfortunately, the situation is unlikely to improve over the next few years. IHT thresholds are set to remain frozen until 5 April 2031, while the property market, although subdued as a result of the inflationary impact of the Middle East conflict, remains resilient and is unlikely to see falling values, except for London and the South East of England.

The inclusion of most unused pension pots within the IHT net from April 2027 (unless inherited by a spouse or civil partner) will increase the number of estates subject to IHT.

Planning for your estate

Wills should be up to date, taking into account realistic property values and the coming inclusion of pension pots. Make sure that, where possible, the residence nil rate band is fully utilised as this can save IHT of £140,000 for a couple.

Lifetime gifts are becoming increasingly popular as a means to mitigate potential IHT liabilities. One problem is that the main residence might be the only sizeable asset, but downsizing could be a way of releasing funds for lifetime gifting.

The government’s guide to how to value an estate for IHT and report its value can be found here.

Photo by Jakub Żerdzicki on Unsplash

Worried about an IHT valuation or estate planning?

Femi Ogunshakin is a solicitor, tax adviser, and former HMRC Inspector. Book a free, no-obligation call to talk it through.

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Penalties for late VAT payments

Written by Femi Ogunshakin on . Posted in VAT, Time To Pay Arrangements. No Comments on Penalties for late VAT payments

More than 580,000 traders were penalised for late payment of VAT last year, representing a quarter of businesses registered for VAT. A sure sign that the tougher penalty regime introduced in 2023 is hitting cash-strapped businesses.

Penalty regime

Each late payment of VAT is considered separately, with penalties charged as follows:

Days late Penalty
Up to 15 None
16 to 30 3% of outstanding VAT
More than 30 A further 3% penalty, plus a daily penalty at a rate of 10% p.a. on the outstanding VAT (charged beginning after the initial 30-day period)
  • A penalty is not charged if a trader has a reasonable excuse. Illness and domestic problems do not count as valid excuses unless really serious. Lack of funds also does not count, nor does reliance on a third party or a lack of a reminder from HMRC.
  • A trader can, however, avoid any further penalties accruing by entering into a time to pay (TTP) arrangement with HMRC. For example, penalties are avoided if a business secures an arrangement before a VAT payment is 15 days late.

The Key Takeaway

Traders struggling to pay a VAT liability should avoid ignoring the overdue bill. Instead, try to negotiate a TTP arrangement to provide a breathing space.

Late Payment Interest Also Applies

Regardless of whether any late payment penalties are incurred, late payment interest is charged from the due date until the date that a VAT liability is paid. The rate charged is currently set at 7.75%.

Penalty increases in 2027

From April 2027, the 3% late payment penalty charged after day 15 will increase to 4%, as will the penalty charged after day 30.

What This Means In Practice

Currently, if a business is, say, 50 days late paying a VAT liability of £50,000, the total penalties charged amount to £3,273. The total will increase to £4,273 from April 2027; a stark warning that businesses need to get on top of their cash flow management.

HMRC’s guidance on how late payment penalties work can be found in the guidance.

Struggling With A VAT Bill?

As a former HMRC Inspector, I know how Time to Pay arrangements are assessed from the inside — and how to approach them. Let’s have a chat — book a free, no-obligation call.

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#VAT #HMRC #TaxPenalties #TimeToPay #CashFlow #SmallBusiness

Cycling to work tax savings continue

Written by Femi Ogunshakin on . Posted in National Insurance Contributions, Benefit-In-Kind. No Comments on Cycling to work tax savings continue

There is no financial limit on the value of cycles that can be provided to employees under the cycle-to-work scheme. Therefore, it was something of a surprise when the Chancellor did not impose a cap in the November 2025 Budget, especially as some cycles can cost over £5,000.

The cycle-to-work scheme has become extremely popular, which should be no surprise given the tax savings.

Typical scenario

After registering with a cycle-to-work scheme provider, the employer purchases the cycle and hires it to the employee, probably under a salary sacrifice arrangement. The hire period will normally be between 12 and 18 months.

  • The cost of the cycle is repaid by the employee by gross monthly salary deductions.
  • If the monthly salary deductions are, say, £400, this will save an employee paying tax at the higher rate of some £160 in tax each month – plus a small amount of national insurance contributions (NICs).
  • The employer saves NICs of £60 each month.

The Qualifying Condition

At least 50% of the cycle’s use must be for qualifying journeys – generally meaning the employee’s commute to work.

The cycle-to-work scheme must be offered across the whole workforce (although this does not necessarily have to be through a salary sacrifice arrangement).

End of the hire period

At the end of the hire period, the employee can return the cycle to the provider, or they can extend the hire agreement; extension comes with a nominal payment. Therefore:

  • Many employees will go for a third option, which is to take immediate ownership of their cycle by paying a fair market value to the employer.
  • For a cycle just a year old and costing over £500, HMRC will accept a disposal value of 25% of the cycle’s original price.

Worth Knowing

The percentage is lower for older cycles and those costing less than £500.

Detailed guidance on the cycle-to-work scheme for employers can be found here (note that the rates of NICs in the guidance are out of date).

Photo by Dmitrii Vaccinium on Unsplash

Questions On Salary Sacrifice Or Employee Benefits?

Getting the tax treatment of employee schemes right protects both employer and staff. Let’s have a chat — book a free, no-obligation call.

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Soaring tax receipts for CGT and NICs

Written by Femi Ogunshakin on . Posted in National Insurance Contributions, Capital Gains Tax. No Comments on Soaring tax receipts for CGT and NICs

The amount of tax collected by HMRC for 2025/26 increased by 9.3% compared to the previous year. The figure is unsurprising given the hike in capital gains tax (CGT) rates, as well as employer national insurance contributions (NICs).

Receipts for CGT

The Headline Figure

CGT receipts for 2025/26 were an astonishing 62% higher than for 2024/25.

CGT is sometimes described as an ‘optional tax’, as it can be avoided by postponing disposals. There is also no CGT charge on death, and future governments may choose to reduce CGT rates.

  • However, those who did sell assets faced a hike in rates from 10% and 20% to 18% and 24%. Many landlords will have sold up in advance of the Renters’ Rights Act 2025 coming into force, while business owners could have benefited from a tax rate saving of 4% by selling prior to 6 April 2026.

There is little to be done during one’s lifetime to escape CGT on buy-to-let properties, but those with a substantial investment portfolio might want to postpone disposals to later in life, if they are planning to retire abroad. With careful planning – professional advice being essential here – CGT can be mitigated; the tax saved might mean a better standard of living in retirement is affordable.

Employer NICs

Class 1 Employer NICs

The receipts from Class 1 employer NICs have gone up to nearly £144 billion, an increase of over £35 billion.

There is limited scope for most employers to avoid the increases, which came in from April 2025, although an unincorporated business might consider taking on senior staff as partners, though probably as limited partners to prevent any personal liability should the business fail.

Be Warned

There has been some speculation regarding the introduction of some type of employer NICs on partnership profits.

Receipts on income tax

Income tax receipts have risen less sharply, although frozen thresholds and allowances are inexorably taking their toll, dragging more and more taxpayers into higher tax bands. Some higher earners may contemplate relocating to a more tax-friendly jurisdiction, which, if the overseas stay is long enough, could avoid CGT on the disposal of investments.

Details of HMRC tax receipts and NICs can be found at HMRC official statistics.

Photo by Eyestetix Studio on Unsplash

Thinking About CGT Or Exit Planning?

As a former HMRC Inspector, I understand exactly how disposals and timing are assessed — and where careful planning can genuinely reduce the bill. Let’s have a chat — book a free, no-obligation call.

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#CapitalGainsTax #CGT #NICs #HMRC #TaxPlanning #BuyToLet

House prices versus inflation

Written by Femi Ogunshakin on . Posted in Advice. No Comments on House prices versus inflation

Bricks and mortar are not always a sure-fire winner.

From January 2016 to January 2026, did house prices grow faster than inflation? The answer is in the graph below.

Nationwide average house prices Nominal House Price Inflation-adjusted House Price £190,000 £200,000 £210,000 £220,000 £230,000 £240,000 £250,000 £260,000 £270,000 £280,000 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 Jul-25 Jan-26

Source: Nationwide, ONS

Nationwide Building Society says the average UK house price in January 2016 was £196,829. Ten years later, it had risen to £270,873, a 37.6% increase. Over the same period, the Consumer Prices Index (CPI) increased by 40.2%.

If the result is not what you expected, it could be because you remember the unexpected boom during and immediately after the Covid-19 pandemic, but forgot the somewhat turgid period for house prices that followed. In the three years from January 2023, the average house price rose by 4.9%, while the CPI added 10.4%.

Ironically, some of the recent slowdown in house price growth is linked to general inflation. One factor that put the brake on house prices was the increase in interest rates made by the Bank of England to bring down inflation (which peaked at over 11% in October 2022). Until June 2022, the Bank of England’s rate was no more than 1%. As anyone facing the imminent expiry of a five-year fixed rate mortgage knows, the Bank’s action on interest rates, now compounded by the war in Iran, has made borrowing considerably more expensive than half a decade ago.

The near-flatlining of house prices and, until recently, cuts to mortgage rates did make life marginally easier for first-time homebuyers. That has not been good news for one group of existing property owners: buy-to-let investors. Zoopla, the property website, reported that at the start of the year, average enquiries per rental property were at their lowest level since 2019 and down a fifth on January 2025. Reduced demand has translated into slowing rental growth, which has come down from 7.8% annual growth in January 2025 to 3.1% a year later, according to data from the Office for National Statistics (ONS). In England, buy-to-let investors are also facing the implementation of the Renters’ Rights Act, which from 1 May 2026 will put an end to no-fault evictions (‘section 21 orders’).

The Bottom Line

Buying and owning your own home generally remains a sensible move, but be wary of treating it as the only investment you need to make.

Read more on private rent and house prices from the ONS here.

Photo by Jakub Żerdzicki on Unsplash

Reviewing A Property Portfolio?

From CGT on disposals to the impact of the Renters’ Rights Act, the tax and legal picture for landlords is shifting fast. Let’s have a chat — book a free, no-obligation call.

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#HousePrices #Inflation #BuyToLet #PropertyInvestment #RentersRightsAct #UKEconomy

A Light Shone on the Limits of the IHT Gift Rule

Written by Femi Ogunshakin on . Posted in Inheritance Tax, Lasting Will & Testaments, Wills & Probate. No Comments on A Light Shone on the Limits of the IHT Gift Rule

The normal expenditure out of income exemption allows individuals to make gifts during their lifetime that are immediately exempt from inheritance tax (IHT) – there is no seven-year wait. A recent case heard by the First-tier Tribunal (FTT) has cast some light on what is meant by ‘normal expenditure’.

Exemption

To be covered by the exemption, gifts must:

  • be made as part of the individual’s normal expenditure;
  • be made out of income; and
  • leave the individual with sufficient income to maintain their usual standard of living.

The income aspect might be considered straightforward, but this is not always the case. There is no statutory definition, and income is not necessarily the same as income for tax purposes. It will, for example, include non-taxable income, such as income from individual savings accounts (ISAs).

HMRC’s Position

HMRC considers income to become capital after it has been accumulated for a period of two years.

‘Usual standard of living’ will generally be what was usual for the individual at the time the gift was made. Exemption may, therefore, not be lost where an individual makes a regular commitment, at a time when surplus income was available, but then has to lower their standard of living for another reason, such as redundancy.

Normal expenditure

The case heard by the FTT was only concerned with whether the gifts made by the taxpayer were normal expenditure. To count as normal, gifts must be habitual or regular, but do not have to be a fixed amount.

Although the taxpayer had made many substantial charitable donations, HMRC took issue with donations to campaigns supporting the UK leaving the EU. Exemption for these donations was denied because they were made over a period of just nine months, which was not sufficient time to establish a settled pattern; there was no predictability to the donations. What is more, there was no particular reason for the financial amount given to each gift.

Why The Exemption Was Denied

• Donations were made over just nine months

• Not sufficient time to establish a settled pattern

• No predictability to the donations

• No particular reason for the financial amount given to each gift

What Counts As A Settled Pattern

A settled pattern would normally mean gifts being made over three to four years, but a single gift might qualify if there is evidence that it was intended to be the first in a pattern.

Detailed guidance on the normal expenditure out of income exemption is available in HMRC’s internal manuals: IHTM14231 to IHTM14255.

Planning Lifetime Gifts?

The normal expenditure out of income exemption is one of the most useful IHT reliefs available, but as this case shows, the detail matters. Let’s have a chat — book a free, no-obligation call.

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#InheritanceTax #IHT #TaxPlanning #HMRC #EstatePlanning #UKLaw

Making Tax Digital launches but few are ready

Written by Femi Ogunshakin on . Posted in MTD, Making Tax Digital. No Comments on Making Tax Digital launches but few are ready

Making Tax Digital (MTD) is now live, but given the low numbers registered with HMRC, many sole traders and landlords affected are still looking at how to comply, keep the administrative burden to a minimum and will probably be looking for inexpensive — or even free — software to use.

The Scale of the Issue

At the start of April, nearly 80% of those required to register for MTD had not done so.

Why is sign-up so low?

The problem is that many do not see any upside to keeping digital records and having to report figures to HMRC quarterly:

  • A number of individuals will find getting records together for the annual self-assessment tax return difficult enough, and will not relish complying with tight quarterly reporting deadlines.
  • Because the MTD compliance threshold is based on income, there will be some who have to comply but will not even have a tax liability. They will almost certainly not want to incur additional agent fees for MTD compliance.

For many individuals, the best option might be to keep the minimum required records using a standard spreadsheet and then use free bridging software to deal with the quarterly reporting requirement. With the first quarterly update due on 7 August, now is the time to get organised.

Finding the right software

HMRC has created a software finder tool to direct taxpayers towards suitable software, including a number of free options. However, several of the available options are still at the development stage.

The Pitfall of Mixed Accounts

Software that imports information directly from the taxpayer’s bank account may be the perfect solution for many sole traders and landlords, but not for those who are putting their business and/or letting income and expenditure through their personal bank account.

Exit options: Can you opt out?

The £50,000 MTD threshold from 6 April 2026 is based on income for 2024/25. There will be some individuals whose income has since fallen to below £50,000, and HMRC has now clarified when it is possible to apply to opt out of MTD.

Strict Opt-Out Rules

Unfortunately, opting out is only possible where all sources of qualifying income have ceased. This is not the case if, for example, self-employment ceases, but there is still property income.

Opting out of MTD can be done via HMRC’s webchat, by telephone or by writing to HMRC.

Need Help Navigating MTD?

With tight deadlines and complex rules, getting your digital records in order is essential. We can help you navigate compliance and avoid unexpected pitfalls. Let’s have a chat — book a free, no-obligation call.

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#MTD #MakingTaxDigital #TaxCompliance #SoleTraders #Landlords

Void Dispositions Under Section 127(1) Insolvency Act 1986: Need for Validation Order

Written by Femi Ogunshakin on . Posted in Insolvency, Corporation Tax, Winding Up Petitions. No Comments on Void Dispositions Under Section 127(1) Insolvency Act 1986: Need for Validation Order

When a company becomes the subject of a winding-up petition, the legal landscape changes instantly—often without directors, contractors, suppliers etc fully appreciating the consequences. At the centre of this shift is section 127(1) of the Insolvency Act 1986 (“Act”), a provision that can render otherwise ordinary business transactions legally ineffective or ‘void’ to use the terminology set out in the legislation.

What is a “void disposition”?

Section 127 (1) of the Act provides that any disposition of a company’s property made after the presentation of a winding-up petition is void, unless the court orders otherwise.

Crucially, this includes:

  • Payments made out of the company’s bank account
  • Transfers of assets; and/or
  • Any transaction involving company property

The Key Point Is Timing

The restriction applies from the moment the petition is presented, not when the company becomes aware of it, and not when a winding-up order is made.

Why this creates real risk for recipients of payments

A common misconception is that once a payment has been received in good faith, it is safe. Section 127 challenges that assumption.

If a winding-up order is subsequently granted:

  • Payments received after the petition date can be declared void
  • The recipient may be required to repay the money
  • This applies even if the recipient had no knowledge of the petition

For example, a supplier who receives payment for legitimate goods or services may later face a demand from a liquidator to return those funds. The commercial impact can be severe:

The Commercial Impact

• Cash flow disruption

• Exposure to unexpected liabilities

• Potential disputes and legal costs

In practice, banks often react to this risk by freezing company accounts, further compounding the company’s difficulties and affecting all parties in its supply chain. In most instances, this takes place within 24 hours of the publication of the winding up petition in the London Gazette, although we have occasions in which third parties such as invoice factoring or other interested parties will deny access to credit upon notification from the likes of credit reference agencies regarding the existence of the petition.

The solution: a validation order

The primary safeguard against the harsh effects of section 127 is a validation order granted by the Business and Property division of High Court, presided over by specialist insolvency judges. This order validates specific transactions (or a class of transactions), ensuring they are not later challenged as void.

What The Court Requires

The court will only grant such relief where it is satisfied that the transactions:

• Are beneficial to, or at least not detrimental to, creditors as a whole, and

• Support the proper conduct or potential rescue of the business

Why instructing a solicitor is essential

Applying for a validation order is not a simple administrative step—it is a specialist court application requiring precision, urgency, and strong evidential support.

A solicitor will:

  • Evaluate the merits of the application and advise on strategy
  • Prepare detailed evidence, including cash flow forecasts and explanations of proposed payments
  • Engage with the court effectively, ensuring the application is properly framed and presented
  • Act quickly, which is often critical where wages, key suppliers, or ongoing contracts are at stake

Without expert legal input, there is a significant risk that:

Without Expert Legal Input

• The application is refused

• Transactions remain vulnerable to challenge

• The company’s position deteriorates further

Conclusion

Void dispositions under section 127 are not just a technical legal issue—they create real commercial risk for companies and anyone dealing with them. Payments that appear routine can later unravel, placing recipients in a difficult and often unfair position.

For companies facing a winding-up petition, early action is vital. Instructing a solicitor to secure a validation order is not merely advisable—it is often essential to protect both the business and those who rely on it.

Facing a Winding-Up Petition?

Time is the single most important factor. A validation order application, prepared and filed quickly, can be the difference between continuity and collapse. Let’s have a chat — book a free, no-obligation call.

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#Insolvency #UKLaw #Restructuring #CorporateLaw #BusinessRisk

An unwelcome April Fool’s for business tax changes

Written by Femi Ogunshakin on . Posted in Capital Gains Tax, Companies House, Corporation Tax. No Comments on An unwelcome April Fool’s for business tax changes

The start of April rolled in some far from funny changes for businesses: reduced capital allowances, increased penalties for late filing of corporation tax returns and the closure of HMRC’s free corporation tax return filing portal.

Capital allowances

Capital expenditure will often qualify for a 100% deduction, but where expenditure does not qualify, then a subsequent annual writing-down allowance (WDA) will be given. For periods commencing on or after 1 April 2026 (6 April 2026 for sole traders and partnerships), the main rate of WDA has been cut from 18% to 14%. This means:

  • Most expenditure on cars does not qualify for a 100% deduction, so the WDA reduction effectively results in more tax payable.
  • Expenditure on new (not second-hand) zero-emission cars still qualifies for a 100% deduction, although this relief is set to end on 31 March 2027 (5 April 2027 for sole traders and partnerships).

A hybrid rate of WDA will apply for accounting periods spanning 1/6 April 2026.

Penalties

The penalties for filing corporation tax returns late have doubled. The initial late filing penalty is now £200, increasing to £400 if more than three months late.

Where a return was also late for the two preceding accounting periods, the £200 and £400 penalties are respectively increased to £1,000 and £2,000.

Corporation tax returns

While not an issue for those using an agent, HMRC has closed their free online corporation tax filing service on 31 March 2026. This means:

  • Going forward, anyone filing company tax returns with HMRC will need to use commercial software.
  • Any changes or amendments to previously submitted tax returns will also have to be made using commercial software.

The closure of HMRC’s tax return filing portal means all records previously held online are no longer available. Hopefully, the records have been downloaded, and these should be stored securely.

Companies House was also going to require company accounts to be filed using commercial software from 1 April 2027, but this requirement has now been postponed.

The government’s guide to capital allowances can be found here.

Photo by Elin Melaas on Unsplash

HMRC’s Changing Approach to Time to Pay

Written by Femi Ogunshakin on . Posted in Company Insolvency, Tax, Time To Pay Arrangements. No Comments on HMRC’s Changing Approach to Time to Pay

I am seeing an increase in requests for assistance with approaching HMRC for Time To Pay (TTP) arrangements, and have identified a number of issues relevant to directors where the risk of company insolvency is imminent. I’ll summarise these briefly as follows;

Discussion Points

  • HMRC has started raising personal liability concerns during TTP discussions.
  • Recent interactions involve faster escalation to director accountability.
  • HMRC assesses governance, decision-making, and arrears buildup.
  • Repeated or delayed engagements can increase personal liability risks.

Risks for Company Directors

  • Directors may be personally exposed to unpaid tax liabilities.
  • Non-compliance, delayed submissions, and inconsistent engagement heighten risks.
  • Personal liability notices are more frequently discussed in TTP contexts.
  • Early, transparent action with professional advice is crucial for protection.

Importance of Proper TTP Management

In view of the above, directors should consider the following;

  • Start discussions with HMRC as soon as possible. Do not delay engagement.
  • TTP requests should be approached with careful preparation and documentation.
  • A TTP should align with the Company’s broader restructuring strategies, not replace them.
  • Clear TTP rationale and early professional advice will help mitigate personal and business risks.
  • Reactive or reactive engagement can lead to increased scrutiny and director liability.
  • Avoid being issued with a winding up petition and explore alternatives to a TTP.

Directors should consider the above if either considering or are in the process of directly discussing TTP arrangements with HMRC, and if in doubt, seek professional advice.

Photo by Towfiqu barbhuiya on Unsplash

HMRC Crypto Asset Disclosure

Written by Femi Ogunshakin on . Posted in Cryptocurrency, Capital Gains Tax, Inheritance Tax. No Comments on HMRC Crypto Asset Disclosure

Despite running for over two years, HMRC’s cryptoasset disclosure service has only generated just over £4 million in disclosures. An indication, perhaps, of the low level of awareness and compliance surrounding cryptoassets.

Most crypto gains are subject to capital gains tax (CGT), and HMRC suspects many cryptoasset investors have failed to report their gains when cryptoassets are sold or gifted:

  • It might well be the case that people think crypto transactions are tax free, especially if it is simply the case of exchanging one type of cryptoasset for another.
  • There is also a disposal if cryptoassets are used to pay for goods or services; easy to do when cryptoassets are added on to one of the specialised Visa cards, which can be used to spend anywhere in the world.

For example, an investor buys into a new cryptoasset using some of their Bitcoin. The new cryptoasset increases in value, so the investor converts back to Bitcoin. Both transactions are disposals, so CGT is due on gains in excess of the £3,000 exemption.

Compliance

HMRC has sent out over 100,000 letters prompting investors to disclose their cryptoasset tax liabilities. However, it has, until recently, been quite easy for investors to avoid scrutiny by using international cryptoasset service providers, which were not required to share any information with HMRC.

New reporting requirements came into force on 1 January 2026. These apply when a crypto investor buys, sells, transfers or exchanges cryptoassets, although several countries that host providers have not yet signed up to the reporting requirements. Likewise, using a decentralised exchange might circumvent the new reporting rules.

Cryptoassets also pose a problem for inheritance tax (IHT). The assets form part of a deceased’s estate, but access may not be possible when security involves private keys and passwords.

HMRC’s detailed guidance on the new cryptoasset reporting requirements can be found here.

Photo by Art Rachen on Unsplash

Are you ready for April’s tax and pension changes?

Written by Femi Ogunshakin on . Posted in Dividends, Capital Gains Tax, MTD, National Insurance Contributions. No Comments on Are you ready for April’s tax and pension changes?

6 April brings a variety of changes to the tax rules.

The start of the tax year on Monday 6 April (Easter Monday) heralds a variety of changes to tax and pension rules, few of them welcome.

Dividend tax The rate of tax on dividends will increase by two percentage points if you pay tax at basic rate (8.75% to 10.75%) or higher rate (33.75% to 35.75%). The additional rate tax on dividends remains unchanged at 39.35%, as does the dividend allowance at just £500.

Making Tax Digital (MTD) for income tax This starts to operate for the self-employed and landlords who have qualifying income (broadly gross income) from both sources that exceeded £50,000 in 2024/25. MTD will require you to submit quarterly returns of income and expenses to HMRC using approved software.

Inheritance tax (IHT) reforms The new rules for agricultural and business IHT reliefs come into effect. Following changes announced in the Autumn 2025 Budget and two days before Christmas, the 100% relief allowance will be a combined £2,500,000 and will be transferable between surviving spouses and civil partners.

Venture capital trusts (VCTs) The rate of income tax relief for the high risk investments will drop from 30% to 20%. At the same time, the size of companies covered by the scheme will double.

Capital gains tax (CGT) The rate of CGT on gains that qualify for business assets disposal relief will rise from 14% to 18%. Other rates of CGT remain unchanged, as does the annual exemption at £3,000.

National insurance contributions (NICs) If you work or live abroad, then you will not be able to pay voluntary Class 2 NICs (£3.65 a week) to accrue UK State pension for 2026/27 and subsequent years. You may be eligible to pay Class 3 NICs, but the cost is much higher at £18.40 a week.

State pension age (SPA) The phasing in of a new SPA of 67 will begin in April 2026. If you were born between 6 April 1960 and 5 March 1961, then your SPA will increase to between 66 years 1 month and 66 years 11 months. If you were born on or after 6 March 1961, your SPA will be at least 67.

If you would like more information on how any of these changes could affect you, please get in touch.

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Rate of compensation on statutory payments increased

Written by Femi Ogunshakin on . Posted in SSP, MAternity Pay, Sick Pay, SMP, Statutory Payments. No Comments on Rate of compensation on statutory payments increased

Although far less generous than last year’s increase, the rate of compensation paid to smaller employers for administering statutory payments will go up from 8.5% to 9% from 6 April 2026.

While employers may welcome extra funding, the small increase will not compensate for higher rates of minimum wage or for the cost of the new ‘day one’ rights for all employees, both coming into effect from 6 April 2026.

Recovery

Employers can usually reclaim 92% of statutory payments, but smaller employers can recover 100% of the cost, along with the 9% compensation. The total rate of recovery will therefore be 109% from 6 April 2026.

For example, if statutory maternity pay of £1,000 is paid, the normal recovery is £920. However, a smaller employer will recover £1,090.

Statutory payments for maternity, paternity, adoption, shared parental, parental bereavement and neonatal care pay are recoverable; but not statutory sick pay.

Smaller employers

An employer is classed as small for statutory payments purposes if their total class 1 national insurance contribution (NIC) payments were £45,000 or less for the tax year before the employee’s qualifying week:

  • Both employee and employer contributions are included, but not class 1A or 1B NICs.
  • The £10,500 employment allowance is not deducted in establishing whether the £45,000 threshold is met. For example, class 1 NIC payments might be £40,000, but if this is after deducting the full employment allowance, then the relevant figure is £50,500. Therefore, it is too high to qualify.
  • The qualifying week varies depending on the type of leave. For example, for statutory adoption pay, the relevant week is the week that the employee is informed they will be matched with a child by the adoption agency.

Relief is claimed on a monthly basis through payroll software using the employer payment summary.

HMRC’s guide to getting financial help with statutory pay can be found here.

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Payroll complications for spring

Written by Femi Ogunshakin on . Posted in Employment Law, Employment Rights, Pensioners. No Comments on Payroll complications for spring

The increase in State pension age (SPA) from 66 to 67 years will be phased in starting 6 April 2026. Employers need to take care because employee class 1 national insurance contributions (NICs) are no longer payable once SPA is reached.

Pension age

Men and women born between 6 April 1960 and 5 March 1961 will reach SPA at 66 years plus a specified number of months. For example, a person born on 5 May 1960 will reach SPA on 5 June 2026, whereas it will be 6 July 2026 for someone born a day later. Pension age will be 67 years for anyone born on or after 6 March 1961.

Class 1 NICs

Although employee class 1 NICs are no longer payable once an employee reaches SPA, employer contributions are still due:

  • For employees, the change applies to the first wage or salary payment on or after SPA is reached. NIC classification is based on the date of payment, not the earnings period.
  • For example, NIC category letter C will be used for the whole of the June 2026 salary (paid at month end) for any employee who has reached SPA on or before 30 June 2026.
  • Employers should check that the employee’s NI category letter has been set to ‘C’ in payroll software so that no further employee class 1 NICs are deducted. The software may do this automatically based on the employee’s date of birth.

The normal procedure is for the employee to show proof of reaching SPA, either with their birth certificate or passport.

For the self-employed, the NICs situation on reaching SPA is more straightforward. They simply stop paying class 4 NICs from the start of the tax year after reaching SPA.

SPA can be checked using the government’s check your SPA calculator, which can be found here.

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New employment rights arrive in April

Written by Femi Ogunshakin on . Posted in Employment Law, Employment Rights. No Comments on New employment rights arrive in April

New ‘day one’ rights come into effect on 6 April 2026 and employers need to be prepared.

While many headline reforms introduced by the Employment Rights Act 2025 will not land until 2027, employers should be aware of the new ‘day one’ rights which employees will be entitled to from 6 April 2026.

Statutory sick pay (SSP)

Entitlement to SSP currently applies from the fourth day of sickness, but this three-day waiting period will be removed:

  • The lower earnings threshold (currently £125 per week) will also be dropped and leave all employees eligible for SSP.
  • From 6 April 2026, employees off sick will receive the lower of the rate of SSP and 80% of their average weekly earnings.

Employers may find themselves dealing with more cases of sick leave abuse, which will need to be handled carefully.

Approaches to reducing abuse include asking employees to check in regularly when off sick and holding return-to-work interviews.

Paternity and ordinary parental leave

Paternity and ordinary parental leave will both become a ‘day one’ right:

  • Currently, paternity leave is only available after 26 weeks of employment; this qualifying requirement will not change concerning paternity pay.
  • Unpaid ordinary parental leave is currently only available after working for a year.

The restriction on an employee taking paternity leave after taking shared parental leave will be removed.

Bereaved partners paternity leave

This has been introduced by separate legislation but will be a new statutory entitlement from 6 April 2026 and again, a ‘day one’ right. There is no statutory pay requirement. The new leave can be taken by an employee who loses the mother of a child within the first year of the child’s life. Up to 52 weeks of leave can be taken, depending on when bereavement occurs. The same leave is available if a child is adopted and the primary adopter dies.

Read more in government factsheets covering SSP and paternity and parental leave changes.

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CGT hikes lead to reduced tax take

Written by Femi Ogunshakin on . Posted in Capital Gains Tax, National Insurance Contributions. No Comments on CGT hikes lead to reduced tax take

The government cut the capital gains tax (CGT) annual exempt amount from £12,300 in 2022/23 to just £3,000 from 2024/25 onwards. You might expect this to lead to a higher tax take, but the results so far have been the exact opposite.

Downward trend

In addition to the annual exempt amount reduction, the rates of CGT on gains from shares and securities (plus other non-residential property) were increased partway through 2024/25 from 10% and 20%, to 18% and 24%:

  • However, CGT receipts were £16.9 billion in 2022/23, falling to £14.5 billion for 2023/24, and to just £13.5 billion for 2024/25.
  • This indicates how sensitive CGT is to taxpayers’ behaviour, with many investors simply sitting on their gains and deferring disposals.

The latest CGT receipts show how increasing tax rates and reducing exemptions doesn’t necessarily mean a straight line to more revenue – a good example of the Laffer Curve in action.

The Laffer Curve

The Laffer Curve represents the theoretical relationship between tax rates and the resulting tax take. If tax rates are set too high, the tax take will start to reduce.

In some cases, it is difficult for taxpayers to do much to mitigate the impact of tax increases. The take from employer national insurance contributions (NICs), for example, has increased dramatically since the starting threshold was reduced and the rate increased. The latest figures for December 2025 show the tax take has increased by 25% compared to the previous December:

  • In contrast, many taxpayers whose income has reached £100,000 have decided that doing an extra £1,000 worth of work is not worthwhile if the resulting take-home pay is just £380.
  • With tax thresholds frozen since 2021/22, an estimated 1.8 million taxpayers now earn more than £100,000, with another 490,000 likely to be caught over the next four years.
  • Many are avoiding the 62% tax trap by reducing the hours they work, declining a promotion or negotiating a pay cut in return for additional holiday.

HMRC’s latest bulletin detailing tax receipts and NICs can be found here.

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