Author: Femi Ogunshakin

Miscalculated corporation tax reliefs targeted by HMRC

Written by Femi Ogunshakin on 24 September 2025. Posted in Corporation Tax. No Comments on Miscalculated corporation tax reliefs targeted by HMRC

Companies that may have miscalculated their corporation tax marginal relief may receive a letter from HMRC as part of a new campaign. The targeted errors could be due to ignoring associated companies.

Associated companies

Directors will be aware that the first £50,000 of their company’s profit benefits from a corporation tax rate of 19%, compared to the main rate of 25% applicable once profits hit £250,000. This means:

Marginal relief eases the transition from the 19% rate to the main rate.
Directors may not appreciate, however, that the £50,000 and £250,000 limits are shared across associated companies.
For example, if a company has two associated companies, marginal relief will apply on profits between £16,667 and £83,333.

Essentially, companies are associated if one is under the control of the other, or if both are under common control. It doesn’t matter whether a company is associated for part of an accounting period, or where a company is resident. However, dormant companies are not treated as associated.

The associated company rules can be quite complex, and, in some circumstances, a company owned by a spouse, civil partner, parent, child or sibling can be treated as an associated company.

One-to-many letters

Any company receiving a letter only has 30 days in which to respond to HMRC, and, if necessary, make any amendment. HMRC could, of course, be mistaken, such as where an alleged associated company is, in fact, dormant.

What a director should definitely not do is ignore a letter. If HMRC were to follow up with a formal compliance check, the process would likely be time-consuming and costly.

Planning

If a company’s corporation tax is higher than it would otherwise be as a result of having associated companies, the overall company structure needs to be reviewed. For example, two companies under common control might have profits of £49,000 and £1,000 respectively. The total corporation tax bill could be reduced by £1,800 if the two companies were combined into one company.

HMRC’s guidance on marginal relief can be found here.

Photo by Barnabas Davoti on Unsplash

Changes made to pension relief claims

Written by Femi Ogunshakin on 23 September 2025. Posted in Pensions. No Comments on Changes made to pension relief claims

HMRC has tightened checks on pension relief after finding that a third of claims made by PAYE tax codes were incorrect.

The problem

Contributions into a personal pension are made net of basic rate tax, so only higher and additional rate taxpayers need claim relief. However, HMRC’s review found that many basic rate taxpayers were trying to claim. Claims were also made where relief had already been given through salary deduction.

To make the situation worse, some claimants had simply guessed their paid pension contributions, rather than using the information provided by their pension provider.

Claims going forward

From 1 September, it is no longer possible to make a claim over the phone; most claims must now be made online. Also:

Previously, taxpayers only needed to upload or send proof of pension payments made if the payments were in excess of £10,000.
HMRC now require all claims to be backed up with supporting evidence each tax year.
For personal pension contributions, this will mean a letter or statement from the pension provider showing the amount contributed.

Postal claims are only possible for those unable to claim online.

The changes have no impact on individuals who complete a self-assessment tax return. Claims for pension relief will continue as normal on the tax return.

Who can claim

Higher and additional rate taxpayers (in Scotland, taxpayers paying the intermediate rate or higher) paying into a personal or workplace pension can make a claim for the additional amount of tax relief for which they are entitled. For example, an additional rate taxpayer will receive a further 25% in relief.

Taxpayers can also make a claim if tax relief is not given automatically on their pension contributions.

HMRC’s guidance on claiming tax relief on pension payments can be found here.

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State Pension Age Under Review Again

Written by Femi Ogunshakin on 6 September 2025. Posted in Pensioners, Pensions. No Comments on State Pension Age Under Review Again

Shortly before Parliament closed for its summer holidays, the government announced a review of the State pension age (SPA).

Pensioners are a sensitive topic for the government. Not only has it been forced to make a U-turn on winter fuel payments, but it has also had to stand firm against the Women Against State Pension Inequality who were affected by the increases in the SPA in the 2010s. So it likely did not relish the requirement inherited from the previous government to undertake a fresh review of the SPA within two years of being elected.

In mid-July, as part of a bring-out-your-dead pile of announcements made just before the summer recess, the Department for Work and Pensions (DWP) revealed two fresh SPA reviews. As was probably hoped, the news was swamped by other government statements, such as the relaunch of the Pensions Commission, which appeared on the same day. Nevertheless, the SPA review will have significant impacts, both for individual and government finances.

The current situation is:

SPA is 66 for men and women.
It will gradually rise to 67 over two years from next April.
Currently, the SPA increase to 68 is legislated to be phased in over two years from April 2044.
The first review, published in 2017, proposed that the SPA should rise to age 68 from 2037–39.
A second review (in 2022) proposed 2041–43 for the move to 68.
Both reviews prompted the government to promise another review before the final decision is made.
At least ten years’ notice will be given of any change to SPA.

The original 2037–39 proposal now looks unlikely to go ahead, not least because it would be hard to meet the ten-year notice requirement. However, there is another reason for delaying further change. Since 2037 was proposed, projections for UK life expectancy have fallen significantly. At the time of the first report, a man aged 68 in 2037 was projected to live 21.1 years and a woman, 23.0 years. The latest figures are 18.4 years and 20.9 years respectively, which would point to abandoning any increase to SPA. Government finances inevitably pull in the opposite direction, as the annual savings run to billions.

Arguably the DWP has won its last two battles with the Treasury (over winter fuel and disability benefits). SPA, in my humble opinion, is unlikely to be a third victory.

You can check your projected SPA on the you.gov site here and State pension forecast here.

Photo by Keith Tanner on Unsplash

As summer fades, an Autumn Budget looms…

Written by Femi Ogunshakin on 5 September 2025. Posted in Budget, Income Tax, Pensions. No Comments on As summer fades, an Autumn Budget looms…

It is once more the time to turn from sunny thoughts of summer holidays to dark contemplation of the Autumn Budget.

In July 2024, Rachel Reeves made her contentious House of Commons statement about the “£22 billion black hole” and, as one of the measures to fill it, severely restricted pensioner entitlement to the Winter Fuel Payment. One consequence of her ‘discovery’ was that the rest of that summer and the first part of autumn was full of speculation about what tax rises would be contained in the 2024 Autumn Budget.

Fast forward a year and there is a similar story playing out. The Winter Fuel Payment features again, but this time it is the £1.25 billion cost of the climbdown on means-testing that matters. To that can be added about the £5 billion expense of another reversal of policy, reform of disability benefits. This new black hole, alongside slowing economic growth, is generating a fresh round of speculation examining what taxes might be increased.

The Chancellor continues to rule out increases to income tax, national insurance and VAT for ‘working people’, leaving potential targets such as:

A further freeze on income tax allowances and bands: The personal allowance and income tax thresholds were originally frozen for four years (2022/23–2025/26) by Rishi Sunak, to which another two years were added by Jeremy Hunt. Rachel Reeves could extend the freeze until April 2030.
Pension contribution tax relief: A regular candidate for revenue-raising, so far, most Chancellors have merely nibbled this low-hanging fruit. Were Rachel Reeves to be bolder and, for example, introduce a flat rate of relief for all contributions, this could generate billions from the ever-growing number of higher and additional rate taxpayers.
A wealth tax: This idea was resurrected recently by Neil Kinnock, a former Labour leader, and to date, the government has studiously refused to rule out the possibility. In practice, wealth taxes have proved difficult to administer and many countries have abandoned them. As if to underline the problems, according to a July 2025 report from the House of Commons Public Accounts Committee, “HMRC has no overview of an individual’s total wealth and faces challenges in getting all the data it needs to risk assess and target wealthy people”.

If your personal finances have not had a recent review, it could be a good move to take stock and make any necessary adjustments before autumn progresses too far.

Photo by Towfiqu barbhuiya on Unsplash

Company cars are having a revival

Written by Femi Ogunshakin on 2 September 2025. Posted in Benefit-In-Kind, Company Car Tax, Company Director, Self Assessment. No Comments on Company cars are having a revival

Recently published statistics show that the company car is making something of a comeback, with the number of recipients for 2023/24 up 80,000 from the previous year.

From a high of 960,000 company car recipients in 2015/16, the number dropped to 720,000 by 2020/21. The level has now picked up to 840,000, with the increase due to the beneficial tax treatment of cars with CO₂emissions of 75 grams per kilometre or less, especially fully electric cars.

Salary sacrifice

With tax thresholds frozen, sacrificing salary in return for the use of a low-emission company car can mean a significant tax saving. For example, an employee with an income of £120,000 – well within the personal allowance trap – who sacrifices £6,000 of salary to cover the employer’s lease cost of a mid-priced, fully electric company car, will save around £2,800 in tax and National Insurance Contributions.

With this in mind:

It is therefore not surprising that the number of zero-emission company car recipients has risen six-fold between 2020/21 and 2023/24, with the number now standing at over 340,000. This is 41% of all company car benefit recipients.
It also explains why the average CO₂ emission of company cars for 2023/24 was 56 g/km, compared to 71 g/km in the previous tax year.
A further advantage of an employee making use of a fully electric company car is that there will be no fuel benefit even if a charging point is provided at the employer’s premises.

The rise in fully electric company car recipients is mirrored in the percentage of company car drivers with diesel cars, which is down to 13%, having been nearly 50% back in 2020/21.

The future

While fully electric company cars currently attract a benefit percentage of just 3%, this percentage is set to increase to a much less beneficial 9% by 2029/30. For the taxpayer in our example, this will cut the overall tax saving to around £1,000. The company car comeback may be short-lived after all.

The tax cost of having a company car can be calculated starting here using HMRC’s company car and car fuel benefit calculator.

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HMRC’s digital roadmap shifts

Written by Femi Ogunshakin on 27 August 2025. Posted in Corporation Tax, Making Tax Digital, Self Assessment. No Comments on HMRC’s digital roadmap shifts

HMRC has scrapped plans for Making Tax Digital (MTD) to include corporation tax. However, new digital services will be rolled out over 2025/26, as outlined in its recently published transformation roadmap.

MTD for corporation tax

HMRC had not confirmed a date for introducing MTD for corporation tax, which has now been officially abandoned; the introduction of MTD for income tax from April 2026 also pushed the corporation tax element further down the priority list.

That leaves the question of how HMRC will modernise corporation tax administration in other ways, especially as the tax gap for corporation tax is now estimated at nearly 16%.

Digital services

The transformation roadmap sets out more than 50 information technology projects, services and measures, including:

A new online service for Pay As You Earn taxpayers, which will make it simpler and easier for employees to check and update their income, allowances and reliefs. The new service will be available through an employee’s personal tax account or through the HMRC app.
The launch of a new expenses service, which will enable employees to submit claims for tax relief on their allowable expenses and to upload the supporting evidence all in one place.
The expansion of digital services for the self-employed, which will improve the registration service and also streamline the exit process for those who no longer need to file a self-assessment tax return.

A biometric voice system is already being used to verify taxpayers’ identities when contacting HMRC, and this system will be expanded throughout the remainder of 2025/26.

HMRC’s long-term aim is to end reliance on phone lines, which will come as no surprise given the long wait times and number of calls going unanswered. By 2030, HMRC intends for 90% of taxpayer interaction to be digital, either through personal tax accounts or using the HMRC app.

HMRC’s transformation roadmap can be found here.

Photo by John on Unsplash

An ominous update for pensions

Written by Femi Ogunshakin on 17 August 2025. Posted in Pensioners, Pensions. No Comments on An ominous update for pensions

Unfortunately, it’s all bad news. The government has confirmed that most unused pensions will fall within the scope of inheritance tax (IHT), and that it will review the State pension age (SPA).

On top of this comes the news that almost half of working-age adults are not making any provision for a private pension.

Unused pensions

The government has published draft legislation to take effect from 6 April 2027. The change will see most unused pension death benefits brought into charge for IHT purposes, although one change has been made in response to industry feedback. All death-in-service benefits will now be excluded from the charge to IHT.

State pension age

By March 2028, the SPA will have increased to 67. The next planned increase to age 68 is set to take place between 2044 and 2046, impacting those born on or after 6 April 1977. There have been recommendations that this timeline be brought forward, but any further changes have until now been shelved due to recent uncertainty about life expectancy.

However, with the government’s recent announcement of the next review of the SPA, further increases are possible.

Lack of pension provision

The government – not surprisingly – is very concerned about the number of people not saving privately for a pension:

Low earners and the self-employed are less likely to be contributing to a pension, with more than three million self-employed people without such savings.
The situation is worse among women and some ethnic groups.
Overall, some 40% of people are currently not saving enough for their retirement.

For a moderate lifestyle, it is estimated that a single person currently requires nearly £32,000 a year, with nearly £44,000 required for a couple; the full State pension is just under £12,000.

These latest findings come despite employees being automatically enrolled into pension saving. The relaunched pensions commission will therefore look at what is preventing greater pension saving, reporting back in 2027.

The currently legislated timetables for SPA can be found here.

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Crypto transactions under new scrutiny

Written by Femi Ogunshakin on 16 August 2025. Posted in Cryptocurrency, HMRC Investigations, Self Assessment. No Comments on Crypto transactions under new scrutiny

From 1 January 2026, crypto investors will face new reporting requirements when buying, selling, transferring or exchanging cryptoassets, such as Bitcoin. This means HMRC will be able to link cryptoasset activity to your tax record.

The latest figures show that seven million people in the UK own some form of cryptoasset, with the value of Bitcoin having increased significantly over the past year.

Capital Gains Tax (CGT) treatment

For CGT purposes, cryptoassets are treated similar to shares, with each type of cryptoasset pooled. There will be a CGT disposal if you:

Sell cryptoassets (even if the proceeds are not withdrawn from the exchange);
Exchange one type of cryptoasset for a different type of cryptoasset;
Use cryptoassets to pay for goods or services; or
Make a gift of your cryptoassets to another person (unless it’s to your spouse or civil partner).

There is no disposal if, for example, you simply move cryptoassets between different wallets.

Reporting requirements

Individual investors will have to provide their name, date of birth, home address and either their national insurance number or their unique tax reference.

Using a non-UK based cryptoasset service provider will not avoid the reporting requirements if the provider is based in a country following the same rules. However, several countries that host providers have not yet signed up to the reporting requirements, and the use of a decentralised exchange might also circumvent the new rules.

Failing to disclose information to a cryptoasset service provider, or submitting an inaccurate or incomplete report, will be subject to a £300 fine.

HMRC

Cryptoasset service providers will report the collected cryptoasset data to HMRC. The first reports covering 2026 will be reported by May 2027, making it easier for HMRC to see if disposals have not been reported on an investor’s self-assessment tax return. Previously, compliance has relied largely on voluntary disclosure.

Tax returns from 2024/25 onwards now include a dedicated section for gains made on cryptoassets in the CGT pages.

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

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Pre-emptive validation orders in insolvency proceedings

Written by Femi Ogunshakin on 7 August 2025. Posted in Insolvency, Winding Up Petitions. No Comments on Pre-emptive validation orders in insolvency proceedings

Advanced warning; I’m about to bang on (again) about s.127(1) of the insolvency Act 1986, and what it means for companies faced with the presentation of a winding up petition.

For those not in the know, this section makes potentially void, any payment (or as the legislation states ‘disposition’) of any asset or payment by the company, void from the date the petition is presented, which arguably is the date on the sealed court papers, not the date of service.

Directors, unaware of this, will typically continue to access and disburse funds from the company’s account(s) until the petition is advertised in the London Gazette, the account frozen following which the likes of me are instructed to assist with an application to the insolvency courts for interim relief, otherwise known as a validation order.

Why the blog? Well, finally, after many years of acting in this space for clients on a post advertising basis, a client decided to get ahead of the curve and not wait until its bank account was frozen, and instructed us to act in advance of the publication, a sensible move, given there is nothing in the legislation that suggests an application can’t be made before the advertisement. The validation order was granted and has been sent on to its bank’s legal team despite the fact that the petition has yet to be advertised.

So, if you are served with a winding up petition, you do not necessarily need to wait until the Gazette publishes the fact; in the right circumstances, a judge in an insolvency court may be prepared to grant a validation order pending the outcome of the petition hearing, enabling your business continue with some semblance of normality whilst it looks to dealing with the the core issue of addressing the petition debt.

I am, as always, grateful to @Kartikeya Sharma of @23ES for his usual excellent advice and advocacy on behalf of our client and for a sterling skeleton argument on the merits of their validation order application.

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Businesses take stock of increased costs

Written by Femi Ogunshakin on 1 August 2025. Posted in National Insurance Contributions, VAT. No Comments on Businesses take stock of increased costs

April’s National Insurance Contributions (NICs) and minimum wage increases are having a major impact on businesses, with around half freezing pay. Many owners are even also considering moving their business abroad to avoid the UK’s high tax environment.

Staffing

Businesses have faced various risks in recent years, including high utility bills and increased costs. However, the changes that came in from April are causing particular concern, with higher employer NIC costs combined with above inflation rises to the minimum wage:

Many business owners have had no choice but to cut staffing levels and put future recruitment on hold.
Staff hours have also been reduced as owners try to rein in costs.
Where possible, businesses are starting to use AI tools and automation to replace jobs.

Along with keeping staffing costs in check, most business owners are also planning to increase prices to stay afloat.

The increase to the capital gains tax rate paid by entrepreneurs when disposing of their business has also harmed business sentiment. From April 2026, the rate will be 18%, having gone up from just 10%.

Moving abroad

In a recently published a survey of 500 business owners, some 40% have indicated that they are prepared to move businesses abroad to escape the UK’s increasingly challenging business environment. Combined with lower taxes, many countries have lower living costs, especially if private school fees are a factor.

A number of countries offer long-stay digital nomad visas, and for more permanent relocation some countries have golden visas. Such visas were previously considered to be the preserve of high-net-worth individuals, but are being increasingly used by the middle class. The golden visa schemes offered by Greece and Portugal are currently popular. With VAT now being charged on private school fees in the UK, the United Arab Emirates is becoming another popular option for families.

The full details of the ‘Business Owners Sentiment Survey’ can be found here.

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Changes to company accounts on the horizon

Written by Femi Ogunshakin on 21 July 2025. Posted in Companies House, Company Director. No Comments on Changes to company accounts on the horizon

Company directors need to be aware of important changes to be implemented by Companies House from 1 April 2027.

Digital software

Directors who submit their company accounts themselves, rather than using an agent, will no longer be able to do so using the Companies House web service or file by paper. From 1 April 2027, company accounts can only be filed using digital software:

Directors will therefore have to use a commercial software product, which will add to the cost of running a limited company.
The Companies House web service will remain open for other statutory filings, such as confirmation statements and director updates.

HMRC will likewise require commercial software to be used when filing company accounts and tax returns from 1 April 2026. Ideally, the software that is chosen should be able to deal with both Companies House and HMRC filing requirements.

Filing options

Companies House is also streamlining the accounts filing options for micro-entities and small companies from 1 April 2027:

Both micro-entities and small companies will have to file a profit and loss account.
Small companies will have to file a directors’ report.
Companies will no longer be able to prepare and file abridged accounts.

Shareholders should be aware that more company information will be publicly available than currently as a result of these changes.

Despite the announcement from Companies House, there remains some uncertainty as to whether the profit and loss filing requirement will come into force from 1 April 2027.

Financial year end changes

Currently, there is no restriction on how often a company can shorten its financial year end. Companies House will now restrict such a change to once every five years, unless there is a valid business reason for shortening more often. This change mirrors the rules when a company lengthens its financial year end.

The starting point for finding software that is available for filing company accounts can be found here.

Photo by Zan Lazarevic on Unsplash

A good time to become a landlord?

Written by Femi Ogunshakin on 15 July 2025. Posted in Income Tax, Landlord, Property. No Comments on A good time to become a landlord?

While positive changes are on the horizon for the buy-to-let market, with a record number of mortgage deals coupled with lower interest rates, is it a good time to become a landlord in England?

Cons

There is still significant uncertainty in the private rental market as a result of the Renters’ Rights Bill, which looks likely to become law by the end of the year. The rule changes (which only apply in England) will make it more difficult for landlords to evict tenants, restrict rent increases, and prohibit landlords from receiving several months’ rent in advance.

Other disadvantages include:

The increased cost of maintaining a property;
The proposal that rented property will have to meet stricter energy efficiency requirements from 2030 onwards (something that a new landlord will need to consider when purchasing property); and
Stamp duty, which can be a significant upfront cost when purchasing a buy-to-let property.

To these concerns, you can add in relatively modest price growth over the past year, plus the good rate of return still available on alternative, risk-free, investments – even National Savings & Investments is paying just over 4% on a five-year bond.

Pros

The main advantage is that rents continue to increase. For the past 12 months to May 2025, average rents have gone up by 7.1% in England, although there are wide regional differences: the North East was 9.7%, with Yorkshire just 3.7%.

Then there is the financing aspect. Potential landlords currently have around 1,200 more buy-to-let mortgage deals available than a year ago, while the average two-year fixed mortgage rate is at its lowest since September 2022.

The decision to become a landlord is far from straightforward. If the decision is a ‘yes’, buying the right property, in the right location, at the right price is more important than ever.

The Government’s guide to the Renters’ Rights Bill can be found here.

Photo by Towfiqu barbhuiya on Unsplash

Company Voluntary Arrangement: What, Why, When?

Written by Femi Ogunshakin on 10 July 2025. Posted in Company Insolvency, Insolvency, Restructuring & Insolvency. No Comments on Company Voluntary Arrangement: What, Why, When?

I had an interesting meeting with the head of services for a local authority nervous about my client’s financial status following its entering into a Company Voluntary Arrangement (“CVA”).

The client’s contract with the local authority had stalled due to the negative perception of what a CVA is and concerns were expressed as to the risk to them in continuing the relationship. The objective of the meeting was to assist the local authority with understanding what a CVA is and it dawned on me that perhaps there is an audience for a blog on the subject as I admit to being surprised how little the local authority understood about the role of a CVA in insolvency, so here goes a summary of what a CVA is and what role it plays in getting a company out of a financial quagmire.

A Company Voluntary Arrangement is a formal agreement between an insolvent company and its creditors, allowing the company to repay its debts over a set period, usually 3-5 years, while continuing to trade. It’s a way for a company to restructure its debts and avoid liquidation or administration. The CVA is supervised by a licensed Insolvency Practitioner.

Here’s a breakdown of how it works:

Proposal and Supervision:

The company, facing financial difficulties, proposes a CVA to its creditors.
A licensed Insolvency Practitioner (IP) supervises the process.

Agreement with Creditors:

The CVA outlines how much of the debt will be repaid, and over what period.
Creditors vote on the proposal, and if approved by a majority, it becomes legally binding.

Debt Restructuring:

The CVA might involve writing off some debt or reducing the amount owed.
It allows the company to continue trading, potentially with reduced monthly payments.

Ongoing Obligations:

The company makes regular payments to the IP, who distributes the funds to creditors.
The company must comply with the terms of the CVA to maintain its trading status.

Potential Benefits:

Avoids liquidation or administration.
Provides a breathing space to restructure and become financially viable.
Can lead to a better outcome for creditors compared to liquidation.

In essence, a CVA is a tool for business rescue, enabling a company to negotiate with its creditors, restructure its debts, and continue trading, ultimately aiming for a return to financial health.

Returning to my meeting, I am pleased to report that not only did the local authority lift the restrictions on the supply of services to my client, it agreed to an uplift in fees and additional numbers in order to support the success of the CVA and the company’s future fortunes.

If you want to know more about CVA’s or any other aspects of dealing with creditors threatening winding up proceedings etc, contact me for a no obligation discussions at femi@femiogunshakin.com or femi.ogunshakin@nexa.law or call me on 07867 795 439.

Photo by Brett Jordan on Unsplash

Employment status revised for hair and beauty salons

Written by Femi Ogunshakin on 8 July 2025. Posted in Income Tax, Self Assessment, Self-Employed. No Comments on Employment status revised for hair and beauty salons

HMRC has recently published guidance on whether people working in the hair and beauty industry should be treated as employed or self-employed. This is an important distinction for owners of such businesses who are renting out chairs.

There is a growing trend of salon owners renting out chairs to other salon businesses. This business model, itself, can blur the lines between employment and self-employment for those working in salons, making it essential to understand the distinctions used by HMRC.

Incorrect classification can have serious tax consequences, especially if the mistake comes to light following an HMRC compliance check.

Self-employment

The classification for some salons will be straightforward, such as where the owner doesn’t work themselves, but rents a number of chairs to people who each work on an independent basis. However, other salons may consist of a mix of working owners, employees and chair renters. The classification here will often be less clear-cut, especially as the salon may want to present a common brand identity.

Some aspects of establishing self-employed status should be simple to implement, if the salon has not already done so. For example, chair renters should:

Have their own business bank accounts and business insurance;
Buy their own products and equipment;
Have their own client list; and
Keep business records.

A common till or card machine is not an issue as long as income is separated for each chair renter.

Problem areas

Ideally, chair renters should be able to decide the hours they work, and when to take time off. However, if a salon has walk-in customers, the owner will want to have a minimum number of personnel available. The decision may, therefore, be something of a compromise, but make sure the input from chair renters is documented.

Similarly, chair renters should be setting their own prices, but this will be problematic if everyone is offering the same services. Clearly, chair renters should set their own prices for any exclusive services they offer. Even if there is a common pricing, each chair renter should display their own price list.

The recently published guidance (along with a link to the check employment status for tax (CEST) tool) can be found here.

Photo by Jason Leung on Unsplash

Inheritance tax and lifetime gifts

Written by Femi Ogunshakin on 3 July 2025. Posted in Inheritance Tax, Retirement. No Comments on Inheritance tax and lifetime gifts

With the inheritance tax (IHT) nil rate bands unchanged for 16 years, more individuals are making lifetime gifts to minimise IHT liability when they ultimately die. However, anyone making gifts needs to be aware of the available exemptions.

Gifts, regardless of their size, are exempt from IHT if the donor then lives for seven years. However, it is always prudent – especially for older donors – to make use of available exemptions.

The most useful exemptions are those for gifts to a spouse or a civil partner, the annual exemption and gifts from income.

Spouse or civil partner

Although a gift to a spouse or civil partner is exempt from IHT, such a gift will not reduce the value of a couple’s combined estate. However, if one spouse or civil partner is younger or in better health than the other, it makes sense for that individual to have sufficient funds so they can then make family gifts.

Annual exemption

The exemption is only £3,000 a year, although any unused amount can be carried forward to the following year; with the current year’s exemption used before any brought forward amount. A couple could use this exemption to invest £6,000 a year into a Junior Individual Savings Account (JISA) for a grandchild.

Gifts from income

Probably the most useful of the exemptions is gifts from income, given that the amount of gift is, in theory, unlimited each year. It’s also the most complicated, with three conditions to be met:

The gift must be made out of income, not capital (income is after paying income tax, with HMRC arguing that income becomes capital two years after it is received);
The gift must be part of the donor’s normal expenditure (this means the expenditure has to be habitual or regular); and
The donor is left with sufficient income to maintain their usual standard of living (so, it is essentially just surplus income that qualifies).

This exemption is ideal for paying school fees for grandchildren. However, it would be of no use where a parent or grandparent helps with a house deposit, because such a gift would not be habitual or regular.

HMRC’s basic guide to how IHT works, including details of various exemptions, can be found here.

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Lack of awareness around Making Tax Digital

Written by Femi Ogunshakin on 30 June 2025. Posted in Advice. No Comments on Lack of awareness around Making Tax Digital

With less than a year until quarterly filing under Making Tax Digital (MTD) is introduced, a recent survey has found that nearly one-third of sole traders are oblivious to the changes.

Furthermore, for the other two-thirds of sole traders who are aware of MTD, there is a large proportion who have not made any preparations. With an estimated three million sole traders, this translates to a worrying number who are not ready for MTD. The survey did not cover landlords.

From April 2026, MTD will become mandatory for sole traders and landlords with an annual income of more than £50,000. The threshold will drop to £30,000 in 2027 and to £20,000 in 2028.

Generational gap

The number of self-employed people has fallen considerably in recent years, although numbers have started to pick up again. Much of the recent increase is due to people working beyond the traditional retirement age, with nearly a quarter of self-employed people now aged 60 or older.

It is the older cohort of sole traders who may struggle the most with MTD. The survey found that those in the 25-to-34 age group were more likely to be well-prepared for April 2026, with a majority feeling the changes will have a positive impact on their approach to filing taxes.

Impact

Some sole traders have deliberately kept their income below £90,000 so that they do not have to worry about VAT registration:

Although they will be able to use a three-line account approach based on total income and expense figures, the additional administration requirements are unlikely to be welcomed.
The deadlines for quarterly MTD submissions are considerably tighter than the self assessment tax return deadline of 10 months; with just over a month in which to make each quarterly submission.
Late submissions will lead to penalties.

One loophole to delay mandatory MTD is to change a sole tradership into a partnership. Rather than, for example, employing a spouse, civil partner or family member, that person could be brought in as a junior partner. MTD requirements would then be postponed, possibly for at least three years.

HMRC’s guidance to find out if and when you need to use MTD for income tax can be found here.

Photo by Bhautik Patel on Unsplash

What you may rely on in court may not be AI

Written by Femi Ogunshakin on 24 June 2025. Posted in High Income Child Benefit Charge, Tax. No Comments on What you may rely on in court may not be AI

Representing yourself at the First Tier Tribunal is one thing, but relying on artificial intelligence (AI) as a basis for appealing an HMRC decision, without human verification, is quite another.

Discovery assessment

A recently heard case concerned a discovery assessment for just over £2,500 in tax from a high-income child benefit charge for 2018/19. The delay was largely caused by uncertainty over whether HMRC could rely on discovery assessments. The government subsequently legislated in HMRC’s favour, meaning the use of a discovery assessment cannot be used as a basis for defence even though the legislation is retrospective in its application.

Artificial, not entirely intelligent

The taxpayer’s entire defence was suspect due to over-reliance on AI:

One aspect of the defence put forward was that HMRC should have notified the taxpayer of the charge, despite the primary responsibility for declaring tax liabilities resting with the taxpayer.
Although none of the cases pulled up and cited by the AI used were entirely fictitious, the cases that were put forward in the taxpayer’s defence were irrelevant to the tax charge in question.

This is, of course, the problem with AI if not used correctly – the AI may not fully understand what is being asked or may miss relevant information. The result is an answer that seems plausible, but is not relevant or accurate. Indeed, the judge for the case said that there is no reason why AI should not be used to research a defence, but the results need to be checked carefully.

HMRC’s use of AI

HMRC itself, of course, makes extensive use of AI, for example, to analyse large amounts of data, such as when a taxpayer’s declared income is insufficient to support their lifestyle. Landlords should be aware that AI allows HMRC to search a range of databases, including the Land Registry, listing websites and various tenants’ deposit schemes to establish whether property income is being correctly declared.

Although aimed at public bodies, the government’s artificial intelligence playbook clearly explains the limitations of AI. The playbook can be found here.

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Will the new simple (self) assessment regime take you by surprise?

Written by Femi Ogunshakin on 11 June 2025. Posted in Advice. No Comments on Will the new simple (self) assessment regime take you by surprise?

Commencing this month, HMRC will begin sending out simple assessments.

They will come as a surprise to many recipients.

From June 2025, HMRC will begin to issue simple assessment letters to those who are not required to make full self assessment returns.

As a rule, you will receive a simple assessment letter if you:

owe income tax that cannot be automatically taken out of your income;
owe HMRC £3,000 or more;
have tax to pay on your State pension;
either do not have a PAYE code or HMRC cannot collect the tax due via an adjustment to your code.

The letter covers the 2024/25 tax year and gives:

a detailed calculation of the tax due;
the latest date by which you must pay the tax (31 January 2026 for the 2024/25 tax year);
how you pay the tax;
what action to take if you disagree with HMRC’s numbers.

HMRC says that while some people receive a simple assessment every year, for most recipients the letter will come out of the blue. One major reason why that happens, and happens in growing numbers, is the freeze in the personal allowance. This has been fixed at £12,570 since April 2021 and is currently not due to rise until 2028/29.

The basic levels of old and new State pensions are currently (2025/26) below the level of the personal allowance. However, if you have additional State pension (which increased by 6.7% in 2024/25), it could be enough, in combination with the main State pension, to take your total State benefits over £12,570. The same could be true if you deferred your State pension(s), resulting in an increased payment.

To further complicate matters, if you owe tax on bank and/or building society interest, HMRC may send you two simple assessment letters for 2024/25, depending on when they receive the interest information. In those circumstances, any amount due on the second assessment is independent from the first.

What HMRC is likely dreading is an overall increase in the new State pension of 5% or more from the current level (£230.25 a week) before the 2028/29 tax year begins. If that happens, the new State pension alone will exceed the personal allowance, potentially dragging anyone receiving a full new State pension into tax. With inflation presently above 3% and around 5.5% earnings growth, that 5% threshold could be breached in 2026/27.

You can find out about simple assessment letters from HMRC on their website.

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Directors personal liability in costs in winding up proceedings

Written by Femi Ogunshakin on 9 June 2025. Posted in Company Director, Insolvency, Winding Up Petitions. No Comments on Directors personal liability in costs in winding up proceedings

It’s not often we ask directors to personally fund costs of legal services following the issue of a winding up petition, but it is a necessary move given s.127(1) of the Insolvency Act 1986. For those not in the know, this section states that;

“In a winding up by the court, any disposition of the company’s property, and any transfer of shares, or alteration in the status of the company’s members, made after the commencement of the winding up is, unless the court otherwise orders, void.”

In plain English, and we very often have to explain this to our director clients, from the moment winding up proceedings commence, any disposition of the company’s property or transfer of shares is void unless the court has granted a validation order (see my blog from 28 November 2024, on validation orders here.

For this reason, and because the outcome of the petition remains uncertain at the point of engagement, as a precautionary measure, we ask directors to not meet our costs from company funds until a validation order is in place, and we are typically instructed to apply for one following the advertisement of the petition in the London Gazette.

We’ve found directors appreciate the point and often will fund the company’s litigation from either their personal resources, or from other businesses they have an interest in (often associated but sometimes independent companies). I should mention that it is not always necessary to fund petition defences from alternative resources, because an application can be made to the court before the petition is advertised. More on this in a follow up blog post.

Whilst I have your attention, in a somewhat related matter, having just read a report by @Kingsley Napier, it occurred to me to highlight the recent costs judgment case of Re MPB Developments Ltd [2025] involving an order that the directors be held personally liable for the costs incurred by the petitioner in a decision based partly on the basis of a non-party costs order (“NPCO”).

By way of background, the High Court found MPB Developments Ltd to be balance sheet insolvent, leading to a winding-up order. The court determined that the company’s liabilities significantly exceeded its assets and that its business plans were unrealistic and lacked viability, especially in relation to repaying substantial loans due in 2029. This decision highlights the importance of realistic financial forecasts and asset valuations in insolvency proceedings, emphasising that the court scrutinises business plans and financial evidence to assess a company’s future solvency[1].

The costs in MPB is why I recommend professional colleagues and directors consider as the outcome in this case will, and dare I say, should inform the decision making process when it comes to defending petition proceedings particularly where there is genuine concern regarding the basis for the litigation (we’ve seen our fair share).

In case you don’t have time or the inclination to read the costs judgment in full, then how about taking a look at the excellent summary of facts published by Kinglsey Napier here.

It would seem directors have a lot more to think about than just preventing the petition from being advertised and/or defending the proceedings. If you find yourself in this predicament, feel free to reach out to me for a discreet and non-obligatory chat to discuss your options when faced with the receipt of a petition and what to consider as a director(s) when taking action to respond.

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[1] Creston Estates Ltd & ORS v MPB Developments Ltd & ORS [2025] EWHC 198 Ch).

Mandatory Payrolling: Employee Benefits

Written by Femi Ogunshakin on 27 May 2025. Posted in Benefit-In-Kind, Employment Tax, Self-Employed. No Comments on Mandatory Payrolling: Employee Benefits

The deadline requiring employers to report most taxable benefits through payroll software has been postponed by one year to 6 April 2027. As a result, employers can continue using form P11D to report benefits for a further year.

Once mandatory reporting is introduced, all benefits, except for employer-provided accommodation and cheap/interest-free loans, will need to be payrolled. The two exceptions can still be reported using form P11D, although the longer-term intention is that they will also come under payroll provision.

For 2026/27

Payrolling remains voluntary, and employers must register before 6 April 2026 to payroll employees’ benefits for this year. As is currently the case, it will not be possible to payroll accommodation or cheap/interest-free loans.

From 2027/28 onwards

Since payrolling will be mandatory, registration will not be necessary. Therefore:

Registration will be required if an employer wants to voluntarily payroll accommodation or cheap/interest-free loans.
The P11D process will remain in place for those employers who provide, but do not payroll, accommodation and cheap/interest-free loans.

An end-of-year process will be available to account for the values of any taxable benefits that cannot accurately be determined during the tax year.

HMRC will automatically remove benefits from employees’ tax codes in readiness for payrolling from 6 April 2027.

Cashflow impact

Statutory Sick Pay Changes

Written by Femi Ogunshakin on 20 May 2025. Posted in Employment Law, Employment Tax, Sick Pay. No Comments on Statutory Sick Pay Changes

Proposed changes to Statutory Sick Pay (SSP) will introduce entitlement from the first day of sickness, with the lower earnings threshold removed.

The changes are part of the Employment Rights Bill, currently progressing through parliament. While the new rules are not expected to take effect until autumn 2025, at the earliest, employers should start revising their policies to be ready.

Unlike other statutory payments, SPP is not recoverable from HMRC. Therefore, the cost is fully borne by employers.

Day one right

Employees are not currently entitled to SSP until the fourth day of absence. This three-day waiting period is to be removed, so an employee will be entitled to receive SSP from day one of sickness. This will mean:

Many employees will no longer have to choose between going to work when unwell or not getting paid.
However, employers could be impacted by increased absences and a loss of productivity.
Employers will also face an extra cost. Under the existing rules, an employee on a week’s sick leave receives SSP of £47.50. The amount payable under the new rules will be £118.75 (the weekly amount of SSP for 2025/26).

Employers could see a rise in sick leave abuse, which will require careful handling. Approaches to reducing abuse include asking employees to check in regularly when off sick, and holding return-to-work interviews.

Lower earning threshold

To qualify for SSP, there is currently an earnings threshold of £125 per week. When this threshold is removed, employees off sick will receive the lower rate of SSP and 80% of their average weekly earnings. Although a small number of employees will receive less SSP per day as a result of this change (those earning between £125 and £148), they will benefit from more qualifying days.

The Government’s factsheet on the removal of the lower earnings threshold can be found here.

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More detail on business and agricultural IHT reliefs threshold cut

Written by Femi Ogunshakin on 13 May 2025. Posted in Inheritance Tax. No Comments on More detail on business and agricultural IHT reliefs threshold cut

HMRC’s recently closed consultation offers further clarity on how the £1 million inheritance tax (IHT) business and agricultural relief allowance will work from 6 April 2026.

The total value of business and agricultural property eligible for 100% IHT relief will be limited to £1 million. Any qualifying assets above this limit will receive relief at a reduced rate of 50%.

For an entrepreneur with a business valued at, for example, £5 million, the new relief threshold could result in an additional IHT liability of £800,000.

The relief

The £1 million allowance will be used up by any lifetime transfers of business and agricultural property made within seven years of death. So:

The allowance will be renewed every seven years on a rolling basis in a similar way to the nil rate band of £325,000.
Business and agricultural property that only qualifies for 50% relief, such as Alternative Investment Market shares, will not use up the £1 million allowance.

Although spouses and civil partners will each qualify for their own £1 million allowance, any unused allowance will not be transferable in the same way as the nil rate band.

Planning

Currently, with unrestricted 100% business and agricultural relief, IHT planning primarily concerns ensuring relief is available.

In future, there will be more incentives to make lifetime gifts where the £1 million allowance is insufficient to cover the value of business and agricultural property. This, of course, has implications for capital gains tax that must be considered.
It may be worthwhile to put a fairly substantial gift into trust. For example, the lifetime IHT payable on a £2 million gift of agricultural property into trust would be £35,000

If making a lifetime transfer of business or agricultural property to a spouse or civil partner, you must be aware that the property should be held for two years before relief will be available.

Annex A of HMRC’s consultation has six case studies which illustrate how the £1 million allowance will be applied. The consultation can be found here.

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What might spark a CGT bill?

Written by Femi Ogunshakin on 12 May 2025. Posted in Capital Gains Tax. No Comments on What might spark a CGT bill?

With basic rate taxpayers now facing doubling capital gains tax (CGT) rates, and with the exempt amount a quarter of its previous level, it is no surprise that considerably more CGT is being paid to HMRC.

Given the changes taking place, it is important to understand the rules.

Rates of CGT

Basic rate taxpayers now pay CGT at the rate of 18%, with a 24% rate for higher rate taxpayers. Rates were previously 10% and 20% respectively, so this is an unpleasant tax hike for couples who arrange for their taxable gains to be made by the lower income partner.

Disposals

A common misconception is that CGT is only due if an asset is sold, but assets given away to anyone other than a spouse or civil partner are also disposals. Furthermore:

With no proceeds coming in if a gift is made, there might be no funds available to pay the related CGT bill.
Selling an asset, such as a second property, to a son or daughter at an undervaluation doesn’t avoid CGT. The tax calculation will be based on the asset’s market value.

Similarly, an exchange of assets does not avoid CGT. Again, the market value of each asset will be used when calculating each person’s CGT liability.

When it comes to cryptocurrency, there can be a gain if it is used to pay for goods or services, or if there is a switch in currencies – such as converting Bitcoin into Ethereum.

Some basic planning

Although there is now less scope for CGT planning, there are still opportunities:

Make use of your £3,000 exempt amount each tax year, as it cannot be carried forward;
Making personal pension contributions in the same year as a disposal may reduce the rate of CGT from 24% to 18%; and
Crystalise assets standing at a loss so that the losses can be used to reduce taxable gains (but be careful not to waste the exempt amount).

Spouses and civil partners should plan as a couple, so that two exempt amounts and basic rate bands can be utilised.

HMRC’s guide to CGT (when it is paid, on what, rates and allowances) can be found here.

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Time To Pay? New VAT Late Payment Penalties

Written by Femi Ogunshakin on 9 May 2025. Posted in Insolvency, Time To Pay Arrangements, Winding Up Petitions. No Comments on Time To Pay? New VAT Late Payment Penalties

It is now more expensive to be late when it comes to making a VAT payment. The slowest payers now face a 250% increase to an annualised rate. In addition, the rate of late payment interest has also increased.

Late payment penalties

Payment for each VAT return is considered separately, and penalties can be avoided if a payment is made within 15 days of the due date. Keep in mind:

An initial 3% penalty is charged if payment is made more than 15 days late (previously 2%).
If more than 30 days late, a further 3% penalty is charged – so, a 6% penalty in total (previously 4%).

Furthermore, a daily penalty at an annualised rate of 10% is charged immediately after the initial 30-day period (previously 4%).

Late payment interest

Interest is charged from the due date until the date VAT is paid. This means that interest can be due even when no penalty has been incurred, because of the requirement to pay within 15 days. From 6 April 2025, HMRC has added a further 1.5% surcharge to the late payment interest rate, so it now stands at 8.5%.

With the bank base rate currently at 4.5%, the daily penalty rate of 10% and the late payment interest rate of 8.5% are somewhat punitive.

Preventative measures

Simply burying your head in the sand over an overdue VAT liability will just see the debt spiral as penalties and interest are added on.

Setting up a time to pay arrangement will avoid penalties being charged. However, such an arrangement will not retrospectively remove any penalties already incurred, and late payment interest will still be charged. An arrangement cannot be set up by those using either the cash accounting or annual accounting schemes.

If some funds are available, it is better to make a payment on account by the due date, leaving only the balance to be paid late. This will avoid late payment interest as well as (if no arrangement is in place) penalties on the amount paid on time.

Details about setting up a payment plan can be found here.

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Paying the high income child benefit charge

Written by Femi Ogunshakin on 7 May 2025. Posted in Employment Tax, High Income Child Benefit Charge, Self Assessment. No Comments on Paying the high income child benefit charge

From this summer, employed taxpayers who have to pay the high income child benefit charge (HICBC) will no longer need to complete a self assessment tax return. Instead, they can report the charge using HMRC’s new online service.

When the HICBC is payable

The HICBC only comes into play when an individual – or their partner – receives child benefit and their annual income exceeds £60,000. This means:

The charge removes 1% of child benefit for every £200 of income over £60,000.
Once income reaches £80,000 the charge is 100%, so the amount of child benefit is essentially reduced to nil.

For those with several children, the HICBC can result in a high effective marginal tax rate.

For 2025/26, child benefit of £26.05 a week is paid for a first child, with £17.25 a week paid for each subsequent child.

New online service

Employed taxpayers will be able to use HMRC’s new digital service to report the amount of child benefit received. This will give them the option of paying the HICBC through PAYE:

Unless the taxpayer has any other income or chargeable gains, there will be no need to submit a tax return following the end of the tax year.
Taxpayers who are required to file a tax return for another reason will still need to report the HICBC on their return.
Anyone who has previously submitted a tax return needs to be careful because HMRC will continue to issue a notice to make a return. Penalties will be incurred if the notice is ignored.

It remains to be seen whether the new online service will alleviate the problems associated with the HICBC. One of the main issues continues to be a lack of awareness, despite the charge being in place for more than ten years. Also, most employed taxpayers are not used to dealing with HMRC.

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Making Tax Digital expands

Written by Femi Ogunshakin on 16 April 2025. Posted in Making Tax Digital, Self Assessment, Self-Employed. No Comments on Making Tax Digital expands

Self-employed people and landlords with an income between £20,000 and £30,000 will be required to use Making Tax Digital (MTD) from 6 April 2028. This will bring a further 900,000 low-income taxpayers under the MTD regime.

HMRC previously stated that those with an income between £20,000 and £30,000 would be mandated before the end of this parliament. The specific start date of April 2028 is therefore earlier than expected.

Timing

Taxpayers with an income of more than £50,000 will be mandated from 6 April 2026 for the 2026/27 tax year. The deadline for finalising MTD obligations for this year is not until 31 January 2028, which doesn’t give HMRC much time to sort out any problems before the new cohort of taxpayers join the system in April 2028. At present:

Unrepresented taxpayers with an income between £20,000 and £30,000 are going to need software that is either free or low-cost.
The availability of such software is quite limited, although more options might become available by April 2028.

The relevant income for meeting the £20,000 threshold will be that for the 2026/27 tax year.

In the future, the MTD threshold might be lowered again as the government has stated there are plans to expand the regime to include those with an income below £20,000.

Self assessment

HMRC has also announced that the year-end self assessment tax return must be submitted using MTD or other suitable software. It was previously thought that taxpayers would be able to use HMRC’s online service, but this is not going to be the case.

When selecting suitable MTD software, it is important to make sure it can also deal with the tax return submission. If the MTD software cannot do this, a different software package will be required to complete the year-end requirement.

HMRC’s list of software that’s compatible with MTD for income tax can be found here.

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Sick Pay and Small Employers’ Relief

Written by Femi Ogunshakin on 10 April 2025. Posted in Employment Tax, Sick Pay. No Comments on Sick Pay and Small Employers’ Relief

Statutory payments can be problematic to administer for smaller employers, but in a rare instance of generosity HMRC compensates for this. Also, from 6 April 2025, the rate of compensation will almost triple from the current 3% to 8.5%.

Employers can usually reclaim 92% of statutory payments for maternity, paternity, adoption, shared parental and parental bereavement (statutory sick pay is no longer recoverable). However, smaller employers can recover 100% of the cost as well as the compensation. So, the total rate of recovery will be 108.5% from 6 April 2025.

Statutory neonatal care pay is being introduced from 6 April 2025, which will be recoverable on the same basis. It will be paid to a parent when their newborn is sick in hospital.

Smaller employers

You are a smaller employer if your total class 1 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 employment allowance reduction is ignored.
The qualifying week will vary depending on the type of leave. For example, for maternity pay, the qualifying week is the fifteenth week before the baby’s due date.

The main rate of employee class 1 NIC is lower for 2024/25 than it was for 2023/24, so an employer who was previously just outside of the £45,000 threshold might qualify from 6 April 2025.

An employer can apply to HMRC to be paid in advance if they cannot afford to make statutory payments.

Recovery

Relief, whether at the normal rate or at the smaller employer rate, is claimed on a monthly basis through payroll software using the employer payment summary. Payroll software should do everything automatically, although you may need to select that you are a small employer.

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

Social media suggestion:

Statutory payment relief is increasing from April 2025. Read the finer details for small business owners here #smallbusiness #statutoryrelief #HMRC

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Side hustles and tax obligations

Written by Femi Ogunshakin on 10 April 2025. Posted in HMRC Investigations, Self Assessment. No Comments on Side hustles and tax obligations

HMRC has recently launched their Help for Hustles campaign to help people earning extra income to understand their tax obligations.

Online platforms, such as eBay, are now required to report users’ income to HMRC. Anyone who is selling goods or services online therefore needs to be aware of their tax reporting requirements. Many regular activities that might have been considered a lucrative hobby now fall into the ‘trading’ category:

Buying or making things to sell: Activities such as selling things that you have made, upcycling furniture to sell, or buying items with the aim of reselling them at a profit. All count as trading.
Side gigs: Even if carried out in your spare time, a side gig such as tutoring or gardening counts as trading. Using an App to pick up work will almost certainly mean trading.
Multiple jobs: Working many different side hustles, without having a main source of income, means you are trading.
Content creators and influencers: It is likely to be trading if you are paid to make sponsored social media posts for a brand or are earning income from advertisements on your online videos or blog.
Property income: This might be from renting out a spare room in your home, a holiday letting, or renting out property using an App such as Airbnb.

You will not normally be treated as trading if you are just selling off some unwanted personal possessions online after clearing out your loft or garage.

Exemptions

If you are trading, no tax will be due if your income is £1,000 or less for the tax year:

If income exceeds £1,000, you will need to inform HMRC and complete a self-assessment tax return.
Although everyone with income of less than £100,000 is entitled to a personal allowance of £12,570, this allowance is particularly relevant for those with multiple jobs, but no main source of income.

Those renting out a spare room can benefit from a tax-break of up to £7,500 a year. Other property income doesn’t need to be reported to HMRC if less than £1,000 for the tax year.

Details of HMRC’s side hustles campaign can be found here.

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Making Tax Digital Expands

Written by Femi Ogunshakin on 3 April 2025. Posted in Landlord, Making Tax Digital, MTD, Self Assessment. No Comments on Making Tax Digital Expands

Timing

Unrepresented taxpayers with an income between £20,000 and £30,000 are going to need software that is either free or low-cost.
The availability of such software is quite limited, although more options might become available by April 2028.

The relevant income for meeting the £20,000 threshold will be that for the 2026/27 tax year.

In the future, the MTD threshold might be lowered again as the government has stated there are plans to expand the regime to include those with an income below £20,000.

Self assessment

HMRC’s list of software that’s compatible with MTD for income tax can be found here.

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Spring Statement: The Magic of £9.9 billion

Written by Femi Ogunshakin on 3 April 2025. Posted in Budget. No Comments on Spring Statement: The Magic of £9.9 billion

There were no tax increases in the Chancellor’s Spring Statement (upgraded from an initial Spring Forecast), but that might just be pain deferred.

Before becoming Chancellor, Rachel Reeves set out a new goal for the public finances, now badged the ‘Stability Rule’. In simple terms, this requires the Government should at least match its day-to-day expenditure with what it receives in tax and other revenue. In 2024/25, the Office for Budget Responsibility (OBR) projects there will be a shortfall under this rule (technically a current budget account deficit) of £60.7 billion. Following past government tradition of fiscal targets, the Chancellor has set a five-year goal taking us to 2029/30.

When Rachel Reeves presented her Budget last October, the OBR projected that she would meet her Stability Rule with £9.9 billion to spare. However five months later, the OBR recalculated the margin (often called headroom) in preparation for the Spring Statement and concluded that, with no changes, the Rule would be missed by £4.1 billion – a £14 billion reversal.

Given that the margin of £9.9 billion (about 0.7% of total government expenditure) proved inadequate last time, it is surprising that the new headroom figure is also £9.9 billion. This is despite the raft of Spring Statement measures – mostly spending cuts. The apparent circularity of the Spring Statement process has prompted speculation that the large cuts to welfare benefits were tailored to fit the Stability Rule, rather than wholly founded in encouraging more people into work.

The problem with maintaining a small £9.9 billion headroom is that when the OBR’s next assessment arrives in the autumn, there is a similar risk of missing the Stability Rule once again. The OBR’s judgement day will coincide with the Chancellor’s one ‘fiscal event’ of the year – the Autumn Budget. A second miss would probably see Reeves turn to tax increases rather than more spending cuts to recover the situation.

There were already signs of preparation for such a move in the Spring Statement. For example, hidden in the main document was a comment about reviewing the balance between cash and shares in Individual Savings Accounts (ISAs). Reducing the amount that could be placed in cash ISAs would yield extra revenue, because it would mean less tax relief being given.

It seems likely that, as happened in 2024, speculation about tax rises will get underway before summer begins. Taking time to focus on your financial planning over the next few months could be more important than ever. You have been warned.

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