HMRC is now providing the option to pay High Income Child Benefit Charge (HICBC) through PAYE, by having your tax code adjusted, instead of needing to file a self assessment tax return.
If you are liable to pay HICBC, and there’s no other reason for you to send in a tax return, the new service will probably be the easiest way to do this. Be aware that time limits apply, and you need to act on or before 31 January in the year after the tax year for which you need to pay the charge. So, for example, if you need to pay High Income Child Benefit Charge for the tax year starting 6 April 2025, and it’s on or before 31 January 2027, you can pay through PAYE. To start the process off, you need to notify HMRC online that you want to pay through PAYE. Do this via the HMRC app, or by searching ‘Child Benefit tax charge pay charge PAYE’ on gov.uk. This then takes you to your Government Gateway login.
The process is slightly different if you already file self assessment returns, but only do so in order to pay HICBC. Here you contact HMRC by phone, and ask to leave self assessment and then register to pay
HICBC through PAYE. Both processes require you to provide specific information listed on the gov.uk page referenced above.
We are always on hand to help you steer a way through.
New process for notifying HMRC of VAT return errors.
Errors on the VAT return will now be notified online to HMRC in most cases. The old VAT652 form, previously used for this, has been withdrawn.
How to notify HMRC
The online notification process is done via your Government Gateway log-in. The form needed can be found by searching ‘Check how to tell HMRC about VAT Return errors’ on gov.uk. You will need to have the net value of the error, and total value of sales to hand.
Businesses exempt from MTD VAT will continue to notify in writing. Note, also, that taxpayers can choose to notify HMRC in writing, instead of using the online facility, if desired.
What the rules say
It’s only the notification process that’s changed. The rules on how to correct errors remain the same.
The correction process depends on the size of the error. For errors with a net value of up to £10,000; or errors between £10,000 and £50,000 and representing less than 1% of the box 6 (net outputs) in the return period in which you find the errors, you can simply correct the next VAT return. This is known as Method 1. Other errors should be notified to HMRC directly (Method 2). You can use Method 2 for errors of any size, if you prefer. Method 2 should always be used for deliberate errors.
There is a four-year time limit from the end of the accounting period to make corrections, though this does not apply to deliberate errors.
Why getting this right matters
The importance of VAT compliance cannot be overstated. It’s not just about good practice – important though that is – it can impact your business financially, too. Interest can be charged for underdeclared VAT, and there can be penalties for errors in VAT returns that result in tax being underpaid, if HMRC considers that the error was careless or deliberate.
Careless errors can attract penalties of up to 30%. Deliberate errors can attract penalties of up to 70%. Penalties for deliberate and concealed errors can be as much as 100%. HMRC has considerable discretion over what is charged, and reductions can be made for errors disclosed without HMRC prompting; and also for the amount of cooperation given by the taxpayer when a disclosure is made.
For penalty reduction purposes, note that any error that HMRC considers careless or deliberate, regardless of size, must be formally notified to HMRC: in these circumstances, correction on the VAT return alone is not enough. If you are in any doubt as to how HMRC would categorise an error, please get in touch to discuss this with us, and we can provide further details.
Tip: Best defence – taking reasonable care
A note on reasonable care
What does taking reasonable care mean? HMRC defines it as taking the ‘care and attention that could be expected from a reasonable person in the circumstances’. It’s also worth noting that as far as HMRC is concerned, the opposite is also true: not taking reasonable care amounts to being ‘careless’.
Taking reasonable care will look different for each taxpayer, depending on individual circumstances and abilities, but it includes basics like keeping sufficient records to form the basis of accurate tax returns; keeping your records safe; and taking advice if there’s something you’re not sure about.
Support when it matters
Recent research by HMRC suggests that VAT can be particularly difficult for many businesses.
We can help with a VAT compliance health check to give you confidence that you are taking reasonable care, should HMRC ever come knocking.
Please don’t hesitate to get in touch below.
Changes to the availability of agricultural property relief (APR) and business property relief (BPR) are expected from 6 April 2026. This was first announced at the Autumn Budget 2024.
Original proposals and inheritance tax impact
As originally planned, the change would have significantly increased the IHT payable on the transfer of many farms and businesses. Two recent major developments, however, now look set to considerably soften the impact.
Allowance under the original proposals
Under the original proposals, the allowance for the 100% rate of relief was set at £1 million for qualifying business and agricultural assets, with 50% relief available for assets in excess of this. This was a per person limit, and not intended to be transferable between spouses and civil partners.
Revised allowance and transferability between spouses
The position has now changed significantly, with the allowance for the 100% rate of relief increasing to £2.5 million and becoming transferable between spouses and civil partners. Any unused £2.5 million allowance on the death of a spouse or civil partner will be transferable to a surviving spouse or civil partner.
What this means in practice
This means that overall, a couple will be able to pass on up to £5 million of qualifying agricultural or business assets between them, without paying IHT, on top of the existing allowances, such as the nil rate band.
Next steps
Our team can review your circumstances and explain how the revised APR and BPR changes may apply to you. Click below to get in touch with us.
The Finance Bill 2025-26 has now been published, with the following changes to Charity Compliance rules.
Previously, legacies received by Charities or CASCs were not treated as ‘attributable income’ and therefore benefited from generous inheritance tax relief without associated spending restrictions. Under the new legislation, legacies will be classified within the ‘attributable income definition’, meaning that the funds must be spent on the Charity’s charitable purposes. Failure to do so may result in a tax charge.
There are 12 investment types that the government recognises for charitable tax reliefs. Previously, one category was subject to a statutory anti-avoidance requirement (that the investment must not be made for anti-avoidance purposes). The requirements will now apply to all 12 investment categories.
The revised tainted donations rules previously considered solely the motivation or intent of the donor when determining whether a donation was tainted. The rules have now broadened to also consider the outcome of the transaction, has the donor received a financial benefit regardless of their stated or subjective motivation. The bar for establishing whether a transaction is tainted has also been lowered, with the test of ‘financial advantage’ being replaced by ‘financial assistance.’
HMRC is also updating its guidance to bolster its enforcement powers. Whilst the majority of charities meet their tax obligations, there is a minority that persistently fail to comply but still claim tax relief, such as Gift Aid. HMRC are working on changes to guidance that will improve HMRC’s powers to compel compliance through sanctioning trustees and charity managers.
The new measures will take effect for transactions that occur on or after 6 April 2026.
Further information: Legislation to introduce changes to charity tax rules – GOV.UK
Following the Upper Tribunal ruling on the Yorkshire Agricultural Society case, HMRC has broadened the scope of VAT relief for fundraising events. Whilst fundraising still needs to be a ‘primary purpose,’ it no longer needs to be just the ‘primary purpose.’ Where an organisation has two primary purposes that cannot be separated in importance, the exemption can still apply. This is provided that one of those purposes is fundraising, as in the case of the Yorkshire Agricultural Society, where the aims were to fundraise and to educate.
Looking forward, this will provide charities with greater flexibility when planning events. In particular where events may also look to serve other goals of the charity. However, charities should note HMRC’s comments on the primary purpose following the ruling:
“If a charity or other qualifying body considers that an event has more than one primary purpose, they must be able to evidence this and provide a clear explanation as to why they cannot be separated in terms of importance.”
“To demonstrate a primary purpose, charities and other qualifying bodies must be able to provide objective documentary evidence that the event was organised as a fundraising event, and not that there was simply an intention to obtain income from the event.”
The event must still therefore be promoted as a fundraising event. HMRC acknowledge this may not be its sole purpose.
Following the ruling, there may be scope to claim a refund for events held in the last 4 years. Where applicable, charities should apply the court decision. Then review HMRC’s guidance to determine if there have been any overpayments of VAT.
Further information: Click here and here
Inheritance Tax (IHT) net set to widen.
From 6 April 2026, changes announced last year will radically overhaul two key IHT reliefs: business property relief (BPR) and agricultural property relief (APR).
The real game changer is the significant restriction of 100% relief on qualifying agricultural and relevant business property in estates or settlements (trusts). Currently, relief is unlimited, but the new rules will introduce a £1 million allowance that effectively caps the relief available. The outworking will be that many more people will now need to fund an IHT liability in the future.
In outline:
The new £1 million allowance will apply to the combined value of business and agricultural assets in an estate qualifying for 100% BPR and/or 100% APR.
The £1 million allowance will also apply to the combined value of relievable agricultural and business property in trusts.
Any qualifying relievable property above £1 million will attract relief at a lower rate of 50%, and the £1 million allowance will rise with inflation from 6 April 2030.
What might this mean for you?
Advance planning will become key, to ensure maximum use is made of each individual limit. The changes will need consideration alongside other IHT rules, like those on lifetime gifting; and an assessment of how IHT interacts with other taxes. You should also consider how to pay any future tax liability on death. Some business owners may accelerate passing assets to the next generation or restructure business ownership and operations.
We appreciate that these decisions may involve a major reorientation in outlook, and could require especially sensitive handling. While last-minute adjustments are possible, these new rules are now expected, so plans should be made accordingly.
From 6 April 2027, further IHT changes will bring unused pension funds and death benefits into its scope. These changes may also require planning, especially for those with significant pension savings. Again, we can advise on the options that may be available.
Bespoke advice is always recommended, so please do contact us to discuss what these changes may mean for you.
Under new rules, more pensioners are now eligible for the Winter Fuel Payment in England, Wales, and Northern Ireland. In Scotland, eligibility has also widened for the Pension Age Winter Heating Payment.
Where taxable income is more than £35,000, however, HMRC will seek to recover any payment received. Recovery will be made by adjusting the 2026/27 tax code, or via the Income Tax self assessment tax return for 2025/26. For many people, these additional processes may be an unwelcome inconvenience.
As payments are usually made automatically to those eligible, you have to opt out of payment to avoid the payment and claw back process. Deadlines apply for the opt-out process but have now passed for this year in all parts of the UK. This unfortunately means that without a last-minute change from HMRC, anyone who has not already opted out will enter the winter 2025/26 payment and recovery cycle.
As regards the future, the first year you can now opt out of is 2026/27. If you live in England, Wales or Northern Ireland, you will be able to opt out for 2026/27 and subsequent years from 1 April 2026. If you live in Scotland, you can apply to opt out now, using an online form accessed via mygov.scot. This, however, will only impact payment from winter 2026/27 onwards.
HMRC presses on with roll-out of Making Tax Digital for Income Tax (MTD IT) – but changes plans for Corporation Tax.
MTD IT is now well on the horizon, with updated draft legislation published over the summer. Significantly, HMRC also published a Transformation Roadmap, underscoring the fact that digital self-serve is very much the direction of travel. According to this document, ‘HMRC will look very different by 2030. Almost all straightforward customer queries will be handled digitally or automatically. At least 90% of customer interactions expected to be digital’.
MTD and Corporation Tax
The surprise announcement over the summer was that plans to introduce MTD for Corporation Tax had been abandoned. But this doesn’t mean that there’s going to be no change for the Corporation Tax population. Though there’s no current Plan B for MTD for Corporation Tax, other comments in HMRC’s Transformation Roadmap suggest things will unlikely stand still.
The Roadmap says: ‘HMRC will modernise services for Corporation Tax, beginning with a renewal of internal systems for Corporation Tax to provide the foundation for future improvements . . . developing an approach to the future administration of Corporation Tax that is suited to the varying needs of the diverse Corporation Tax population.’
‘HMRC recognises that this population includes a wide range of entities and situations. From small businesses to multinationals, from charities and property management companies to unincorporated associations. HMRC will work with stakeholders to identify changes that provide the best outcomes . . . and is committed to consult and provide early clarity and assurance on both the design and timing of changes.’
Helping with digital compliance
HMRC’s new world focuses on digital compliance, which will inevitably challenge taxpayers. We are on hand to advise on the best way ahead for you and your business. Please don’t hesitate to contact us with any queries you may have.
It may not be as straightforward as you think.
When is a volunteer not a volunteer? When they’re a worker as regards employment status?
It’s a question that the Court of Appeal will be considering later this year, when it reviews the case of Coastal Rescue Officer, Mr Groom.
Mr Groom volunteered for many years for the Coastal Rescue Service (CRS). The relationship unravelled when Mr Groom was subject to disciplinary activity, and asked to be accompanied by a trade union representative to the disciplinary hearing. Mr Groom was turned down because the right would only apply if he was a worker. The case ended up at the Employment Appeal Tribunal (EAT).
Not the label that matters
It’s not always appreciated that in law, there is no such thing as volunteer status. What matters isn’t the label, but the legal status behind it. Depending on the exact details of the individual arrangement, there’s a possibility that someone described as a ‘volunteer’ could, be held to be a worker, or an employee for employment status purposes. Both types of status carry significant employee rights and employer responsibilities, such as minimum wage and entitlement to paid holidays.
Check the reality
One of the defining features of a worker is working under a contract. In this particular case, the CRS argued that there was no contract. Its handbook for volunteers said that the relationship was a ‘voluntary two-way commitment where no contract of employment exists’.
The EAT, however, looked at the reality underlying all this. It noted that Mr Groom worked under a Volunteer Agreement. This sets out minimum levels of attendance at training and incidents, and expectations to uphold the CRS’ professional reputation. But what made the critical difference was the issue of payment.
Though many of Mr Groom’s activities were unpaid, he was entitled to submit monthly claims for payment for others. The volunteer Code of Conduct stated that such payment was ‘to cover minor costs caused by your volunteering, and to compensate for any disruption to your personal life and employment and for unsocial hours call-outs’. Submitting claims is optional, and it was noted that some volunteers chose not to claim.
Take-away message
The EAT ruled that ‘the only proper construction of the documents is that a contract comes into existence when a [volunteer] attends an activity in respect of which there is a right to remuneration’.
The decision doesn’t mean that every volunteer is to be classed as a worker. Even for Mr Groom, the question of whether worker status applied for unpaid activities was left to be decided at another time. Nevertheless, anyone using volunteers – or offering work experience or internships – will want to be sure they don’t run the risk of their arrangements being classified as conferring worker or employee status. The Court of Appeal’s verdict will be important to watch.
Investors who are also employees cannot benefit from SEIS, but existing or new directors in the company are eligible.
Providing the company has <50 employees, is unlisted, has gross assets of no more than £200k, and is carrying on a qualifying trade on a commercial basis, a UK tax-paying investor will be able to:
• Claim an income tax reduction equal to 50% of the money invested (subject to an annual investment limit of £100k);
• Pay no capital gains tax on any profits made from an SEIS investment; and
• Offset a loss against income tax providing they hold the shares for at least 3 years before selling them.
• Claim an income tax reduction equal to 30% of the money invested (subject to an annual investment limit of £1m);
• Defer CGT payments when the gain is reinvested in shares of an EIS qualifying company;
• Pay no capital gains tax on any profits made from an EIS investment; and
• Offset a loss against income tax providing they hold the shares for at least 3 years before selling them.
The shares must be ordinary shares which are paid up in full and in cash when they are issued.
Companies can only raise a maximum of £5 million in aggregate under SEIS.
Businesses have been given more time to prepare for the change to compulsory Payrolling Benefits in Kind. The start date has been moved from April 2026 to April 2027.
What Employers Need to Know
From April 2027, most benefits in kind must be reported under Real Time Information (RTI) and employers will also need to pay Income Tax and Class 1A National Insurance contributions (NICs) during the tax year.
To make this possible, HMRC will expand the number of RTI data fields. These extra fields will hold data that is currently reported in forms P11D and P11D(b).
Some benefits are not yet included in mandatory payrolling. Employment-related loans and accommodation remain outside the rules for now. For these, the P11D and P11D(b) process will continue temporarily, however, employers can choose to payroll them voluntarily.
To payroll benefits voluntarily for the 2026/27 tax year, you must register in advance. For the tax year starting 6 April 2027, registration will be open from November 2026 to 5 April 2027.
How Benefits Will Be Calculated
The taxable value of a benefit in kind will be calculated as follows:
• Take the annual cash equivalent of the benefit.
• Divide it by the number of relevant pay periods for each employee.
• The resulting figure will be liable to Income Tax and Class 1A NICs each pay period.
• Employers must report this figure alongside employee earnings in each period.
If the value of a benefit is not known at the start of the year, employers must use a reasonable estimate.
HMRC’s Further Guidance
HMRC has highlighted specific situations:
• Globally mobile employees within modified PAYE arrangements: HMRC is considering keeping the P11D and P11D(b) processes for these cases.
• Employees and directors receiving no income: Employers will still need to provide details of benefits in kind and expenses via an FPS. Class 1A NICs will be due in the same way as for employees with income. The FPS will show no payments of earnings and no tax paid. Any uncollected tax will be recovered through the P800 reconciliation process, simple assessment, or self assessment.
What Employees Should Expect
For employees, the change means tax on benefits will move into real time. Employers will need to explain this clearly to staff. In the first year of mandation, some employees could face a cash flow impact if they are already paying tax on benefits from a previous year.
Next Steps for Employers
More information is expected from Autumn 2025 onwards. In the meantime, it may be worth considering voluntary payrolling of benefits in 2026/27. This would give businesses a chance to test the system before it becomes compulsory. Advance registration is required for voluntary payrolling.
We are happy to advise on voluntary payrolling or any other steps you need to take to prepare for the change.
The government has announced changes that could be good news if you have a side hustle. Whether you make extra money through eBay sales, dog walking, or creating content online, the rules are shifting, particularly when it comes to side hustle tax.
“We are changing the way HMRC works to make it easier for Brits to make the very most of their entrepreneurial spirit.”
But when it comes to tax, there’s always some fine print. Not needing to file a tax return doesn’t mean you won’t have tax to pay. Understanding side hustle tax is essential as there are two allowances of £1,000 each, which apply to trading and property income. Any side hustle income above this level is likely to be taxable, so being aware of your side hustle tax obligations is crucial.
Here’s what’s changing: the Income Tax self-assessment reporting threshold for trading income will rise from £1,000 to £3,000. This hasn’t come into effect yet, but the plan is clear, providing more clarity around side hustle tax requirements.
HMRC expects 300,000 people will no longer need to file a tax return. However, around 210,000 of them may still need to pay tax. To make this easier, HMRC is preparing a new online service for people to pay what they owe without filing a full return.