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.