Month: May 2026

Landlord tax and National Insurance considerations

When renting out property, landlords may have both Income Tax and National Insurance considerations to consider. However, rental income is generally taxable.

For individuals, the first £1,000 of rental income is tax-free under the property allowance. Where rental income exceeds this, landlords may need to register for self-assessment and report their income to HMRC. Reporting is required where net rental income exceeds £2,500 after allowable expenses, or £10,000 before allowable expenses. If a tax return is not usually completed, registration for self-assessment is required by 5 October following the end of the tax year in which the income first arose. 

In addition to Income Tax, some landlords may also be able to pay voluntary National Insurance contributions. In certain circumstances, Class 2 contributions may be available where a person is considered “gainfully employed” for National Insurance purposes, such as where property letting is their main occupation or they actively manage multiple properties. Where Class 2 contributions are not available, voluntary Class 3 contributions may be an option to help maintain entitlement to the State Pension and certain benefits.

Rental profits are calculated by deducting allowable expenses from rental income. Allowable expenses may include costs such as letting agent fees, maintenance and repairs, insurance, utilities, Council Tax, advertising and accountancy fees. However, capital expenditure, such as property purchase costs or improvements beyond basic repairs, is not deductible.

Losses from property letting may be carried forward and offset against future rental profits or other property income, but only within the same property business. There are different tax rules on what costs you can claim depending on whether it is residential or commercial properties.

Source:HM Revenue & Customs | 18-05-2026

VAT Cash Accounting

The VAT Cash Accounting Scheme can help businesses improve cash flow by allowing VAT to be accounted for when customers actually pay invoices, rather than when invoices are issued. This can be particularly beneficial for businesses that offer credit terms or experience delays in customer payments.

Under normal VAT accounting rules, VAT is payable to HMRC once an invoice has been raised, even if payment has not yet been received. Using cash accounting helps reduce the risk of businesses funding VAT liabilities from their own resources.

Businesses can normally join the scheme if their estimated VAT taxable turnover is no more than £1.35 million in the next 12 months. Once using the scheme, businesses may continue to do so until turnover exceeds £1.6 million.

However, the scheme is not available in certain situations, including when a business has outstanding VAT returns or payments, has committed a recent VAT offence or is already using the Flat Rate Scheme.

There is no formal approval process required to join. Eligible businesses can start using the scheme from the beginning of a VAT accounting period or from the date of VAT registration if newly registered.

Businesses may also leave the scheme voluntarily at the end of any VAT period and can rejoin later if the eligibility conditions continue to be met.

Source:HM Revenue & Customs | 18-05-2026

Can you claim Business Asset Disposal Relief

Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company, or an individual’s interest in a trading partnership. When this relief is available, a reduced 18% rate (2026-27) of Capital Gains Tax (CGT) applies. 

To qualify for BADR, certain conditions must be met:

Sale of a Business or Business Closure:

  • You must be a sole trader or business partner; and
  • You must have owned the business for at least 2 years leading up to the sale or closure.
  • You must dispose of your business assets within 3 years to qualify.

Sale of Shares or Securities:

Both of the following must apply for at least 2 years up to the date you sell your shares:

  • You must be an employee or office holder of the company (or a company within the same group).
  • The company’s main activities must involve trading, not non-trading activities like investment, or it must be the holding company of a trading group.

Additional rules can apply if the shares are from an Enterprise Management Incentive (EMI).

Currently, you can claim a total of £1 million in BADR over your lifetime, allowing you to qualify for the relief multiple times. The lifetime limit may be higher if you sold assets before 11 March 2020. Investors' Relief CGT rates mirror those for BADR and have also been set at 18% since 6 April 2026.

Source:HM Revenue & Customs | 18-05-2026

Verify your ID at Companies House

Identity verification requirements at Companies House became a legal requirement for directors and people with significant control (PSCs) from 18 November 2025. This date marked the start of a 12-month transition period for identity verification. 

Companies House is introducing the new requirements on a phased basis and affected individuals are being contacted directly with guidance on what action is required and the relevant deadlines. It is estimated that between 6 and 7 million individuals will need to complete identity verification by November 2026.

Verification is generally a one-time process and can be completed either directly through Companies House using GOV.UK One Login or through an Authorised Corporate Service Provider (ACSP), such as an accountant or solicitor.

Most individuals will be able to verify their identity online using photo identification documents such as a passport, UK driving licence or biometric residence permit. Alternative methods are also available, including in-person verification at selected Post Office branches or by using information linked to a UK bank account and National Insurance number.

Individuals who are unable to use the standard online or in-person routes may appoint an ACSP to verify their identity on their behalf. The provider must be registered with Companies House and supervised for anti-money laundering purposes.

Failure to comply with the new requirements could result in restrictions on company filings and penalties.

Source:Companies House | 18-05-2026

Fiscal drag explained

The freezing of tax thresholds can result in a phenomenon commonly referred to as 'fiscal drag'. This occurs when tax allowances and rate bands remain unchanged while wages and inflation increase. As earnings rise, more taxpayers are ‘dragged’ into paying tax or moving to higher tax bands, despite there being no increase in the actual tax rates.

Fiscal drag is sometimes described as a “stealth tax” because government tax revenues increase without the need for headline rate rises. Its impact is particularly noticeable during periods of high inflation and wage growth, as pay increases intended to maintain living standards can instead lead to higher effective tax burdens.

The effect depends on several factors, including inflation, earnings growth and government policy regarding tax thresholds and allowances. Normally, thresholds may be increased annually in line with inflation, a process usually known as uprating. However, governments may decide to freeze thresholds for fiscal reasons.

In recent years we have seen a number of personal tax thresholds frozen for extended periods. As a result, increasing numbers of taxpayers are paying tax at higher rates, while some individuals who previously paid no Income Tax have become taxpayers for the first time. The Office for Budget Responsibility (OBR) estimates that the continued freeze in Income Tax thresholds until 2030-31 will raise more than £55 billion annually by 2030-31.

Fiscal drag can therefore have a significant impact on disposable income, particularly where salary increases are modest in real terms but still sufficient to move taxpayers into higher bands or reduce entitlement to certain allowances and benefits.

Source:HM Government | 18-05-2026

Making Tax Digital – which software to use

Making Tax Digital (MTD) for Income Tax is now in force for many self-employed individuals and landlords. Since 6 April 2026, taxpayers with qualifying business or property income exceeding £50,000 are required to maintain digital records and submit quarterly updates to HMRC using compatible software.

The threshold is scheduled to reduce to £30,000 from April 2027 and to £20,000 from April 2028, bringing many more taxpayers within the scope of the rules. Although quarterly submissions are now required, taxpayers must still complete a final year-end declaration by the following 31 January.

Choosing which software to use for MTF is therefore an important decision. The software should be able to keep digital records, submit quarterly updates, support the final declaration process and link directly with HMRC systems. Some products are designed for more simple requirements, while others offer more advanced features such as invoicing, bank feeds, receipt capture and integration with existing accounting systems.

HMRC also recognises that some taxpayers may wish to continue using spreadsheets. This remains a possibility provided these are linked to HMRC through compatible ‘bridging’ software.

We would be happy to help recommend suitable software solutions that manage the MTD for Income Tax most appropriately for your circumstances.
 

Source:HM Revenue & Customs | 18-05-2026

Can a tribunal be fair after all is long said and done?

Employment disputes can drag on for years, which inevitably raises the question of how long is too long for a hearing to be deemed fair. Mr. Boateng was originally employed in January 2017 by a gentlemen’s outfitters at their branch in the Strand before being relocated and promoted to hiring manager. After an incident involving the claimant and several colleagues at the Stratford branch on 23 July 2019, he was ultimately dismissed on grounds of ‘misconduct’ on 28 October 2019 after an unsuccessful internal appeal.

In early 2020, Mr. Boateng initiated legal proceedings concerning over thirty allegations of racial and religious discrimination dating back to 2017, in parallel with a claim for unfair dismissal. However, the hearing was postponed for over a year due to the pandemic and a formal insolvency process. By the time the case reached a preliminary assessment in 2023, the evidentiary landscape had shifted dramatically, as 21 of the 22 individuals concerned had since left the company. Moreover, the outfitter reported that 17 of those former employees were either impossible to locate or else explicitly refused to participate in the tribunal. As the earliest allegations were by then historical, the employer argued that they could no longer mount a meaningful defence, as the collective "memory of the firm" had essentially dissipated.

Both tribunals concurred that the discrimination claims should be struck out under Rule 37(1)(e) of the Employment Tribunal Rules, which allows for the termination of a case if a "fair hearing" is no longer possible. As almost every key witness had been lost, this was deemed to have created a "substantial disadvantage" to the employer, one transcending mere inconvenience. As discrimination claims require an employer to be able to call the specific person accused of discrimination to explain their mental processes, per Section 136 of the Equality Act 2010, the narrative was fragmented. Thus, no balanced picture could emerge, as only the “dismissing officer” was still available to testify.

This case reiterates that both sides have the right to a fair trial under Article 6 of the ECHR, thereby highlighting the importance of pursuing claims promptly and of keeping detailed contemporaneous records, as witnesses cannot later be relied upon to remain available or indeed helpful so many years after the fact. For employers, this case demonstrates the value of conducting timely and thorough internal investigations and of obtaining and preserving witness statements. Thus, even if a staff member leaves the company, a robust written record created at the time of the grievance can serve as a "documentary bridge" to ensure a fair hearing.

Source:Tribunal | 17-05-2026

Covering basic business risks

Many business owners spend considerable time focusing on sales growth, staffing and profitability, although basic business risks are sometimes overlooked until a problem arises. A simple review of key risk areas can often help protect both the business and the personal finances of the owners.

One of the most important areas is insurance cover. Businesses should regularly review whether they hold appropriate policies for employers’ liability, public liability, professional indemnity, stock, equipment and business interruption. As businesses evolve, insurance arranged several years ago may no longer reflect current activities or turnover levels.

Cyber security has also become a growing concern for businesses of all sizes. Even smaller firms are increasingly targeted by phishing attacks, ransomware and invoice fraud. Basic protections such as strong passwords, multi-factor authentication, secure backups and staff awareness training can significantly reduce exposure to cyber risks.

Cash flow risk should also be monitored carefully. Many otherwise profitable businesses experience financial pressure because customers pay slowly or overheads rise unexpectedly. Maintaining realistic cash flow forecasts, monitoring debtor balances and building cash reserves can provide greater financial resilience.

Businesses that rely heavily on one or two major customers may wish to consider how vulnerable they would be if that income reduced suddenly. Diversifying customer bases and maintaining good relationships with suppliers can help reduce operational risks.

Owners should also review whether key procedures and responsibilities are overly dependent on one individual. Cross-training staff and documenting important processes can help businesses continue operating smoothly during illness, absence or unexpected departures.

A modest amount of planning today can often prevent far more serious financial and operational difficulties later.

Source:Other | 17-05-2026

New employers check list

Taking on your first employee can help a business grow, although it also brings a number of important responsibilities.

Before employing staff for the first time, business owners should consider the following points:

  • Register as an employer with HM Revenue and Customs before the first payday.
  • Set up a payroll system capable of operating PAYE and filing Real Time Information reports with HMRC.
  • Check whether workplace pension auto-enrolment rules apply and ensure that pension responsibilities are understood.
  • Prepare written contracts of employment setting out pay, hours, holiday entitlement, sickness arrangements and notice periods.
  • Make sure you are aware of, and comply with, the National Living Wage and National Minimum Wage regulations.
  • Confirm that employees have the legal right to work in the UK and retain copies of supporting documents.
  • Arrange employers’ liability insurance, which is normally a legal requirement for businesses employing staff.
  • Budget for the full cost of employment, not just salary. Employers should also allow for National Insurance, pension contributions, holiday pay, training costs and equipment.
  • Decide how wages and expenses will be paid and ensure that sufficient business cash flow is available each month.
  • Put in place procedures covering sickness reporting, holidays, disciplinary matters and employee records.
  • Consider whether health and safety requirements apply to the workplace, particularly where employees will use machinery, vehicles or specialist equipment.
  • Review whether additional software, office space, telephones or IT systems will be needed as staffing levels increase.
  • Ensure that employee data is handled securely and in line with UK data protection requirements.
  • Plan induction and training procedures to help new employees settle into the business quickly and productively.
  • Review pricing and profitability regularly, as employing staff often increases fixed monthly overheads.

Careful preparation before employing staff can help reduce administrative problems, improve compliance and support the long-term growth of the business. If you need help integrating any of these points, please call, we can assist you.

Source:Other | 17-05-2026

Tax and termination payments

The tax treatment of termination payments is governed by a detailed set of rules that determine how much is taxable and whether National Insurance contributions apply. The structure of a termination package can have a significant impact on the final tax position for both the employee and employer.

There still a number of important exemptions available. Employees do not usually pay tax or National Insurance on employer contributions made into a registered pension scheme as part of a termination package, although tax charges may arise if pension annual allowance limits are exceeded. Legal fees paid directly by an employer to a solicitor in connection with a settlement agreement are also generally exempt.

In addition, payments made because of an employee’s injury, disability or ill health may qualify for exemption where the condition prevents the employee from continuing to carry out their duties.

Employees do not normally pay tax on the first £30,000 of qualifying termination payments. This can include statutory redundancy pay, enhanced redundancy payments and certain non-cash benefits provided after employment ends. Any amount above the £30,000 threshold is generally taxable and may also trigger employer Class 1A NICs.

It should be noted that not all termination payments qualify for the £30,000 exemption. Amounts treated as earnings remain fully taxable and subject to employee and employer National Insurance. This includes payments in lieu of notice (PILONs), gardening leave payments and Post-Employment Notice Pay (PENP).

Source:HM Revenue & Customs | 10-05-2026
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