Month: May 2026

Do you need to register for self-assessment?

Depending on your income and circumstances, you may need to register for self-assessment. This may be the case even if most of your income is taxed through PAYE.

You will usually need to file a self-assessment tax return if you are self-employed as a sole trader and your gross income exceeds £1,000 before expenses. Partners in business partnerships must also submit a self-assessment tax return.

A self-assessment tax return may also be required if your total taxable income exceeds £150,000 in the 2026-27 tax year, although people with lower income levels can still fall within self-assessment depending on their circumstances. This often applies where there is other untaxed income, such as rental income, foreign income, savings or investment income, including dividends.

Other common reasons for filing include paying Capital Gains Tax after selling assets or being liable to the High Income Child Benefit Charge. Although some smaller amounts of income relating to online selling or property income may be covered by allowances, it is important to check the position carefully.

If you need to complete a tax return for the first time, HMRC must generally be notified by 5 October following the end of the relevant tax year. For the 2026-27 tax year ending on 5 April 2027, the registration deadline will usually be 5 October 2027. HMRC also provides an online checker to help determine whether you need to file a return that can be found at www.gov.uk/check-additional-income-tax.

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

Working out your UK residence status

Your UK residence status affects how much tax you pay in the UK and, in particular, whether your foreign income and gains are subject to UK tax.

In simple terms, UK residents are normally taxed on their worldwide income and gains, while non-residents are generally only taxed on UK-source income and certain UK assets.

Residence status is mainly determined under the Statutory Residence Test, which looks at the number of days spent in the UK together with other connections you may have here.

You may be resident under the automatic UK tests if:

  • you spent 183 or more days in the UK in the tax year
  • your only home was in the UK for 91 days or more in a row – and you visited or stayed in it for at least 30 days of the tax year
  • you worked full-time in the UK for any period of 365 days and at least one day of that period was in the tax year you’re checking

You may also be resident under the sufficient ties test if you have spent time in the UK and have family, work or property ties to the UK.

On the other hand, individuals working full-time overseas and spending limited time in the UK may qualify as non-resident under what is known as the overseas tests.

Special split-year rules can sometimes apply when moving into or out of the UK, meaning the tax year is divided between resident and non-resident periods.

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

Tax effects of living away from your home

Many homeowners assume that if a property has been their main residence at some point, any gain made on sale will automatically be free from Capital Gains Tax (CGT). Whilst in many cases, this is correct there are exceptions. For example, periods spent living away from your home can sometimes reduce the amount of Private Residence Relief available.

The good news is that some periods always qualify for relief. In most cases, the final 9 months of ownership are automatically exempt, provided the property was your only or main residence at some stage. There can also be relief for up to the first two years of ownership where a property was being built, renovated or where you were unable to move in immediately.

Additional relief may also be available where you temporarily lived elsewhere. Absences of up to three years for any reason can qualify, while periods of up to four years may qualify where you had to work elsewhere in the UK. Time spent working overseas can also qualify for relief in full. Normally, you must have lived in the property before and after the absence unless your work prevented your return.

Where more than one property is owned, the rules become more complicated as generally only one property can qualify as your main residence at any one time. Married couples and civil partners are also normally restricted to one main residence between them.

These rules can have a significant impact on the amount of CGT payable when a property is sold, particularly where second homes or lengthy absences are involved.

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

Tax-free gifts for Inheritance Tax purposes

Making gifts during your lifetime can be an effective way to reduce the value of your estate for Inheritance Tax (IHT) purposes.

One of the most commonly used exemptions is the annual exemption. This allows an individual to give away up to £3,000 each tax year without the gift forming part of their estate for IHT purposes. If the exemption is not used in full, any unused amount can be carried forward to the following tax year, although only for one year. This means that someone who made no qualifying gifts in 2025-26 could potentially give away up to £6,000 in 2026-27 free of IHT.

There is also a useful exemption for small gifts. You can give as many gifts of up to £250 per person each tax year as you wish, provided no other exemption has been used for the same individual. This is known as the small gift allowance.

Special rules apply to wedding and civil partnership gifts. Parents can give up to £5,000 to a child tax-free, grandparents and great-grandparents can give up to £2,500, and anyone else can give up to £1,000. In many cases these exemptions can be combined with the annual exemption.

Another valuable relief covers gifts made out of surplus income. There is no fixed monetary limit, but the gifts must form part of normal expenditure, be made out of income rather than capital, and leave the donor with enough income to maintain their usual standard of living. This exemption can be very useful for individuals with excess pension or investment income who wish to help children or grandchildren on a regular basis. Keeping clear records is important, as HMRC may ask for evidence that the conditions have been met.

Gifts between spouses or civil partners are generally exempt from IHT, provided both parties are permanently domiciled in the UK. Gifts to charities are also normally exempt.

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

Reclaiming VAT on car leasing costs

Businesses that lease cars often assume they can recover all of the VAT charged on car  leasing payments. In practice, the rules are more limited.

Where a business leases a qualifying car, HMRC normally only allows 50% of the VAT on the leasing charges to be reclaimed. The restriction is designed to reflect an element of private use, even where the vehicle is mainly used for business journeys.

The rules are different in certain cases. For example, full VAT recovery is generally available where the vehicle is used as a taxi or for driving instruction, as these are treated as wholly business activities. This would allow qualifying businesses to recover 100% of the VAT charged on the lease.

The 50% restriction can also apply to short-term vehicle hire, including temporary replacement cars. However, where a car is hired for no more than 10 days and is used entirely for business purposes, the VAT block does not usually apply.

These rules can easily be overlooked, particularly where businesses hire vehicles on an ad hoc basis or assume that some business use automatically means full VAT recovery. It is important to ensure that the correct amount of VAT is reclaimed on car leasing costs to avoid issues arising after the fact.

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

Why cyber security is now a business survival issue

Cyber security is no longer a concern limited to large corporations. Increasingly, smaller businesses are finding themselves targeted by phishing attacks, payment frauds and ransomware incidents, many of which are becoming more sophisticated through the use of artificial intelligence (AI).

Recent reports suggest that cyber criminals are now using AI technology to produce highly convincing emails, fake invoices and fraudulent payment requests that can be difficult for employees to identify. As a result, many small businesses are becoming vulnerable to attacks that previously may only have affected larger organisations.

The financial consequences can be severe. In addition to direct losses, businesses may face operational disruption, reputational damage and the loss of sensitive customer information. In some cases, businesses can remain affected for weeks following a successful attack.

Smaller businesses are often attractive targets because cyber criminals may assume that internal controls and staff training are less developed than in larger organisations.

Business owners may wish to review whether they currently have:

  • strong password procedures,
  • multi-factor authentication,
  • regular software updates,
  • secure backup arrangements,
  • staff cyber awareness training,
  • and clear payment authorisation procedures.

Particular care should be taken where payment instructions are received by email, especially if bank details appear to have changed unexpectedly. Verification procedures involving telephone confirmation can often prevent costly mistakes.

Source:Other | 10-05-2026

Employment law changes pressure small businesses

Many small business owners are already feeling the effects of rising staffing costs, tighter recruitment conditions and increased administration. Recent employment law changes are now adding further pressure, particularly for employers that do not have dedicated HR support.

A number of the changes introduced during 2026 affect day to day management procedures and employee rights. Areas receiving particular attention include Statutory Sick Pay, parental leave, redundancy protections and record keeping requirements. While the changes are intended to strengthen employee rights, many smaller employers are concerned about the additional compliance burden involved.

For many businesses, the challenge is not simply the cost of the changes themselves. It is the increased need to ensure policies, procedures and employment documentation remain up to date. Businesses relying on informal arrangements or older employment contracts may now face greater risks if disputes arise.

Employers should consider reviewing:

  • employment contracts,
  • staff handbooks,
  • sickness absence procedures,
  • parental leave arrangements,
  • and redundancy processes.

While many employers will understandably focus on immediate trading pressures, keeping employment matters under regular review is becoming increasingly important. In practice, preventative action is often considerably less costly than dealing with disputes after problems arise.

If you would like to discuss how recent employment changes may affect your business, please contact us.

Source:Other | 10-05-2026

How the Marriage Allowance works

The Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner. Your Personal Allowance is the amount you can earn before paying Income Tax (£12,570 for the 2026–27 tax year). This transfer can reduce your partner’s tax by up to £252 in the tax year subject to the conditions outlined below.

To benefit as a couple, the lower-earning partner must usually have an income below their Personal Allowance, and the higher-earning partner must be a basic rate taxpayer. In practice, this normally means their partner's income is between £12,571 and £50,270 in the current 2026–27 tax year. For those living in Scotland, the thresholds are slightly different.

When you transfer part of your Personal Allowance, your own tax position may change, and you might pay some tax yourself. However, as a couple you will usually pay less tax overall.

For example, if you earn £11,500 and your partner earns £20,000, transferring £1,260 reduces your partner’s taxable income and can lower your combined Income Tax bill. In this case, the couple saves £214 in tax overall.

You can backdate a claim for Marriage Allowance to 6 April 2022 if you are eligible. The transfer continues automatically each year unless you cancel it, for example if your circumstances or income change.

Source:HM Revenue & Customs | 04-05-2026

Self-employed National Insurance

Most self-employed people are required to pay Class 4 National Insurance contributions (NICs).  Class 4 NICs are payable if their profits are £12,570 or more a year.

Class 4 NIC rates are currently 6% for chargeable profits between £12,570 and £50,270 plus 2% on any profits over £50,270.

A number of categories of people are exempt from paying Class 4 NICs, these include:

  • People under the age of 16 at the beginning of the year of assessment.
  • People over State pension age at the beginning of the year of assessment. A person who attains State pension age during the course of the year of assessment remains liable for Class 4 NICs for the whole of that tax year.
  • People receiving profits in their capacity as a trustee, executor or administrator of a person liable to tax under ITTOIA2005/S8.

The mandatory payment of Class 2 National Insurance Contributions (NICs) for the self-employed was abolished effective from 6 April 2024. It can be advantageous for some self-employed people who do not pay NICs through self-assessment to make voluntarily Class 2 NICs. This can help them to access certain contributory benefits including the State Pension. It is important to confirm that this would be beneficial before making any voluntary payment. The current 2026-27 weekly rate for making voluntary Class 2 NICs is £3.65.

Most self-employed individuals pay Class 2 and Class 4 NICs via the self-assessment system. Certain self-employed individuals, such as examiners, moderators, invigilators, and ministers of religion, without a salary, do not pay National Insurance through self-assessment but it may be beneficial for them to make voluntary contributions.

Source:HM Revenue & Customs | 04-05-2026

National Insurance liability on benefits in kind

National Insurance contributions that relate to employee benefits are known as Class 1A National Insurance contributions. Employers must pay these National Insurance contributions on most work-related benefits provided to employees, such as a company mobile phone or other non-cash perks.

Class 1A National Insurance also applies to certain termination payments. For example, employers may need to pay Class 1A National Insurance contributions on payments exceeding £30,000 made when an employee’s employment ends, such as redundancy or other termination awards. However, this only applies where Class 1 National Insurance has not already been charged on those amounts.

Timing of payment depends on the nature of the liability. For benefits in kind, Class 1A National Insurance is generally payable annually, with payment due by 22 July following the end of the tax year (or 19 July if paying by post). The payment of Class 1A National Insurance on termination awards is dealt with through PAYE at the time the payment is made.

Late payment can result in interest and penalties, so ensuring timely reporting and payment is important.

Source:HM Revenue & Customs | 04-05-2026
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