NEWS and information

The Charity Commission has updated guidance to reflect the introduction of Charities SORP 2026, which applies to accounting years starting on or after 1 January 2026.

The reporting requirements in the new Charities’ Statement of Recommended Practice (SORP) are split between three tiers based on the charity’s level of income.

The three new tiers are as follows:

• Tier 1 – for charities with income up to £500,000;
• Tier 2 - for charities with income between £500,000 - £15m;
• Tier 3 - for charities with income above £15m.

Other changes to the accounting rules were made to ensure consistency with FRS 102 and in response to stakeholder feedback.

The most significant changes include income reporting under new five-step revenue recognition requirements, overhaul of lease accounting and revisions to the statement of cash flows. There are also amendments to accounting for social investments and heritage assets.

On cash flows, to help smaller charities, the requirement in the previous SORP for charities with income over £500,000 to produce a cash flow statement has been changed. The SORP increases the income threshold to £15m under tier 3 requirement.

‘This means that only charities in tier 3 are required by SORP to produce a statement of cashflows. However, charities in tiers 1 and 2 are required by FRS 102 to prepare a statement of cash flows where they do not meet the definition of a small entity under FRS 102.

All charities must use the SORP to prepare their accounts unless the trustees have opted to prepare receipts and payments accounts and their charity is a non-company charity with an income of £250,000 or less in the reporting period.

We have all heard the saying that it's 'Tax Deductible' and that payment will reduce your tax bill. How does that work for your business, say a Limited company?

1) The deduction needs to be related to the trade, or as HMRC puts it. 'Wholly, exclusively, and necessarily for business.  

2) Evey £ spent on expenses will reduce your tax bill by between 19% and 25% depending on business size. For example, £1,000 spent on advertising will save you between £190 and £250 in tax. 

3. Some expenses can be beneficial to this formula such as pension contributions, directors' salary, and electric / hybrid car purchases.

There has been increased scrutiny from Tax Inspectors who are using Artificial Intelligence tools when reviewing submitted tax returns. Therefore, it is particularly important that tax returns are completed correctly.

There is lots of online guidance and help available but better still seek out professional advice to help fill out your return correctly. Please see the content section.

If you have gaps in your National Insurance record from 2006-07 onwards, you may have extra time to fill them and boost your state pension. But you need to act soon - if you request a callback from the DWP before 5 April 2025, you can still take advantage of this extension. After that date, you'll only be able to backfill contributions for up to six years. 

Employers will need to consider wage increases to both the National Living wage and the National Minimum wage.

From 1 April 2025, the National Living Wage will increase to £12.21 for employees aged twenty-one and above.

At the same time, the National Minimum wage rate will increase to:

1. £10 for employees aged 18-20.
2. £7.55 for employees who are under eighteen.
3. £7.55 for apprentices.

It all comes down to your cashflow forecast and whether your sales revenue will flow in as anticipated. If you need guidance on creating a cashflow forecast or recommendations for software to help with regular forecasts, we're here to assist. 

In April 2025, the new State Pension will rise by 4.1% to £230.25 per week, thanks to the triple lock, but what is the triple lock?

It's a pledge which states that the new State Pension, which applies to those who reach pensionable age after 2016, must rise by the highest of the three following factors - average earnings growth between May and July the previous year, the Consumer Prices Index (CPI) rate of inflation from the previous September, or by 2.5%.

This commitment has been in place since 2011 and it protects the new state pension, making sure it pays enough for pensioners to live off when they stop working.

The Labour government has committed to keeping the triple lock in place for the whole of this parliament.

As an employee, an individual’s salary is subject to PAYE – their employer deducts income tax and Class 1 National Insurance contributions (NIC) so taxpayers need not worry about anything. However, once they become self- employed there is no employer, so they need to account for income tax and NIC themselves.

The individual must complete a Form SA1 or register for self-assessment online via the Government Gateway and is given a Unique Tax Reference (UTR) number which is required when a tax return is submitted.

As well as having to account for income tax, they must do the same with NIC. As an employee they were paying Class 1 NIC through PAYE, their employer paying it too. However, as a sole trader Class 4 NIC must be paid through the tax return.

Prior to April 2024, Class 2 NIC, a fixed rate of £3.45 (for 2024–25) was payable per week (also through the tax return); however, after this date, Class 2 is optional for those whose income is below the small profits threshold (£6,725 for 2024–25) in order to fulfil the necessary years for state benefits entitlement.

Companies House has taken the first major step towards mandatory identity verification for directors/people of significant control (PSCs) and anyone filing on behalf of a company with the release of the voluntary identity verification (IDV).

The voluntary period of IDV was rolled out on 8 April 2025 and comes weeks after Companies House launched the registration process for authorised corporate service providers (ACSP). 

The new service is driven by the need for individuals to verify their identity directly with Companies House through the gov.uk One Login or via their ACSP – a third-party representative such as an accountant.

This is the first step in Companies House’s efforts to tackle the misuse of the companies register, culminating in mandatory identity verification from autumn 2025, where more than six million directors will need to comply. 

The introduction of IDV is one of the key changes coming into force under the Economic Crime and Corporate Transparency Act 2023, which has given Companies House enhanced powers to stamp down on economic crime.

For existing directors, compliance and IDV will take effect over the 12-month period after 18 November 2025: their ID must therefore be verified by next autumn.

For new directors appointed after the rules come into force, verification must be completed within 14 days. Existing companies will be unable to file confirmation statements unless every director’s ID has been verified, thus commercial imperatives will drive compliance.

Acting as a director without being verified once director duties commence will be a criminal offence. The transitional period provides ample opportunity to comply with the requirements and Companies House has indicated that it will support businesses in compliance and adopt a proportionate approach to enforcement.

Thereafter, failure to complete IDV before the deadline will have consequences. Persistent non-compliance could result in fines, potential disqualification as a director, and/or the company being struck off the register.

High interest rates and frozen personal savings allowance means that more than a million extra savers may have to pay tax.

HMRC has been writing to taxpayers to tell them their savings will incur tax, which is an annual activity and is part of their mission to get people to pay the right amount of tax.

Now that the 2023-24 tax year is closed with self-assessment finalised, HMRC has been reviewing the savings tax liability situation. HMRC receives data from banks and building societies detailing the amount of interest paid to their individual account holders. 

Nearly 300,000 people filed their tax return in the first week of the new tax year, almost 10 months ahead of the 2024-25 deadline.

Anyone who thinks they may need to complete a tax return for the 2024 to 2025 tax year can use the checker tool on gov.uk to find out. New entrants to self- assessment must register to receive their unique taxpayer reference (UTR). This can only be done online or by letter as of 6 May 2025.

 Early filing makes sense, giving peace of mind to focus on the business in hand. Please contact us for further help and advice.

Tougher rules for company directors under ECCTA 2023 will start to bite from autumn 2025 onwards with radical accounts reform also planned.

On accounting reform, however, there is as yet no timetable for the move to require all companies, regardless of size, to file a balance sheet and profit and loss account. This will be a major change for small businesses so it is likely that there will be a reasonable lead time before this in introduced as a mandatory requirement in the Economic Crime and Corporate Transparency Act 2023.

By autumn 2025:

• identity verification will be made a compulsory part of incorporation and new appointments for new directors and personal service companies (PSCs).

• begin the 12-month transition phase to require more than seven million existing directors and PSCs to verify their identity - the identity verification will happen as part of the annual confirmation statement filing.

By spring 2026:

• make identity verification of the presenters a compulsory part of filing any document.

• require third party agents filing on behalf of companies to be registered as an authorised corporate service provider (ACSP) including accountancy and law firms.

• reject documents delivered by disqualified directors as they will be prohibited from doing so, unless they are delivered by an ACSP for specified filings permitted by law.

By the end of 2026:

• require all limited partnerships to submit more information, providing greater transparency for users of the register.

• complete the transition period for all individuals on the register requiring identity verification and start compliance activity against those who have failed to verify their identity.

• facilitate greater cross-checking of information and data between Companies House and other public and private sector bodies.

In a bid to slash print and postage costs by £50m and drag HMRC communications into the 21st century, letters will no longer be sent out automatically to taxpayers from next spring, with email alerts notifying them of new documents in their personal tax accounts or the HMRC app instead

As part of HMRC’s ambitious digital by default programme, which envisages 90% of HMRC interactions with taxpayers being online or digital only by 2029-30 tax year, the Budget papers confirmed a major shift to digital by default had been signed off by the government, starting sooner than expected.

This means that the days of posted brown letters from HMRC are very much numbered with only the ‘digitally excluded’ or those who actively opt out of digital still able to receive old school posted letters, starting in spring 2026.

The rollout of digital by default will be controlled and there will be an opt-out available to continue to receive letters if preferred. Legislation will also be amended to allow HMRC to contact taxpayers by email.

Under the plan, digital letters will be sent to taxpayers’ HMRC accounts, not to their email addresses.

Taxpayers will be required to provide an email (or other digital contact detail) for the HMRC app and online account.

Essentially anyone who currently uses the HMRC app or a personal tax account (PTA) will be in the first tranche of taxpayers affected. They will no longer be sent letters in the post, but instead will receive an email notification advising them that a new HMRC letter, document or communication has been uploaded to their account for viewing.

Clearly HMRC is hoping that the majority of taxpayers will go digital by the end of the decade, with the policy paper on the plan stating that people who still want to receive letters can make the choice ‘not to engage with us digitally’.

Legislation will be included in Finance Bill 2025-26 to amend the current law governing HMRC’s use of electronic communications set out in sections 132 of Finance Act 1999 and s135 of Finance Act 2002.

Under the proposals, HMRC will have the statutory powers to require ‘customers using HMRC’s digital services to provide valid digital contact details (for example, email address or mobile number) at designated interaction points, such as annual filing of taxes’. 

With the data breach incident last year when tens of thousands of taxpayers’ personal tax accounts (PTAs) at HMRC were compromised, security will be a massive priority for the public to ensure this new approach is fully secure.

With Making Tax Digital for Income Tax racing towards landlords and the self employed, HMRC has confirmed the exact filing dates for quarterly reporting 

 From April 2026, if turnover is above £50,000 from self employment and property income combined, taxpayers will need to use MTD-compatible software to keep digital records and send HMRC quarterly updates and also a self assessment tax return at year end.

Lower earners will be pulled into the MTD regime from April 2027 when the threshold drops to £30,000 and subsequently this will be reduced even further in April 2028 to £20,000.

When everyone is dragged into MTD under current plans an estimated two million taxpayers will be in the system, with mandatory quarterly reporting via commercial software. The first phase will see over 860,000 taxpayers in the system.

Listed below are the important filing dates to avoid breaking HMRC rules and facing financial penalties.

Date                                       Event

31 January 2026                  Submit self assessment tax return for 2024-25 tax year

06 April 2026                       Start keeping records using MTD for Income Tax software

07 August 2026                   First quarterly update

07 November 2026.           Second quarterly update

31 January 2027                  Submit self assessment tax return in usual way for 25-26.

07 February 2027.               Third quarterly update 

07 May 2027                        Fourth quarterly update      

07 August 2027                   First quarterly update for 2027-28    

07 November 2027             Second quarterly update    

31 January 2028                   Submit tax return  to HMRC from MTD software 2026-27 

07 February 2028                Third quarterly update      

07 May 2028.                        Fourth quarterly update     

Those earning extra income alongside their day jobs may need to check if they have earnt over the threshold. That means they will need to file a self-assessment tax return warns HMRC.

Once you earn over £1,000 through a side hustle you will need to register with HMRC so they you can file a self-assessment tax return before the end of January 2026.

A side hustle can come in many forms, from dog walking, selling products via online platforms like Ebay, and property rental.

HMRC predicts that up to 65% of side hustlers are unaware that they should be registered for tax, and if done early anything owed can be spread across a number of months.

The increase in employers’ National Insurance contributions is beginning to show as over the last three months businesses have paid £5bn more than last year.

The overall tax takes increased by £11.76bn between April and June 2025, soaring to £209.6bn in just three months. Almost £5bn of this increase has come directly from employers’ NICs.

Income tax, capital gains tax and NICs have accounted for £120.5bn of the total tax take so far this year, £9.4bn higher than last year. From April this year employers’ NICs rose to 15% from 13.8% while the threshold was also reduced to £5,000 from £9,100 on the same day which is heavily impacting the amount paid by businesses. (See first article above).

HMRC is sending around four million tax refund letters between June and August 2025. You might be due a P800 letter in the post if you’ve overpaid Income Tax.

As well as employees who are paid by PAYE, this could also impact pensioners who have paid too much tax. There are lots of reasons why people end up paying too much tax - the biggest reason is that you could be on the wrong tax code.

The most common code for the current tax year is 1257L for people who have one job or pension. This means you can earn £12,570 in one tax year before being taxed, as this is the current personal allowance.

But this tax code doesn't apply to everyone. For example, if you have a second job, this will have a BR, D0 or D1 tax code, or if you have no personal allowance, you may have an 0T tax code.

You can find your tax code on your latest payslip, on your P45 if you have recently quit your job, or on GOV.UK if you have a Government Gateway ID. This is a 12-digit number that is free to sign up for, and it allows you to access UK government services online.

If you're due a refund, HMRC will either send you a text, or you'll be asked to claim it online. The correct link is always an official GOV.UK page.

You'll need the reference number on your P800 letter and your National Insurance number. If your tax code has been wrong for a while, you can claim back up to four additional years.

HMRC may pay back further than four tax years under certain circumstances - for example, if it was their fault that you overpaid tax. If it turns out you've not paid enough tax due to an incorrect tax code, then you will have to pay this back.

Don't let this put you off - it is better to sort this out sooner rather than later to avoid being hit with a bigger bill. You can try and get the tax written off if it was not your fault that you underpaid - but this is not a guarantee.

Major changes to filing for small companies will come into force shortly with compulsory profit and loss accounts and balance sheet disclosures

Companies House will start streamlining the accounts filing options for small and micro-entity companies with the abolition of abridged accounts from 1 April 2027 and new more demanding reporting requirements. 

Micro-entities will be required to file a copy of their balance sheet and profit and loss account at Companies House.

Small companies will be required to file a copy of balance sheet, directors’ report, auditor’s report (unless exempt) and profit and loss account.

The higher level of disclosure will improve transparency as companies will no longer be able to prepare and file abridged accounts, which must contain a simpler balance sheet, along with any notes. Currently, filing using this method has the benefit of not requiring a simpler profit and loss account or a copy of the director’s report.

There will also be a requirement for more information when claiming an audit exemption. In future, any company claiming an audit exemption will need to give an enhanced statement from their directors on the balance sheet. 

It will also clamp down on abuse of dormant company status.

Directors of dormant companies will need to specify which exemption is being claimed and confirm that the company qualifies for the exemption.

This additional statement is intended to act as a deterrent to criminal activity and to provide additional enforcement evidence.

From April 2027, Companies House will also curtail the number of times a company can change accounting reference periods to once in a five-year period.

‘The new framework is part of the Economic Crime and Corporate Transparency Act 2023, (see earlier article above), and the regulations are set out in section 396 Companies Act 2006.

These enhancements are designed to ensure that the companies register is more reliable and accurate, and should give higher standards of disclosure and reduce fraud and error.

A company is ‘small’ if, in a year, it satisfies any two of the following criteria:

• a turnover of £10.2m or less;
• £5.1m or less on its balance sheet; and
• 50 employees or fewer.

A company is a ‘micro-entity’ if, in a year, it satisfies any two of the following criteria:

• a turnover of £632,000 or less;
• £316,000 or less on its balance sheet; and
• 10 employees or fewer.

The cost of incorporating a business on Companies House is set to double from next year as digital filing fee shoots up from 1 February 2026.

Companies House plans to increase fees for incorporation to £100 from the current £50, and confirmation statements to £50 from £34, affecting both companies and limited liability partnerships (LLPs) filing digitally while the paper fee will also shoot up. The higher fees will come into effect from 1 February 2026, although the fee for a voluntary strike-off filing is being reduced.

The latest fee rises will increase costs for all entities registered, including private limited companies, LLPs, charitable companies and overseas entities. It is part of a broader initiative to clean up the company register and stamp out fraudulent companies.

The new fee list has been published and there are significant increases across many of the categories, including for digital and paper filing costs.

Fees were last hiked in May 2024 when the digital incorporation fee was increased from a negligible £12, but that was the first change in fees for nearly a decade. UK registration fees still remain low by international standards.

These are the key Companies House fee changes:

• incorporation digital filing fee will go up from £50 to £100 
• confirmation statement digital filing fee will go up from £34 to £50 
• voluntary strike off digital filing fee will be reduced from £33 to £13 

The increase in fees will help fund investment in upgrades to technology, as well as investigations and enforcement activity by the Insolvency Service.

For many small business owners and company directors, pensions still feel like something far off, important in theory, but not really part of their day-to-day decisions. Dividends, on the other hand, sound far more appealing: immediate, simple, and tangible. You can spend a dividend. A pension feels like a promise.

However, instead of paying themselves a dividend and watching a chunk go to HMRC, they can pay that same money into their pension and keep it all working for their own future. It’s not about losing access to the money; it’s about choosing who benefits from it first.

With dividends, you share your profits with the taxman. With a pension, you keep the whole lot, just for a later date.

An example of the numbers behind the decision:

For many company directors, the dividend vs. pension question becomes clearer once you crunch the numbers:

£60,000 profit as a dividend

• Corporation tax (19 percent) = £11,400
• Net dividend = £48,600
• Dividend tax (33.75 percent) = approx. £16,400
• Final amount in hand = ~£32,200

£60,000 profit as a pension contribution

• Full amount counts as a business expense
• Saves £11,400 in corporation tax
• Entire £60,000 goes into the pension
• No personal tax or National Insurance
• At retirement: 25 percent tax-free, rest taxed as income (Assuming here a higher rate taxpayer).
• Net amount = ~£42,000 (plus potential investment growth)

Once directors see the figures, pensions stop feeling like a someday plan and start looking like a smart, tax-efficient way to build long-term wealth.

Landlords and self employed caught by phase one of Making Tax Digital (MTD) for Income Tax rules will not have to pay penalties if late filing quarterly updates

The government has decided not to apply late submission penalties for quarterly updates during the 2026-27 tax year for income tax self assessment taxpayers required to join Making Tax Digital (MTD).

This means that tranche one of taxpayers earning non-PAYE income in excess of £50,000 will not be liable for new penalty regime under MTD until April 2027.

HMRC will apply the new penalty regime for late submission and late payment to all income tax taxpayers due to join the new system from 6 April 2027. This will be legislated for via secondary legislation.

The new system is based on a points-based sanctions regime and will penalise those who persistently do not comply by missing filing and payment deadlines, while being more lenient on those who occasionally fail to meet obligations.

Under the new regime, when a taxpayer misses an annual submission deadline, they will incur a penalty point. A taxpayer becomes liable to a fixed financial penalty of £200 only after they have reached the points threshold of two for late submission of their final declaration.

The decision to waive year-one MTD penalties was coupled with confirmation that the government plans to implement a single penalty system from 1 April 2027, abolishing the current monetary system.

This means that the new MTD approach will be reflected across the wider HMRC penalty regime for late payment of income tax self assessment and VAT for tax year 2027-28.

Under reforms to salary sacrifice, the amount of someone's salary that can be sacrificed via pension contributions without facing a class 1 national insurance (NI) charge will be limited to £2,000 from April 2029.

The government impact assessment, published on 4th December 2025 found that 3.3 million employees sacrifice more than £2,000 of salary or bonuses. With 7.7 million total salary sacrifice users, the government set out that around 44% would be affected by the change.

Of those that would be liable to pay class 1 NI contributions on salary or bonus pension contributions above that £2,000 limit, the government assessed the average additional NI liability at £84 in the first year of changes being introduced.

The measure is anticipated to affect 290,000 employers that offer salary sacrifice schemes for pension contributions, the government report stated.

In its impact assessment, the government set out that the cost of salary sacrifice relief has increased "markedly", rising from £2.8bn in foregone national insurance contributions in the 2016 to 2017 tax year to £5.8bn in tax year 2023 to 2024.

It stated that, were it not to make changes, this figure would rise to £8bn by the 2030 to 2031 tax year.

The Office for Budget Responsibility has forecast that the salary sacrifice NI update is expected to raise £2.6bn in 2030/31, rising to £4.7bn in 2029/30.

HMRC overcharged employees £3.5bn in income tax last year, with 5.6m people paying too much due to mistakes on tax codes in the PAYE system

Taxpayers must check that they are not overpaying through the PAYE system as HMRC stresses that the liability to report on incorrect tax code rests with the taxpayer, not the taxman. 

Taxpayers are responsible for identifying a mistake on their PAYE tax code, 

If HMRC does not have the most up-to-date information, it will continue to deduct tax based on its own estimate of income without checking the figure with the taxpayer.

‘Even when overpayments are identified, reclaiming the money can be slow and frustrating. Many taxpayers face long waits, with written requests often ignored and phone calls going unanswered at HMRC.’

The scale of the issue is surprising, with 5.6m taxpayers a year being given the wrong tax code.

 Millions of people are paying the wrong amount of tax simply because HMRC is almost guessing what they earn. For too many people, this will go completely unnoticed.

HMRC won’t always correct overcharging mistakes automatically. If you don’t check your tax code or your PAYE calculation, you may never get your money back. The onus is on taxpayers to spot HMRC’s errors.’

HMRC issues the wrong tax code for various reasons, often related to benefits in kind issues, which employees really must check. These include:

• company benefits in kind, ie, company cars, healthcare and gym memberships, even though they no longer receive the benefit;
• additional income, such as rent, dividends, or freelance work they no longer do;
• multiple jobs; and
• out of date or late employer payroll information.

HMRC’s coding assumptions often go unchecked because paper tax code notices are no longer routinely issued, meaning millions of employees may be unaware that their tax code is wrong and that they are being overcharged.

Taxpayers should check that they are not overpaying through the PAYE system as HMRC is under no obligation to check and tell them if they have overpaid.  HMRC now conducts fewer internal assessments to find errors and overpayments.

But ultimately the responsibility to make sure the tax code is correct goes down to the individual taxpayer.