Tax news for your business

Sole traders and side income

• Trading allowance tripled. The tax-free trading allowance rises from £1,000 to £3,000 from 6 April 2027, and the Self Assessment reporting threshold for trading income rises in line.
• Making Tax Digital widens. From 6 April 2027, Making Tax Digital for Income Tax applies to sole traders and landlords with qualifying income over £30,000 (down from £50,000). If that includes you, you will need compatible software and quarterly updates. Speak to us now so you are set up in good time.

Landlords and savers

• Higher rates on property and savings income. From 6 April 2027, income tax on property and savings income rises to 24% (basic rate), 44% (higher rate) and 49% (additional rate). The property income rates apply in England, Wales and Northern Ireland, and the Scottish and Welsh governments can set their own.
• Thresholds stay frozen. Income tax thresholds remain frozen until April 2031, so more income will be taxed at higher rates over time.

If you own rental property personally, it is worth reviewing how it is held and when income and expenses fall before April 2027.

Company owners

• Capital allowances. The first-year allowance for main-rate plant and machinery rises from 40% to 50% for spending from 1 January 2027. The main-rate writing-down allowance falls from 14% to 12% from April 2027 (1 April for companies, 6 April for unincorporated businesses).
• Dividends. Dividend tax rates were left unchanged.

Selling or passing on a business

• Business Asset Disposal Relief halved. The lifetime limit falls from £1 million to £500,000 for disposals on or after 6 April 2027.
• New Founders’ Relief. A reduced Capital Gains Tax rate is planned for qualifying disposals of shares from 6 April 2027. The conditions are still being consulted on (the consultation closes on 30 November 2026) and are expected to be strict.

If you are thinking about selling your company in the next year or two, the timing could make a real difference to the tax you pay. Talk to us before 5 April 2027.

Employers

• Benefits through payroll. From 6 April 2027, company cars and vans, car and van fuel, and medical benefits must be taxed through payroll rather than on P11D forms. Most other benefits follow from April 2028.
• National Living Wage. Rises to £13.21 an hour from 1 April 2027.
• Mileage. The tax-free rate for business mileage above 10,000 miles a year rises from 25p to 35p per mile from 6 April 2027. The rate for the first 10,000 miles stays at 55p.

What to do now

• Check whether Making Tax Digital will apply to you from April 2027.
• Landlords: review ownership and timing before the new rates start.
• Planning a business sale: get advice before 5 April 2027.
• Employers with company cars or medical cover: prepare to payroll benefits from April 2027.

Source: Budget 2026: Overview of tax legislation and rates (GOV.UK). This article is general information based on the Budget announcements and is not advice for your circumstances. Some measures are subject to consultation and legislation and may change.

What changed

HMRC used to accept that a double cab pick-up able to carry a payload of one tonne or more was a van. Following a Court of Appeal decision, HMRC changed its view: a double cab is as suited to carrying people as goods, so most are now treated as cars for direct tax.

• Company vehicle benefit. From 6 April 2025, an employee or director with private use of a double cab is taxed under the company car rules, based on its list price and CO2 emissions, instead of the flat van benefit charge. For most diesel pick-ups the taxable benefit is much higher.
• Capital allowances. A double cab bought on or after 1 April 2025 (companies) or 6 April 2025 (sole traders and partnerships) gets car allowances of 18% or 6% a year, depending on emissions. It no longer qualifies for the Annual Investment Allowance or full expensing.
• Leasing. Lease rentals are treated like car leases, so 15% of the cost is disallowed where emissions are over 50g/km.

Transitional rules

• Benefit in kind. If the employer bought, leased or ordered the pick-up before 6 April 2025, van treatment continues until the earliest of the vehicle being sold, the lease ending, or 5 April 2029.
• Capital allowances and leases. Where the contract was signed before 1 April 2025 (companies) or 6 April 2025 (sole traders and partnerships), the old treatment only covered spending before 1 October 2025. That window has now closed.

What has not changed

For VAT, a double cab with a payload of one tonne or more is still a commercial vehicle, so VAT can usually be reclaimed on the purchase where it is used in the business. Single cab pick-ups and ordinary vans are not affected, and double cabs with a payload under one tonne were always cars.

What to do now

• Check the payload, and the order or purchase date, of each pick-up your business runs.
• If a pick-up still has van treatment under the transitional rules, remember that selling it or ending the lease ends that treatment.
• Before replacing a pick-up, compare the tax cost with a van or an electric car. The difference in benefit in kind can be large.
• Make sure your P11D or payrolled benefits use the right treatment for each vehicle.

Source: HMRC Capital Allowances Manual CA23511. This article is general information and is not advice for your circumstances. Rules can change; please speak to us before acting.

Reading the code

Multiply the number by 10 to get your tax-free pay for the year. The standard code, 1257L, gives the full £12,570 Personal Allowance and is used for people with one job and no taxable benefits. A company car or medical insurance reduces the number, because the benefit is taxed through your pay.

• L the standard Personal Allowance.
• M or N Marriage Allowance received from, or transferred to, your partner.
• T other calculations have been made to work out your allowance.
• 0T no allowance is given, often while HMRC waits for details.
• BR, D0, D1 all income from that job or pension is taxed at the basic, higher or additional rate. These are usual for a second job or pension.
• NT no tax is taken.
• K your untaxed income or benefits are more than your allowance, so tax is added rather than an allowance given.
• S or C you pay Scottish or Welsh rates of income tax.

Emergency codes

If W1, M1 or X follows your code (or your payslip shows NONCUM), you are on an emergency code. Each pay period is taxed on its own, which can mean too much tax. It is common when a new employer does not have your P45, or when benefits or the State Pension start. Give your employer your P45; HMRC usually puts the code right within 35 days of starting.

Common reasons a code is wrong

• A company car or other benefit that has ended is still being deducted.
• You have two jobs or pensions and the allowance is on the wrong one.
• HMRC is using an old estimate of other income, such as rent or savings interest.
• Tax owed from an earlier year is being collected through the code.
• Marriage Allowance has not been picked up.

How to put it right

Check your code in your personal tax account online or in the HMRC app, and update your job, benefits and estimated income there. HMRC tells you and your employer of a new code within 15 working days. Monthly-paid staff usually see it on the next or following payslip; weekly-paid staff by about the third. Tax overpaid is normally refunded through your pay once the code is corrected, or after the tax year ends when HMRC sends its calculation.

What to do now

• Compare the code on your payslip with the one in your personal tax account.
• Directors: check the benefits HMRC is using match your P11D or payrolled benefits.
• If you have more than one job or pension, check which one has your allowance.
• We can deal with HMRC on your behalf as your agent.

Source: GOV.UK – What your tax code means. This article is general information and is not advice for your circumstances. Rules can change; please speak to us before acting.

When your VAT is due

• Quarterly and monthly returns. The return and cleared payment are due one calendar month and seven days after the period ends. For a quarter to 30 September, that is 7 November. There is no extra time for weekends or bank holidays.
• Direct Debit. HMRC collects three working days after the deadline. Set up the mandate at least three working days before you file.
• Annual Accounting Scheme. The return and balancing payment are due two months after the end of the year.
• Larger businesses. Businesses with VAT bills of more than £2.3 million a year also make monthly payments on account.

Late returns: penalty points

Each late return earns one penalty point, including nil and repayment returns. Once you reach the threshold (2 points for annual returns, 4 for quarterly, 5 for monthly) HMRC charges a £200 penalty, and another £200 for every further late return. Points are wiped once you file on time for a set period (12 months for quarterly returns, 6 months for monthly, 24 months for annual) and all returns for the past 24 months are in.

Late payment: penalties and interest

• Days 1 to 15. No penalty, but interest runs from the day after the due date.
• Days 16 to 30. A first penalty of 3% of the VAT still unpaid at day 15.
• Day 31 onwards. A further 3% of the VAT unpaid at day 30, plus a second penalty charged daily at 10% a year until the VAT is paid.
• Interest. Charged at 4 percentage points above the Bank of England base rate.

If you cannot pay in full, asking HMRC for a Time to Pay arrangement early helps: agreeing one within the first 15 days avoids the first penalty, and later requests stop the penalties growing.

What to do now

• Put each VAT deadline in your diary, or pay by Direct Debit.
• Keep your bookkeeping in Xero up to date so returns are never late.
• If cash is tight, talk to us before the deadline about Time to Pay.
• Check your penalty points in your HMRC business tax account.

Source: GOV.UK – How late payment penalties work if you pay VAT late. This article is general information and is not advice for your circumstances. Rules can change; please speak to us before acting.