All posts by Terry Harris

Income Tax

Income reporting threshold increased

May 8, 2025 by Terry Harris 0 Comments

The £3,000 reporting threshold for trading, property, and other income will simplify tax returns—300,000 people could be freed from filing. A digital alternative is also coming.

As part of the Spring 2025 Tax Update: Simplification, Administration and Reform, the government confirmed changes to the Income Tax Self Assessment (ITSA) reporting thresholds for trading, property, and other taxable income. From a future date within this Parliament, these thresholds will all be aligned and increased to £3,000 (gross) each.

This reform is designed to streamline the tax system and reduce unnecessary reporting. As a result, up to 300,000 taxpayers will no longer be required to submit a self-assessment return if their taxable income falls below the new threshold. Of those affected, an estimated 90,000 individuals will have no tax to pay at all and will not need to report their trading income to HMRC in the future.

For those with income below the threshold who do have tax to pay, a new digital reporting service will be introduced, offering a simpler alternative to self-assessment Taxpayers will also retain the option to remain in self-assessment if they prefer.

The government has said that they will release further details in a transformation roadmap set to be published later this year.

Source:HM Government | 05-05-2025
Payroll

Mandating the Payrolling of benefits in kind update

May 8, 2025 by Terry Harris 0 Comments

HMRC has delayed mandatory payrolling of benefits in kind by a year to April 2027, giving employers and software providers more time to prepare. Penalties will be eased in the first year.

The requirement to report Income Tax and Class 1A National Insurance Contributions for most BiKs and expenses through Real Time Information (RTI) will now begin from 6 April 2027, rather than 6 April 2026 as previously announced.

From April 2027, employers will report BiKs and expenses via the Full Payment Submission (FPS), aligning with the method currently used for reporting salaries. The number of RTI fields will be expanded to reflect the data currently captured through P11D and P11D(b) forms.

The deferral is intended to give payroll professionals, software providers, tax agents and others additional time to prepare for the transition. From April 2027, employers will also have the option to payroll employment-related loans and accommodation on a voluntary basis.

To support a smooth rollout, HMRC will waive penalties for inaccuracies related to mandatory payrolling for 2027–28, provided there is no evidence of deliberate non-compliance. However, existing late filing, late payment penalties, and interest will continue to apply.

HMRC has confirmed that its Basic PAYE Tools software will also be updated to support payrolling of benefits in kind from April 2027.

Source:HM Revenue & Customs | 05-05-2025
Payroll

Reversal of requirement to report more detailed employee hours paid

May 8, 2025 by Terry Harris 0 Comments

The government has scrapped plans for detailed PAYE reporting of employee hours from April 2026, citing concerns over cost, complexity, and practicality. Employers will stick with current rules.

As part of the Spring 2025 Tax Update: Simplification, Administration and Reform summary, the government confirmed that it will no longer proceed with the previous governments plans to mandate more detailed reporting of employee working hours through Pay As You Earn (PAYE) Real Time Information (RTI) submissions. 

Under the original proposals, employers would have been required to submit significantly more detailed employee hours data on the hours worked by each employee via RTI returns from 6 April 2026. These proposals were reflected in the draft Income Tax (Pay As You Earn) (Amendment) Regulations 2025, which were expected to formalise the changes in law. However, the government has now announced that it will not take these draft regulations forward, effectively shelving the proposed reforms.

The enhanced reporting requirements would have meant employers providing detailed data on actual hours worked per pay period, as opposed to the current obligation to report an employee’s normal working hours. Significant concerns were raised by employers, payroll providers, and representative bodies regarding the complexity, cost, and practicality of these changes. 

Employers will therefore continue to report normal hours worked using the existing RTI framework, without the need to supply more detailed information. 
 

Source:HM Government | 05-05-2025
Employment & Payroll

How to check employment status

May 8, 2025 by Terry Harris 0 Comments

HMRC’s CEST tool gets a revamp from 30 April 2025, with clearer questions and updated guidance to help users decide employment status for tax—plus stronger backing from HMRC.

In a Written Ministerial Statement delivered on 28 April, the Exchequer Secretary to the Treasury announced a series of administrative and simplification measures designed to advance the government’s commitment to modernising the tax and customs systems.

Among these measures is an important update to HMRC’s Check Employment Status for Tax (CEST) digital tool, set to take effect from 30 April 2025. The CEST tool plays a key role in helping users determine whether a worker should be treated as employed or self-employed for tax purposes across both the private and public sectors.

The forthcoming changes aim to improve usability and clarity, making it more accessible and efficient for individuals and organisations alike. In conjunction with these technical improvements, HMRC will issue updated guidance to support users in navigating the revised set of questions, ensuring they are better equipped to use the tool correctly and confidently.

The service provides HMRC’s view as to whether IR35 legislation applies to a particular engagement and whether a worker should pay tax through PAYE as well as helping to determine if the off-payroll working in the public sector rules apply to a public sector engagement. HMRC has confirmed that it will stand by the outcome produced by the CEST tool, provided that the information entered is accurate and complete. However, HMRC will not stand by the results of contrived arrangements and designed to get a particular outcome from the service.

The service can be used by a variety of users, including:

  • Workers providing services;
  • Individuals or organisations engaging workers; and
  • Employment agencies placing workers with clients.
Source:HM Treasury | 05-05-2025
Business Support

Fresh Ideas for Additional Revenue Streams

May 7, 2025 by Terry Harris 0 Comments

For many small and medium-sized enterprises (SMEs), the core business keeps the lights on, but additional income streams can provide much-needed stability and growth. Whether you're a service provider, a retailer, or run a niche consultancy, diversifying your revenue can cushion seasonal dips, economic shocks, or customer churn. Here are some practical ways to bring in extra income without straying too far from your core business.

Offer Online Courses or Webinars

If you’ve got specialist knowledge, turn it into a digital product. Creating online courses or hosting webinars allows you to monetise what you already know. This works particularly well for consultants, tradespeople, or niche service providers. Platforms like Teachable or Thinkific make setup relatively easy.

Introduce Subscription Services

Subscription models work for more than just magazines. If you sell products, consider offering a monthly bundle or repeat-order service. If you’re in a service industry, a retainer model or premium membership can offer exclusive content, support, or discounts to subscribers.

Rent Out Equipment or Space

Do you have tools, machinery, or office space that sits idle some of the time? Renting these out, even on an occasional basis, can generate passive income. This is especially useful for creative or construction businesses that own specialist gear.

Sell Branded Merchandise

If you’ve built a recognisable brand, merchandise could be a low-effort income stream. Think branded mugs, notebooks, tote bags, or even digital downloads like planners or templates. Print-on-demand services mean you don’t need to hold stock.

Affiliate Marketing or Product Referrals

If you already have a mailing list or online presence, recommending relevant products or services could bring in commission. Just ensure the partnerships are relevant and credible to maintain trust with your audience.

Create a Paid Newsletter or Exclusive Content Channel

If your business produces insights or useful information, consider launching a paid newsletter or members-only blog. Tools like Substack or Patreon allow you to test this with minimal upfront cost.

Offer Freelance or Consulting Services

If your business has a quiet season, consider offering your skills on a freelance basis. This works well for design, IT, marketing, or finance professionals looking to supplement core revenue.

Need help tailoring any of these ideas for your business? Call now so we can discuss your options.

Source:Other | 06-05-2025
Business Support

How to Increase Gross Profit Returns

May 7, 2025 by Terry Harris 0 Comments

Gross profit is one of the clearest indicators of how well your business is performing. It’s the money left after deducting the direct costs of producing goods or services from your turnover. If your gross profit margins are tight, your business will struggle to cover overheads, let alone make a net profit. So, here are a few practical tips to help boost your gross profit returns.

Review Your Pricing Strategy

One of the quickest ways to increase gross profit is to charge more. That sounds simple, but many small business owners hesitate to raise prices out of fear of losing customers. If you’ve not reviewed your prices in the last year, you’re probably overdue. Inflation, supplier costs and market demand all change – and your pricing should reflect that. Even a modest price increase can make a noticeable difference to your bottom line.

Cut Direct Costs Without Cutting Corners

Take a close look at your cost of sales. Can you negotiate better terms with suppliers? Are there alternative materials or services that are more cost-effective without affecting quality? Regularly benchmark your supplier costs and don’t be afraid to shop around. That said, cutting quality to save money usually backfires. The goal is value, not just cheapness.

Upsell and Cross-Sell

Increasing the average transaction value is a smart way to lift gross profit. Train your team (and yourself) to spot opportunities to upsell or cross-sell. For example, if you sell coffee, can you offer a pastry at a discounted rate? If you're in professional services, can you bundle related services together? It’s often easier to sell more to an existing customer than to find a new one.

Streamline Production or Service Delivery

Time is money, especially if you sell services. Look at how you or your team deliver work. Are there steps that can be automated or removed? Can you reduce waste, rework, or idle time? The more efficiently you operate, the more profit you keep.

Monitor Your Margins

Finally, don’t rely on gut feel – use your accounts. Regularly track your gross profit margin by product, service, or client type. This helps you spot what's making money and what's not. Focus your energy where the returns are highest.

Source:Other | 06-05-2025
Tax Diary

Tax Diary June/July 2025

May 2, 2025 by Terry Harris 0 Comments

1 June 2025 – Due date for corporation tax due for the year ended 31 August 2024.

19 June 2025 – PAYE and NIC deductions due for month ended 5 June 2025. (If you pay your tax electronically the due date is 22 June 2025).

19 June 2025 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2025.

19 June 2025 – CIS tax deducted for the month ended 5 June 2025 is payable by today.

1 July 2025 – Due date for corporation tax due for the year ended 30 September 2024.

6 July 2025 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2025 – Pay Class 1A NICs (by the 22 July 2025 if paid electronically).

19 July 2025 – PAYE and NIC deductions due for month ended 5 July 2025. (If you pay your tax electronically the due date is 22 July 2025).

19 July 2025 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2025.

19 July 2025 – CIS tax deducted for the month ended 5 July 2025 is payable by today.

31 July 2025 – Pay second self-assessment payment on account for 2024-25.

Source:HM Revenue & Customs | 01-05-2025
Corporation Tax

Definition of R&D for tax purposes

May 1, 2025 by Terry Harris 0 Comments

When claiming tax relief or capital allowances on R&D, it’s crucial to ensure activities meet strict statutory definitions. Understanding Section 437 ITA and DTI guidelines is key to securing legitimate tax benefits and avoiding costly mistakes.

An activity is generally considered as R&D if it meets two key criteria:

  1. It is recognised as R&D under standard accounting practice; and
  2. It satisfies the specific conditions set out in the Department of Trade and Industry (DTI) guidelines.

In addition, the definition of R&D for Capital Allowances purposes includes oil and gas exploration and appraisal activities. These are defined as operations conducted with the objective of:

  • Searching for petroleum within a defined area; or
  • ascertaining the characteristics, extent, or reserves of a petroleum-bearing area in order to assess the commercial viability of extraction.

The legislation also allows for the definition of R&D to be further clarified or restricted by secondary regulations made under ITA/S1006. These regulations may either designate certain activities as qualifying R&D or exclude specific activities from being treated as such.

For the purposes of Research and Development Allowances (RDA), any activity defined as R&D under ITA/S1006 regulations must be treated accordingly. Conversely, if an activity is specifically excluded by regulation, it must not be considered R&D for RDA claims.

Source:HM Revenue & Customs | 28-04-2025
HMRC notices

Tax treatment of income after cessation

May 1, 2025 by Terry Harris 0 Comments

After a business closes, income can still arise. Post-cessation receipts must be properly reported and taxed under specific rules. Knowing what qualifies — and what does not — ensures businesses and individuals stay compliant with UK tax law.

Under the legislation, the individual or entity who receives, or is entitled to receive, the post-cessation income is liable to Income Tax or Corporation Tax on that income. This recipient does not need to be the same person who originally carried on the trade. The key factor is whether the income in question meets the definition of a post-cessation receipt.

To fall within the scope of these rules, the income must:

  • be received after a person permanently ceases to carry on a trade;
  • arise from the carrying on of the trade before the cessation; and
  • not be otherwise subject to tax.

Additionally, the legislation outlines specific types of income that are treated as post-cessation receipts beyond those that naturally arise from the winding down of a trade. However, certain types of payments, such as consideration received for the transfer of trading stock, are specifically excluded from this classification and are dealt with under different tax rules.

Source:HM Revenue & Customs | 28-04-2025
Corporation Tax

Tax refunds for dissolved companies

May 1, 2025 by Terry Harris 0 Comments

Dissolving a company ends its legal existence — but unresolved assets become property of the Crown under bona vacantia. Directors must act carefully to settle assets and liabilities before dissolution, avoiding costly mistakes and lost opportunities.

Dissolving a company is a formal legal process that marks the end of its existence. While this process may seem straightforward, it is essential for directors and company officers to understand the legal and financial consequences that arise once a company is dissolved. In particular, in relation to outstanding assets, liabilities, and the principles of bona vacantia.

A company legally ceases to exist upon dissolution. From that point forward, it can neither undertake activities nor receive assets, including tax refunds. It is therefore the responsibility of the company's directors to ensure that all assets and liabilities are appropriately resolved prior to the dissolution taking effect.

Any assets or rights (excluding liabilities) that remain within the company at the date of dissolution automatically pass to the Crown as bona vacantia, a legal doctrine meaning “ownerless goods.” The management of bona vacantia assets is delegated to different bodies across the United Kingdom depending on the company's location, but all act on behalf of the Crown.

Importantly, only companies that have been formally dissolved fall under bona vacantia. Companies that are in the process of liquidation or being wound up are not yet subject to these rules, as they are still legally in existence. Until dissolution is complete, the company retains ownership of its assets and rights.

In certain circumstances, it may be possible to restore a dissolved company to the Companies Register if the dissolution occurred within the last six years. Restoration would reverse the effects of bona vacantia, reinstating the company’s rights to its previously held assets. However, this process can be complex, time-consuming, and should not be relied upon as a remedy for poor planning.

Source:HM Government | 28-04-2025