Terry Harris

Are you using the best VAT scheme for your business?

Jul 23, 2026 by Terry Harris 0 Comments

Small businesses have several VAT schemes available that can simplify VAT administration and may help with cash flow. However, as a business grows or its circumstances change, it is important to review whether the VAT scheme being used is still the best for your business.

The main VAT special schemes available to small businesses are the flat rate scheme, the annual accounting scheme and the cash accounting scheme. The turnover limits for joining and leaving each scheme vary, so businesses should check that they continue to meet the relevant conditions.

The flat rate scheme is available to businesses that expect their annual taxable turnover in the next 12 months to be no more than £150,000, excluding VAT. Businesses already using the scheme can continue until their turnover exceeds the exit total income threshold of £230,000, including VAT. The scheme simplifies VAT reporting by allowing businesses to pay a fixed percentage of their VAT-inclusive turnover to HMRC, with the percentage depending on the type of business. However, businesses should check whether using the scheme is financially beneficial before applying.

The annual accounting scheme allows eligible businesses to submit one VAT return each year instead of quarterly returns. It can be used alongside the flat rate scheme or with standard VAT accounting. The scheme is available to businesses with taxable turnover of up to £1.35 million and can continue until turnover exceeds £1.6 million.

The cash accounting scheme can improve cash flow by allowing businesses to pay VAT to HMRC when customers have paid them rather than when sales invoices are raised. It is available where estimated VAT taxable turnover is no more than £1.35 million and can continue until turnover exceeds £1.6 million.

Reviewing your VAT arrangements regularly can help ensure you are using the scheme that best fits your business needs.

Source: HM Revenue & Customs | 19-07-2026

General

Is HMRC holding money that belongs to you?

Jul 23, 2026 by Terry Harris 0 Comments

It is important to know if HMRC is holding money that belongs to you. For example, if you have paid too much tax to HMRC, you may be able to claim a tax refund (also known as a tax rebate). Overpayments can happen for a number of reasons, including changes in your employment, paying tax using the wrong startegy or not claiming eligible expenses.

The process for claiming a refund depends on your circumstances, including whether you complete a self-assessment tax return and the type of income or expense involved. HMRC provides an online service to help you find out what you need to do if you have overpaid tax.

You may be able to claim a refund if you have paid too much tax on income from a job, job-related expenses such as working from home, fuel, work clothing or tools, a pension, overpayments revealed by a self-assessment tax return or a redundancy payment. Refunds may also be available for UK income taxed while living abroad, interest from savings or payment protection insurance (PPI), income from a life or pension annuity, foreign income, or UK income earned before leaving the UK.

HMRC offers an online service at www.gov.uk/claim-tax-refund/y that allows you to check whether you are eligible and, in many cases, submit a claim.

If you have already claimed a tax refund, you can use HMRC’s guidance to check when you should expect a response.

Source: HM Revenue & Customs | 19-07-2026

HMRC notices

Advising HMRC of change in circumstances

Jul 23, 2026 by Terry Harris 0 Comments

If your personal details or circumstances change, you may need to tell HMRC as this could affect your tax position or entitlement to certain benefits.

You should notify HMRC if you get married or form a civil partnership, or if you divorce, separate or stop living with your husband, wife or partner. You should report these changes as soon as possible, as failing to do so could result in you paying too much tax or receiving a tax bill at the end of the year. If you receive Child Benefit, you must also tell HMRC separately about changes to your relationship or family circumstances.

If your spouse or civil partner dies, you should contact HMRC to report the death and any changes to your income following their death. You should also tell HMRC if you move home so they can update your contact details. HMRC is usually informed automatically if you legally change gender by applying for a Gender Recognition Certificate.

You must also tell HMRC about certain changes to your taxable income. Your employer or pension provider will usually report changes to your employment income or pension, but you must tell HMRC about other changes, such as starting or stopping income from self-employment or property, receiving taxable benefits such as State Pension or Jobseeker’s Allowance, getting benefits from your job such as a company car, or receiving income above your Personal Allowance.

You must also report other changes, such as receiving lump sums from selling shares or property that is not your main home, and income from inherited property, money or shares.

If you make self-assessment payments on account and expect a significant decrease in income, you should tell HMRC as it may be possible to reduce your payments. Keeping HMRC updated helps ensure you pay the correct amount of tax and receive any benefits or allowances to which you are entitled.

Source: HM Revenue & Customs | 19-07-2026

HMRC notices

Self-Employed – Are your business records in order?

Jul 23, 2026 by Terry Harris 0 Comments

As a self-employed individual, whether a sole trader or partner, you must keep accurate records of your business income and expenses to back up your self-assessment tax return. You should also keep your personal income details up to date. Nominated partners will also need to keep partnership records.

You can also choose an accounting method. Since the 2024-25 tax year, the cash basis is the default. This means that you record income and expenses when money is received or paid. There will therefore be no Income Tax liability on monies not yet received. This is very different to traditional accounting where you record income and expenses by the date you invoiced or were billed.

Your records should detail all sales, income, business expenses and any grants received. If applicable you must also include VAT and PAYE records. Holding proof, such as receipts, bank statements and sales invoices, allows you to calculate profit or loss and present the records to HMRC if requested. You should ensure all your records are accurate and clearly identify business transactions.

You must retain your business records for at least 5 years after the 31 January submission deadline of the relevant tax year. For instance, if you sent your records for 2022-23 by the 31 January 2024 deadline then you must keep these records until at least the end of January 2029. If records are lost or destroyed, provide your best estimated figures and inform HMRC.

Maintaining diligent and accurate records for the specified period is vital for meeting your tax obligations and ensuring compliance with HMRC requirements.

Source: HM Revenue & Customs | 19-07-2026

Employment & Payroll

Does your business need to register as an employer?

Jul 23, 2026 by Terry Harris 0 Comments

If you are starting to employ staff or engaging subcontractors for construction work, you will generally need to register as an employer with HMRC. This obligation extends even to individuals who are the sole director of their own limited company, in other words, you must register even if you are only employing yourself.

It is important that you register before your first payday to obtain your employer PAYE reference number, which is essential for operating PAYE correctly. You cannot register more than two months prior to the date you intend to start paying people.

Should circumstances require you to pay an employee before receiving your PAYE reference number, you should still run payroll, securely store your full payment submission and subsequently send a late full payment submission to HMRC.

For limited companies with one to nine directors, online registration is typically available. After completing your registration, you can check HMRC's guidance to understand when to expect your official letter confirming your employer status and providing your PAYE reference number. There is also an option to continue an application if you have already started the registration process.

To ensure compliance and avoid issues, register with HMRC before your first payday, or follow the specific late submission process if payment is unavoidable beforehand.

Source: HM Revenue & Customs | 19-07-2026

Employment Law

Don’t let discrimination lead to resignation or risk facing career compensation

Jul 22, 2026 by Terry Harris 0 Comments

A recent ruling has cleared the path to uncapped financial compensation following a forced resignation. A longstanding social worker had complaints raised over her work by an interim service manager. The ensuing investigation, however, failed to inform her of the specific allegations, their source, or their scope. This covert enquiry had a profound and detrimental effect on the mental health of the individual, leading to anxiety, depression and sleep disturbances. As a result, she submitted formal grievances that were not satisfactorily resolved before her eventual dismissal.

The social worker successfully pursued a complaint of indirect disability discrimination and constructive unfair dismissal at Tribunal, although she subsequently appealed the assessment of compensation. While the original Tribunal had initially upheld her claims and awarded a total of £153,906, including past loss of earnings, injury to feelings, expenses, a basic award, and £20,000 for pension loss, it made no award for any future loss of earnings.

The Appeal Tribunal forcefully dismissed the Council’s cross-appeal, ruling that any act of workplace discrimination which inflicts an ongoing psychiatric injury that is sufficient in severity to drive an employee to lose their career is fully recoverable under discrimination law. The Appeal Tribunal confirmed that compensation, under Section 124 of the Equality Act 2010, must be assessed based on the principles of tort law, which seek to place the injured party back into the exact financial position they would have enjoyed had the wrong never occurred, ruling that any financial losses resulting from a ‘career crash’ need only stem from the unlawful act itself. Thus, from a legal standpoint, a single act of discrimination inflicted during employment can cause the ultimate loss of a job and career, albeit in this case an indivisible psychiatric injury caused by a surreptitious investigation.

The flawed grievance procedures did not break the chain of causation or remedy the deep psychological damage already inflicted by the discrimination. Moreover, the Judge ruled that the original Tribunal had erred in arbitrarily diminishing the future loss of earnings and failing to properly apply the official Principles for Compensating Pension Loss when calculating her defined benefit pension scheme.

This austere ruling is a clear warning to executives concerning clandestine workplace investigations, as employers can no longer hide behind the pretext that an internal investigation was kept quiet to protect the employee. If a workplace process isolates vulnerable employees, fuels toxic office rumour-mongering, and prevents employees from defending themselves, then it can be legally classified as a traumatising act of discrimination.

Source: Tribunal | 21-07-2026

Value Added Tax

Could new VAT rules change how you sell online?

Jul 20, 2026 by Terry Harris 0 Comments

The Government has launched a consultation on proposals that could significantly change the way VAT is collected on goods sold through online marketplaces. Although the changes are not yet law, they could affect thousands of UK businesses that use online platforms to reach customers.

The consultation forms part of HMRC's continuing efforts to reduce VAT fraud and simplify tax administration. It focuses on extending the responsibilities of online marketplaces, making them more accountable for ensuring the correct amount of VAT is collected on certain transactions.

At present, businesses selling through online marketplaces remain responsible for charging, accounting for and paying VAT where appropriate. Under the proposals, online marketplace operators could become liable for accounting for VAT on a wider range of sales made through their platforms.

The Government believes this approach would reduce errors, improve compliance and create a more level playing field between businesses that already meet their VAT obligations and those that do not.

If the proposals proceed, many online sellers could find that some aspects of their VAT administration become simpler. However, the changes are also likely to require businesses to understand precisely when marketplace operators are responsible for VAT and when responsibility remains with the seller.

Businesses that trade through more than one sales channel may need to pay particular attention. For example, a retailer that sells products through an online marketplace as well as its own website could find that different VAT rules apply depending on where each sale originates.

Although the consultation is still at an early stage, it highlights the direction of travel towards greater involvement of digital platforms in tax collection. Similar approaches have already been introduced in other areas of UK taxation and internationally, reflecting the growing importance of online commerce.

For business owners, the message is not one of immediate action but one of awareness. If your business relies on online marketplaces, it is sensible to keep informed about the consultation and consider how any future changes might affect your accounting systems, invoicing procedures and record keeping.

We will continue to monitor the progress of the consultation and provide updates as further details become available. In the meantime, if you sell goods through online marketplaces and would like to review your current VAT procedures, please contact us. We can help ensure your business remains compliant while identifying opportunities to simplify your VAT administration as the rules continue to evolve.

If you would like to discuss how these proposals could affect your business, please get in touch. We will be pleased to help you understand the potential impact and prepare for any future changes.

Source: Other | 19-07-2026

Income Tax

Has a pay rise quietly increased your tax bill?

Jul 20, 2026 by Terry Harris 0 Comments

Many employees and business owners have welcomed higher earnings over the past few years. However, for a growing number of taxpayers, a larger salary does not necessarily mean significantly more money in their pocket.

The reason is a process known as fiscal drag.

Although tax rates have remained broadly unchanged, personal tax thresholds have been frozen for several years. As wages increase, more people are finding themselves paying tax at higher rates, even if their pay has only kept pace with inflation.

This means that someone who previously paid only the basic rate of Income Tax may now be paying tax at 40%, while others may have moved into the additional rate band. The effect can be surprisingly expensive, particularly when combined with the loss of valuable tax allowances.

Moving into a higher tax band can affect far more than your Income Tax bill. It may reduce your Personal Savings Allowance, increase the rate of Capital Gains Tax payable on certain assets, and expose you to the High Income Child Benefit Charge. Individuals with income above £100,000 may also begin to lose their Personal Allowance, creating an effective marginal tax rate of 60% on part of their income.

Business owners should also remember that higher personal income may affect the most tax-efficient way of extracting profits from their company. The balance between salary, dividends and pension contributions should be reviewed regularly rather than simply carried forward from previous years.

Fortunately, there are often legitimate ways to reduce your taxable income. Pension contributions remain one of the most effective planning opportunities, while Gift Aid donations can also extend the basic rate tax band. Business owners may benefit from reviewing the timing of dividends, bonuses or other income where flexibility exists.

The important point is not to assume that a higher salary automatically leaves you better off after tax. A modest increase in income can sometimes trigger unexpected tax consequences that outweigh much of the additional earnings.

If your income has increased recently, now is an excellent time to review your overall tax position. Early planning can often reduce your tax liability while ensuring you continue to make the most of the reliefs and allowances available.

If you would like us to review your personal tax position or discuss ways to improve your tax efficiency, please contact us. We will be pleased to help you identify opportunities to minimise your tax bill while remaining fully compliant with HMRC's rules.

Source: Other | 19-07-2026

Value Added Tax

Do you know who must register for VAT?

Jul 16, 2026 by Terry Harris 0 Comments

Businesses must register for VAT if their taxable turnover exceeds the VAT registration threshold, or if they expect it to exceed the threshold in certain circumstances.

The VAT registration threshold is currently £90,000. The threshold applies to the value of taxable supplies made by a business.

A business must register for VAT if either of the following applies:

At the end of any month, the value of taxable supplies made in the past 12 months exceeds £90,000; or
At any point, there are reasonable grounds to believe that the value of taxable supplies in the next 30 days will exceed £90,000.

For the first condition, HMRC gives the following example. On 15 July, a business reviews its turnover and finds that taxable supplies made in the previous 12 months total £100,000. This is the first time the business has exceeded the VAT threshold. The business must apply for VAT registration by 30 August, and the effective date of registration will be 1 September.

The second condition can apply where a business knows it will exceed the threshold in the next 30 days. For example, if a business agrees a £100,000 contract on 1 May and payment is due at the end of the month, it must apply for VAT registration by 30 May. The effective date of registration will be 1 May.

The £90,000 threshold also applies to relevant acquisitions of goods from EU Member States into Northern Ireland.

Source: HM Revenue & Customs | 13-07-2026

Income Tax

When does a hobby become a taxable business?

Jul 16, 2026 by Terry Harris 0 Comments

Not every hobby becomes a taxable business, but it is important to be aware when this can happen. This can apply even if you are making some money from your hobby. HMRC looks at a range of factors to decide whether an activity is a genuine trade, including whether there is a business intention behind it or whether it remains a personal interest.

A hobby can gradually develop into a business, particularly where activities become more regular, organised or profit-focused. For example, repairing cars, selling collectibles or making items to sell may generate income, but this alone does not automatically mean a person is carrying on a business. HMRC considers whether the activity passes the “business test” when deciding if tax rules apply.

Small-scale or occasional sales from hobbies will not usually be treated as a business. However, where a hobby grows into a more substantial activity, it may create tax obligations. Many successful businesses have started as hobbies.

Where income does become taxable, there are two separate £1,000 tax-free allowances that may help:

the trading allowance for income from self-employment, casual services or hiring out personal equipment
the property allowance for gross property income, such as renting out a driveway

If either relevant allowance covers all the income from that activity, the income is tax-free and does not need to be declared. If income exceeds £1,000, the allowance can sometimes be deducted instead of actual allowable expenses when calculating taxable profits.

Source: HM Revenue & Customs | 13-07-2026

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