Category: Income Tax

Tax returns for a deceased taxpayer

You may need to submit tax returns for someone who has died. As the personal representative, you are legally responsible for reporting income earned before and after death.

This person, known as the ‘personal representative’, is legally responsible for dealing with the deceased’s money, property and possessions. This includes reporting income earned both before death and income generated by the estate afterwards.

HMRC will inform the personal representative if self-assessment return is needed for the deceased. If so, they will send the necessary forms. To complete the return, the personal representative will need financial details such as:

• Bank and savings records
• Dividend statements
• Employment documents (P45 or P60)
• Pension and state pension information
• Income from property or self-employment

The tax return must be sent by post to meet the deadline provided in HMRC’s letter. The personal representative can also appoint an accountant or other professional to assist in compiling the tax return.

If the estate continues to generate income (e.g., from rent or investments), the personal representative may also need to:

• Register with HMRC
• Submit a separate tax return for this income

Who is liable to Income Tax at Scottish rates?

Where you live determines if you pay Scottish Income Tax. The rules are not based on where you work, who pays you, or national identity, but on your main UK home during the tax year.

The definition of a Scottish taxpayer is generally linked to the question of whether the taxpayer has a 'close connection' with Scotland or elsewhere in the UK. The liability to Income Tax at Scottish rates is not based on nationalist identity, location of work or the source of a person’s income e.g., receiving a salary from a Scottish business.

The Scottish rate of Income Tax (SRIT) is payable on the non-savings and non-dividend income of those defined as Scottish taxpayers. HMRC’s guidance states that for the vast majority of individuals, the question of whether or not they are a Scottish taxpayer will be a simple one – they will either live in Scotland and thus be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer. 

If a taxpayer moves to or from Scotland from elsewhere in the UK, then their tax liability for the tax year in question will be based on where they spent the most time in the relevant tax year. Scottish taxpayer status applies for a whole tax year. It is not possible to be a Scottish taxpayer for part of a tax year.

You may also need to pay Scottish Income Tax if you live in a home in Scotland and also have a home elsewhere in the UK. In this case, you need to identify which is your main home based on published guidance and the facts on the ground. You may also be liable to SRIT if you do not have a home and stay in Scotland regularly, for example you stay offshore or in hotels.

Accounting on a cash basis

From April 2024, the cash basis is the default method for sole traders and most partnerships when preparing Self-Assessment returns. Designed to simplify tax reporting, the cash basis lets businesses record income and expenses when money actually moves, easing the admin burden for many. Those who prefer or need traditional accruals accounting must actively opt out when submitting their tax return.

Businesses that prefer traditional accruals accounting or who are ineligible for the cash basis, must opt out of the cash basis when submitting their self-assessment return.

A number of other changes to the cash basis took effect from April 2024. This included the following:

• The removal of the turnover thresholds for businesses to use the cash basis.
• The removal of the restrictions on using relief for losses made in the cash basis, aligning the rules with accruals.
• Interest restrictions have been removed so both cash basis and accruals accounting are subject to the same tax rules.
• People with more than one business are able to choose whether they use the cash basis or accruals accounting for each business they have, rather than having to pick one method for all their businesses.

The cash basis is not available to limited companies and limited liability partnerships.

Claiming for uniforms, work clothing and tools

Buying tools or clothing for your job? You could claim tax relief. Check if you qualify and how to get your money back. If you have spent your own money on items essential for your work, such as tools or specialist clothing, HMRC may allow you to claim tax relief, even up to four years after you paid. There are two ways to make a claim, and it might be simpler than you think.

You may be able to claim tax relief on:

• Cleaning, repairing, or replacing specialist clothing (e.g. uniforms, safety boots).
• Repairing or replacing small tools needed for your job (e.g. scissors, screwdrivers).

However, you cannot claim for the initial cost of purchasing uniforms, tools or specialist work clothing.

There are two options for making a claim:

1. Claim the actual amount
   • You’ll need to provide receipts or proof of purchase.
   • Submit your claim under ‘Other expenses’ online at https://www.tax.service.gov.uk/claim-tax-relief-expenses/what-claiming-for.
2. Claim a Flat Rate expense / deduction
   • Use this if your job qualifies for a standard fixed amount.
   • There is no need to provide receipts.
   • Claim under ‘Uniform, work clothing and tools’ in the same online portal mentioned above.

If you complete a self-assessment return, you must claim through your tax return instead.

You cannot claim tax relief on PPE (e.g., gloves, hard hats, goggles). If your job requires PPE, your employer must provide it for free or reimburse you for any purchase.

This tax relief is designed to support employees with essential job-related costs and so it’s worth checking if you are eligible to claim.

Tax rules for savings interest

You could earn up to £18,570 in tax-free savings interest in 2025–26, thanks to the personal allowance, starting rate for savings, and the Personal Savings Allowance.

If your taxable income for the 2025–26 tax year is less than £17,570, you will not pay tax on the interest you receive. This figure combines the £5,000 starting rate for savings (taxed at 0%) with the £12,570 personal allowance.

In addition, the Personal Savings Allowance (PSA) provides further tax-free savings interest: basic-rate taxpayers can earn up to £1,000 in interest tax-free, while higher-rate taxpayers can earn up to £500. Those who pay the additional rate of tax on income over £125,140 are not eligible for the PSA. This means that a basic-rate taxpayer with no other income could receive up to £18,570 in tax-free interest.

It's important to understand that if your total non-savings income exceeds £17,570, you are no longer eligible for the starting savings rate. However, if your non-savings income falls between £12,570 and £17,570, the starting rate is reduced by £1 for every £1 your income exceeds your personal allowance.

Interest earned from ISAs or premium bond winnings is not included in these thresholds and remains tax-free. Those with higher savings in tax-free accounts can continue to benefit from their applicable PSA.

Banks and building societies no longer deduct tax from interest payments automatically. If you do owe tax on savings income, you must declare it through a self-assessment tax return.

If you’ve overpaid tax on your savings interest, you can submit a claim for a refund. Claims can be backdated up to four years from the end of the current tax year. For the 2021–22 tax year, the deadline to make a claim is 5 April 2026.

Who must send in a tax return

From self-employment to rental income, there are many reasons you may need to file a Self-Assessment return. Know the triggers and register with HMRC by 5 October if this is your first time.

There are a number of reasons why you might need to complete a self-assessment return. This includes if you are self-employed, a company director, have an annual income over £150,000 and / or have income from savings, investment or property.

You must file a self-assessment tax return if any of the following apply to you during the tax year:

• You were self-employed as a sole trader and earned more than £1,000 (before expenses).
• You were a partner in a business partnership.
• Your total taxable income exceeded £150,000 in the 2025–26 tax year. However, even if your income is under £150,000, other factors (such as rental income or capital gains) may still require you to file a self-assessment return.
• You had to pay Capital Gains Tax on the sale or disposal of assets.
• You were liable for the High Income Child Benefit Charge.
• You had other sources of untaxed income, such as:
  • Rental income from property
  • Tips or commission
  • Savings and investment income (including dividends)
  • Foreign income

If you need to file a self-assessment return for the first time, you must inform HMRC by 5 October following the end of the tax year. For the 2025–26 tax year (which ends on 5 April 2026), the deadline to register is 5 October 2026.

HMRC has an online tool www.gov.uk/check-if-you-need-tax-return/ that can help you check if you are required to submit a self-assessment return.

When do the higher rates of Income Tax apply

Once your income passes £100,000, your tax-free allowance starts to shrink. Between £100,000 and £125,140, the effective tax rate climbs to 60%, but smart planning can help.

If you earn over £100,000 in any tax year your personal allowance is gradually reduced by £1 for every £2 of adjusted net income over £100,000 irrespective of age. This means that any taxable receipt that takes your income over £100,000 will result in a reduction in personal tax allowances.

Your personal Income Tax allowance would therefore be reduced to zero if your adjusted net income is £125,140 or above. Your adjusted net income is your total taxable income before any personal allowances, less certain tax reliefs such as trading losses and certain charitable donations and pension contributions.

If your adjusted net income is likely to fall between £100,000 and £125,140 your £12,570 tax-free personal allowance is gradually tapered. This tapering continues until your allowance is fully withdrawn at an income level of £125,140. This effectively results in a 60% marginal tax rate on income between £100,000 and £125,140.

For example, if your adjusted net income is £110,000, you would lose £5,000 of your personal allowance. This additional £5,000 is taxed at 60% due to the combined effect of the 40% higher rate of Income Tax and the partial loss of the personal allowance.

If your income sits within this band you should consider what financial planning opportunities are available in order to avoid this personal allowance trap by trying to reduce your income below to £100,000. This can include giving gifts to charity, increasing pension contributions and participating in certain investment schemes.

Do not forget to claim the marriage allowance

If one partner in a marriage or civil partnership earns under £12,570, you could save up to £252 a year, and up to £1,260 if you backdate your Marriage Allowance claim for the past four years.

The Marriage Allowance can be claimed by married couples and civil partners where one partner does not pay tax or does not pay tax above the basic rate threshold for Income Tax (i.e., one partner must earn less than the £12,570 personal allowance for 2025-26).

If claimed, the lower-earning partner can transfer up to £1,260 of their unused personal tax-free allowance to their spouse or civil partner. The transfer can only be made if the recipient (the higher-earning partner) is taxed at the basic 20% rate, which typically means they have an income between £12,571 and £50,270. For those living in Scotland, this would usually apply to an income between £12,571 and £43,662.

By using the allowance, the lower-earning partner can transfer up to £1,260 of their unused personal allowance, which could result in an annual tax saving of up to £252 for the recipient (20% of £1,260).

If you meet the eligibility criteria and have not yet claimed the allowance, you can backdate your claim for up to four years. This could provide a total tax saving of up to £1,260 and would include the tax years 2021-22, 2022-23, 2023-24, 2024-25 and the current 2025-26 tax year. Applications for the allowance can be submitted online at GOV.UK.

Can you reduce your 31 July tax payment on account

Expecting lower profits 2024-25 compared to 2023-24? You can ask HMRC to reduce your 31 July 25 tax payment on account. Act early to manage cash flow. Use your online account or we can handle it for you.

Self-assessment taxpayers normally pay their income tax in three instalments each year. The first two payments on account are due on 31 January during the tax year and 31 July after the tax year ends. These are each based on 50% of the previous year’s net income tax liability.

This means that the 31 January 2025 (now passed) and upcoming 31 July 2025 payments are both based on your 2023–24 tax liability.

A final balancing payment is due on 31 January 2026, once your actual tax bill for 2024–25 has been confirmed through your submitted tax return.

If you expect your income or profits for 2024–25 to be lower than for 2023–24, you can ask HMRC to reduce your 31 July 2025 payment on account. This can be done through your HMRC online account or by submitting form SA303 by post. You must provide a reasonable estimate of your expected tax liability.

If we are your registered tax agent we can undertake this election for you.

There is no limit to how many times you can apply to adjust your payments. However, if you reduce your payments too far and underpay, HMRC may charge interest or penalties on the shortfall.

You are not required to make payments on account if:

• Your net Income Tax liability for 2023–24 was less than £1,000, or
• At least 80% of your 2023–24 tax liability was collected at source (e.g. through PAYE).

If your taxable profits are likely to increase in 2024–25, there’s no need to notify HMRC in advance, but you should be prepared for a higher balancing payment in January 2026.

Could you extend Child Benefit claim?

Parents of 16–19-year-olds: confirm your child’s continued education or training by 31 August 2025 to keep Child Benefit payments going. Last year, over 870,000 families updated HMRC, most online. It only takes a few minutes and helps avoid missed payments. If your child is still in approved education, act now to stay on track.

Taxpayers entitled to the child benefit should be aware that HMRC usually stop paying child benefit on the 31 August following a child’s 16th Birthday. Under qualifying circumstances, the child benefit payment can continue until a child reaches their 20th birthday if they stay in approved education or training. This must be confirmed to HMRC, or payments will stop.

Approved education must be full-time, with more than 12 hours per week of supervised study or course-related work experience. Approved education includes A levels, T levels, Scottish Highers, NVQs up to Level 3, home education (if started before 16 or after 16 with special educational needs), study programmes in England, and pre-apprenticeships. The course must be started before the child turns 19.

Child Benefit cannot be claimed if your child is:

• Studying for a university degree or BTEC Higher National Certificate (advanced course).
• On an apprenticeship (unless it’s a Foundation Apprenticeship in Wales).
• Undertaking a course with an employer’s agreement (e.g., to secure a job or gain skills for an existing job).

Approved training should be unpaid and can include:

• Wales: Foundation Apprenticeships, Traineeships, or the Jobs Growth Wales+ scheme.
• Scotland: The No One Left Behind programme.
• Northern Ireland: PEACEPLUS Youth Programme 3.2, Training for Success, or Skills for Life and Work.

Courses that are part of a job contract are not approved.

HMRC sends a letter in your child’s last year at school asking you to confirm their plans. The letters include a QR code which, when scanned, directs them straight to GOV.UK to update their claim quickly and easily online. This can also be done on the HMRC app.

Parents have until 31 August 2025 to tell HMRC that their 16-year-old is continuing their education or training, in order to continue receiving Child Benefit. No child benefit is payable after a young person reaches the age of 20 years.

Child Benefit is paid at a weekly rate of £26.05 for the only or eldest child, and £17.25 for each additional child. However, families where either parent earns over £60,000 a year may be affected by the High Income Child Benefit Charge (HICBC). This means they may have to pay back some or all of the benefit through their income tax return. If income exceeds £80,000, the full amount of Child Benefit must be repaid. Families can still choose to receive the benefit and pay the charge or opt out of receiving payments to avoid the charge altogether.