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Welcome...
To March's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
If you need further assistance just let us know or you can send us a question for our Question and Answer Section.
We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.
Please contact us for advice in your own specific circumstances. We're here to help!
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HMRC issues Making Tax Digital reminder to workers
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From 6 April 2026, self-employed workers and landlords earning over £50,000 in gross income will need to keep digital tax records throughout the year, submit quarterly tax updates to HMRC, and file an annual Making Tax Digital (MTD) tax return.
864,000 sole traders and landlords will be in the first group affected. This will rise to nearly 3 million people by April 2028 as lower income bands are added.
The Association of Taxation Technicians warns that people must prepare now to avoid errors, missed submissions and unnecessary stress. Affected individuals are urged to confirm whether they fall under the new MTD rules, choose compatible commercial accounting software, speak to an accountant or tax adviser early to understand the new quarterly deadlines and record-keeping requirements.
HMRC describes MTD as one of the biggest tax system changes in years. The goal is to modernise tax reporting and reduce errors, but it requires significant preparation from taxpayers.
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HMRC issuing pensioners with new tax codes for winter fuel repayments
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Some state pensioners will receive updated PAYE tax codes. This is to recover winter fuel payments from those whose total income exceeded £35,000 in the 2025-26 tax year.
The UK Government has introduced a new income-threshold system, replacing the old Pension Credit-linked eligibility rules. Around two million pensioners are expected to repay their winter fuel payment through the tax system. They will be notified by letter or via the HMRC app.
All eligible pensioners still receive the winter fuel payment automatically. If their income is above £35,000, HMRC adjusts their tax code to reclaim £200 for those under 80 and £300 for those aged 80+. Repayments are spread across the tax year via PAYE-roughly £17 per month for a £200 repayment. Pensioners cannot repay in a lump sum; it must be done through tax code adjustments.
HMRC will recover payments during the 2026-27 tax year by altering tax codes. After the tax year ends, HMRC will check whether the correct amount was collected. If not enough was recovered, a tax calculation will be issued for any remaining balance.
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High earners actively avoiding crossing the £100k income threshold
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According to the Chartered Management Institute, 43% of managers say they or their employees have taken steps to keep income below £100k. This behaviour is driven by the steep tax consequences that kick in once earnings exceed that level.
This is known as the '£100,000 tax trap'. Once income exceeds this, families lose access to tax-free childcare worth up to £2,000 per child and 30 hours of free childcare, worth up to £7,500 per child per year. In addition, the personal allowance tapers away between £100,000 and £125,140, creating an effective marginal tax rate of 62% (and 69.5% in Scotland).
To mitigate this, it was found that workers are responding as follows:
27% increased pension contributions to reduce taxable income.
24% used salary-sacrifice schemes (though these will be capped from 2029).
15% reduced hours or went part-time.
9% turned down promotions.
8% retired early.
6% donated to charity to stay below the threshold.
It is argued that this causes wider economic concerns, such as discouraging extra work, especially among doctors. Experts argue the threshold is 'irrational' and harmful to productivity.
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HMRC is increasing tax investigations
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HMRC is intensifying checks on individuals and small businesses. Many investigations begin because of avoidable mistakes that trigger automated red flags. Here are six common mistakes that can trigger an HMRC investigation:
- Living beyond your declared means-if your lifestyle (cars, holidays, property) doesn't match your reported income, HMRC's data-matching systems may flag you. They compare bank data, land registry records, and even social media activity.
- Running a cash-heavy business-businesses like restaurants, salons, and trades are considered higher risk. Poor record-keeping or unbanked cash can raise suspicion.
- Late or incorrect tax filings-missing deadlines or frequently amending returns suggests disorganisation or possible avoidance.Repeated issues put you firmly on HMRC's radar.
- Mixing personal and business finances-sole traders often fall into this trap. It makes audits harder and can look suspicious. A separate business bank account is strongly recommended.
- Unrealistic or excessive expense claims-HMRC algorithms flag unusually high expenses, especially for travel, meals, or home-office use. Claims must be wholly and exclusively for business.
- Sudden or unexplained changes in income-sharp drops in turnover or profit without a clear reason can prompt scrutiny. HMRC expects documented explanations (e.g. losing a major client).
Good record-keeping and accurate reporting are essential. If you are unsure, please get in touch to discuss your situation to avoid unnecessary stress and costs.
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March Questions and Answers
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Q: Are Premium Bonds a tax efficient way of saving?
A: Premium Bond prizes are always tax-free, including large wins such as £100,000 or £1 million.
This makes them appealing for people who have already used tax-free allowances like ISAs or the personal savings allowance.
However, you would need to invest £10,000 to earn the average 3% rate of return. As most prizes are small, big wins are rare, and you could have bad luck and win nothing.
Please get in touch with us to discuss tax efficient ways of investing your money.
Q: My father paid capital gains tax when selling our family home despite not living there (he still paid the mortgage). Shouldn't the sale have been covered by his private residence relief?
A: Capital Gains Tax (CGT) on the sale of a property is based on legal ownership and actual occupation. In order to qualify for private residence relief (PRR), your father would need to be the registered owner of the property and have lived there as his main residence for the entire period of ownership.
PRR is not based on the family continuing to live there. Once he moved out and no longer occupied the home as his main residence, your father's eligibility for relief stopped. It would be considered as a second property for the purposes of his CGT calculation.
Q: I've used up my ISA allowance - is it worth putting money into a CITR savings account?
A: There are 33 account providers accredited to use Community Investment Tax Relief (CITR), mostly offering investment opportunities but one does offer a savings account.
Your deposited money would be used to support charities and social enterprises and would be locked away for several years before you can make any withdrawals.
Whilst the interest earned is very low (and is taxable), and could possibly be zero depending on movements in the Bank of England base rate, this account offers a tax relief of 5% on three quarters of the money you put in. You must claim this through a self-assessment tax return.
Depending on how much you have to deposit and how readily you might need access to it, it may be better to put your cash into a regular savings account and pay the tax on the interest. This CITR account only really comes into its own if you have a large sum to save.
Please get in touch to discuss your options with us.
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1st
- Corporation Tax payments are due for companies with a year-end of 30th May
19th
- For employers operating PAYE, this is the deadline to send an Employer Payment Summary (EPS) to claim any reduction on what you'll owe HMRC.
- It is also the deadline for employers operating PAYE to pay HMRC by post, for February.
22nd
- Deadline for employers operating PAYE to pay HMRC electronically, for February.
31st
- Corporation Tax Returns (CT600 form) are due for companies with a year-end of 31st March.
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