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Welcome...
To June'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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Making Tax Digital (MTD) for Income Tax - deadline reminders
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From April 2026, MTD for Income Tax came into force for sole traders and landlords who had gross income over £50,000 in the previous tax year. You must send quarterly updates summarising income and expenses - not full tax returns. The first quarterly update (covering April to June) is due by 7 August. The subsequent deadlines are 7 November 2026, 7 February 2027 and 7 May 2027.
This does not change the need to submit a self-assessment tax return by 31 January 2027. Tax payments are also still due on 31 January and 31 July each year, as before.
These quarterly updates must be submitted using HMRC recognised software. There are many free and paid for options available, as well as utilising an accountant to act as an agent for you. Don't forget that separate submissions must be made for each income stream, for example if you earn money from being self-employed but also receive rental income, you'll need to submit two updates.
Research shows 70% of sole traders don't understand what they need to do under the new MTD system, only 37% know about the first deadline and just 8% currently use software to manage their tax records.
Please get in touch if you need assistance in choosing the right option for you or want to check that your choice will keep you compliant with the new rules as HMRC is introducing fines for non-compliance and late submissions.
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HMRC rejects almost half of Making Tax Digital exemptions
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At the time of its request, a Freedom of Information request has shown that HMRC rejected 47% of applications for exemption from the MTD for Income Tax scheme. Over 1,600 taxpayers had applied for exemption due to "digital exclusion" but only 855 were approved.
Taxpayers can apply if they cannot use digital tools because of age, disability, health conditions, or religious beliefs. Those approved can continue filing traditional Self-Assessment returns.
759 of the approved exemptions related to taxpayers entering the system in April 2026, ahead of the first rollout phase. Applications are expected to rise as the April 2027 deadline approaches as more sole traders and landlords will be eligible due to the earnings threshold dropping from £50k (earned in the 2024/25 tax year) to £30k (earned in the 2025/26 tax year).
As digital exclusion is hard to define and evidence, please get in touch if you would like us to assist in an exemption application.
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Pensions to be included in IHT calculations from April 2027
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From April 2027, unused defined contribution (DC) pensions will be counted as part of a person's estate for inheritance tax (IHT). This is a significant shift from current rules where most DC pensions fall outside the estate. Defined benefit (DB) pensions remain unaffected.
Estates above the nil-rate band will face a 40% IHT charge. It is believed that 10,500 estates will pay IHT for the first time and 38,500 estates will see higher bills, averaging £34,000 extra. However, this change will only see a move from 5% to 8% of all estates paying IHT.
Despite this, research shows widespread anxiety with 54% of adults fearing their families will face higher IHT and 22% now feeling less confident about their pensions. People are already reacting to the impending change, with savers withdrawing £3.9bn in lump sums in the year after the announcement - £868m more than the previous year. One in seven are spending more of their pension; nearly half plan to. Other things to consider, if you feel your family will now receive an IHT bill, is to exchange your pension for an annuity (these are normally outside the scope of IHT) or use the gifting rules to reduce your estate's overall value.
Please get in touch to discuss your options if you feel this rule change is going to affect you.
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Drop in tax relief on VCTs may affect economic growth
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The Chancellor reduced income tax relief on Venture Capital Trusts (VCTs) from 30% to 20%, effective 6 April 2026. Many have argued that despite political rhetoric about boosting growth, this tax change (amongst others) actively undermines early-stage businesses. They say that it cuts a lifeline for British start-ups and will cost investors thousands.
VCTs are listed funds that invest in young, unquoted companies. They are a crucial source of capital for early-stage businesses. They have raised £4.3bn in the last five years, according to HMRC. Past beneficiaries include Graze, Virgin Wines, and Zoopla.
The annual VCT investment limit has doubled to £10m, intending to help companies scale beyond the start-up phase. But cutting the tax relief at the same time is seen as contradictory - "giving with one hand and taking with the other." The last time VCT relief was cut - from 40% to 30% in 2006 - fundraising dropped by two-thirds year-on-year. Wealthier investors may redirect their money elsewhere, for example EIS/SEIS (offering 30-50% relief), pensions or mainstream equity income funds.
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June Questions and Answers
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Q: I retired last year but have since taken on a part-time job. My defined benefit pension uses up my Personal Allowance, so how much tax will I have to pay?
A: As you state the full £12,570 Personal Allowance has been consumed, all your earnings for your part-time job will be taxable at your marginal rate. This is most likely to be 20% for you, if your total annual income remains below £50,270.
If you are paid through a PAYE scheme, your employer will get a tax code from HMRC, reflecting your Personal Allowance has been used up, and deduct the tax automatically.
You should be aware that if you are also in receipt of the state pension, it could complicate your tax position. Whilst taxable, the state pension is paid with no tax deducted. But HMRC will collect any tax due via the tax code on other sources of income - in your case, your part-time job. This can result in more tax being taken via PAYE than you might be expecting.
Please get in touch to discuss ways of reducing your tax exposure under these circumstances.
Q: Looking at my paperwork for the last tax year, I think I may have overpaid tax. What do I need to do to correct this with HMRC?
A: HMRC usually notifies you if you've paid too much (or too little) tax by the end of the tax year. It typically sends a P800 tax calculation letter, or a Simple Assessment letter. These letters explain whether you owe tax or are due a refund and get sent out starting in June of the subsequent tax year. You'll only get a letter if you're employed or receiving a pension. Self-Assessment taxpayers won't receive a P800 or Simple Assessment — their bill adjusts automatically.
Reasons you might get a P800:
Incorrect tax code (e.g., HMRC had outdated income info)
You changed jobs and were paid by two employers in the same month
You started receiving a workplace pension
You received ESA or Jobseeker's Allowance
Reasons you might get a Simple Assessment:
You owe tax that can't be taken automatically from your income
You owe more than £3,000
You need to pay tax on your State Pension
If you don't receive a letter and still think you've overpaid tax, you can request a refund online via GOV.UK using your Government Gateway ID, access the HMRC app using the "claim a refund" option, or by post using a P800 or relevant form.
Q: I am close to reaching the age where I can take my private pension but have no plans to retire yet. Are there tax benefits if I defer my pension until I do?
A: Yes. Judging by what you have said, you have not started to take any of your pension, whether it be the tax-free lump sum available at age 55 or a regular drawdown of income. If that is the case, you can continue to contribute up to £60k per tax year to your pension. This attracts tax relief.
If you had taken any of your pension as income, you would have triggered the Money Purchase Annual Allowance (MPAA), which is the limit on the amount you can contribute to your defined contribution pension. The limit drops from £60k to £10k, greatly reducing the maximum potential tax relief available. Also, unlike the Standard Annual Allowance of £60k, you cannot carry forward any unused MPAA from previous years.
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1st
- Corporation Tax payments are due for companies with a year-end of 31st August.
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 May.
22nd
- Deadline for employers operating PAYE to pay HMRC electronically, for May.
30th
- Corporation Tax Returns (CT600 form) are due for companies with a year-end of 30th June.
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Please contact us if we can help you with these or any other tax or accounts matters.
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