 |
Welcome...
To July'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!
|
|
|
|
|
|
HMRC Inheritance Tax Enquiries Hit Six-Year High
|
top
|
|
HMRC opened 4,940 formal inheritance tax (IHT) enquiries in the last financial year - an 18% increase year-on-year. This is the highest level in six years, driven by a government crackdown on avoidance and non-compliance previously announced by the Chancellor, Rachel Reeves. She aims to raise an extra £6.5bn a year by the end of Parliament through HMRC modernisation and recruitment of 5,000 compliance caseworkers and 1,800 debt collection officers.
Formal enquiries are triggered when HMRC believes an IHT return may be incomplete or inaccurate. HMRC can demand documents, valuations, and explanations from families or accountants during these checks. However, only 40% of last year's checks resulted in amendments, down from 45% the previous year. Still, IHT receipts hit a record £8.5bn last year.
Frozen IHT thresholds, combined with rising property values and inflation, mean more estates are being pulled into the tax net each year. This will increase further in 2027, when pensions are added to the value of estates.
|
| |
|
Summer attractions see VAT reduced to 5%
|
top
|
|
As part of the government's "Great British Summer Savings" package, aimed at helping families during rising costs linked to the Iran war, Rachel Reeves announced a VAT cut to 5% on tickets (for adults and children) for theme parks, zoos and museums. It also includes children's tickets for the cinema, theatre, concerts and restaurant meals.
This measure will only last over the summer holidays (25th June until 1st September) and is intended to give families "a bit of breathing room to enjoy moments that matter without the same level of financial strain", according to the Prime Minister, Kier Starmer. It will cost the Government around £300m but is hoped to stimulate spending in the UK's visitor attraction sector, giving a much-needed boost to the economy.
|
| |
|
Increase in Mileage Allowance
|
top
|
|
The Approved Mileage Allowance Payment (AMAP) for employees using their own car for work (not commuting) has risen from 45p to 55p per mile for the first 10,000 miles per tax year. After 10,000 miles, the rate remains 25p per mile.
The Chancellor made this announcement recently and the change has been backdated to 6 April 2026.This is the first increase since 2011 and applies to employees and self-employed workers using their own car or van for work. You cannot claim separately for fuel, tax, MOT, repairs, etc. - the mileage rate is meant to cover all running costs.
If your employer pays less than 55p, you can claim tax relief on the difference (for example, employer only pays 30p, so you claim tax relief on 25p). If your employer pays nothing, you can claim tax relief on the full 55p. Claims are made via HMRC or a self-assessment tax return.
|
| |
|
Reminder: check if you are eligible for the Employment Allowance
|
top
|
|
The Employment Allowance allows companies and charities to reduce their annual National Insurance (NI) liability. For the second tax year running, the maximum you can claim is £10,500 (the maximum prior to April 2025 is £5,000).
To be eligible, you must be a business or public body and do less than half your work in the public sector. You can also be a charity or employ a care/support worker. Since April 2025, if your company pays more than £100,000 in Class 1 NI, you can claim. However, you cannot claim if your company only has one director, and they are the only employee liable for secondary Class 1 NI.
You make the claim through your payroll software by stating "yes" in the Employment Allowance indicator field on your Employment Payment Summary (EPS) submission. If successful, HMRC will reduce your Class 1 NI liability once you've run your payroll each month, until the £10,500 (or the amount you were eligible for) is used up or the tax year ends (whichever comes sooner).
|
| |
|
July Questions and Answers
|
top
|
|
Q: I can no longer claim tax relief on my expenses when working from home. Is there anything I can do (I'm a basic rate taxpayer)?
A: The Working From Home (WFH) tax relief scheme was introduced to allow employees who were contractually required to work from home to make a flat rate claim to help cover the extra household costs associated with working from home.
That was abolished from 6th April 2026 as HMRC stated there were high levels of non-compliance with over 50% of claims being ineligible. This is a loss of about £62 per year for basic rate taxpayers and £124 per year for higher rate taxpayers.
To try to fill this gap, you could ask your employer if they would pay you the WFH allowance directly. You'd need to have a formal homeworking agreement in place, otherwise the payments would be treated as a benefit-in-kind and be taxed accordingly.
Employers can reimburse evidenced additional household costs (e.g., utilities, business phone use) tax-free if necessary for the job. Mixed-use costs must be fairly apportioned They can also provide equipment (computers, furniture, etc.) tax-free if personal use is only incidental.
Q: Is there a way to mitigate the recent increase in dividend tax?
A: For this tax year, whilst the dividend allowance of £500 has remained frozen, the tax rate has increased 2 percentage points on each tax band (ordinary rate is 10.75%, upper rate is 35.75%). This has led many to review their investment strategies. The two main ones are:
- Stocks and Shares ISA - ideal for high-yield equity and UK equity income funds.
- Pension - ideal for long-term compounding of reinvested dividends, higher-rate taxpayers who want maximum tax efficiency, people expecting to be basic-rate taxpayers in retirement.
Both ISAs and pensions make dividends completely tax-free, but they do it in different ways and with very different consequences for access, tax relief, and long-term efficiency. ISAs win on flexibility; pensions win on raw tax power. If your goal is pure dividend efficiency, pensions are mathematically superior because you get tax relief on contributions, dividends grow tax-free and you may withdraw at a lower tax rate than you saved going in.
Other options to consider, particularly if you are a company director who pays part of your salary as dividends:
- Use spouse or partner allowances - transfer shares to your lower-earning spouse to use their allowances and lower tax band. Each partner has their own dividend allowance and personal allowance, doubling efficiency if structured well.
- Time dividends across tax years - spreading dividends across years helps avoid higher tax bands and makes full use of allowances.
- Consider capital gains instead of dividends - extracting value via share sales may qualify for CGT reliefs like Business Asset Disposal Relief. CGT rates can be lower than dividend tax.
Please get in touch with us to discuss your options.
Q: With unspent pensions being included in my estate for inheritance tax purposes from next year, how can I reduce my estate's value below £2m so that I don't lose the residence nil-rate band?
A: With the Inheritance Tax (IHT) threshold being frozen until 2031 and pensions being included in the IHT calculation from April 2027, more estates are finding themselves rising above £2m in value.
As you are no doubt aware, the standard nil-rate band is £325k and there is an additional nil-rate band of £175k if leaving a home to children or grandchildren. This means that couples can combine allowances to pass on up to £1m tax-free. However, for every £2 your estate is worth more than £2m, you lose £1 of this residence nil-rate band until it disappears. This means estates left by a single person worth £2.35m receive no residence nil-rate band, while for couples it's £2.7m
There are several ways to reduce your estate's value in a tax-efficient manner:
- Gifting - annual exemption of £3k per tax year, small gifts of £250 per person (unlimited recipients but cannot combine with other allowances for the same person), and wedding gifts of up to £5k for a child's marriage. Unlimited gifts become IHT-free if you survive 7 years (the "7-year rule").
- Charitable Gifting - gifts to charity reduce your taxable estate. Leaving 10% or more of your estate to charity reduces the IHT rate from 40% to 36%.
- Downsizing - moving to a cheaper home releases equity and reduces estate value. But you must give away or spend the released equity for it to reduce your estate (the 7-year rule may apply).
- Accessing pension wealth earlier - with pensions entering IHT from 2027, drawing down earlier may reduce your estate's value. But once taken, tax-free lump sums cannot be put back into the pension and you must ensure withdrawals don't jeopardise your retirement income.
Please get in touch to discuss these and other ways of reducing your IHT exposure.
|
| |
|
|
1st
- Corporation Tax payments are due for companies with a year-end of 30th September.
6th
- Deadline for submitting P11D and P11D(b) forms for the tax year 2025-26.
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 June.
22nd
- Deadline for employers operating PAYE to pay HMRC electronically, for June.
- It is also the deadline for paying class 1A National Insurance owed on expenses or benefits for the tax year 2025-26.
31st
- Corporation Tax Returns (CT600 form) are due for companies with a year-end of 31st July.
|
| |
|
|
|
|
Please contact us if we can help you with these or any other tax or accounts matters.
In addition, if there's anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
|
If you are not already a client and are interested in becoming one, we would love to come to meet with you to discuss how we can help and provide you with a competitive quote for our services.
All new client consultations are provided free of charge and without obligation.
|
| |
If the images do not show.
If the images contained within this email do not show correctly please add this email to your safe senders list.
|
| |
|
|
