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Welcome...
To December'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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Top earners see an increase in HMRC investigations
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HMRC is intensifying its crackdown on wealthy taxpayers, backed by major government funding, with investigations rising sharply. HMRC's wealthy team launched 13,055 investigations into high earners in the last tax year, a 60% increase compared to 8,110 the year before. Focus is on individuals earning over £200,000 or with assets above £2m. Around 850,000 people (2% of the UK population) fall into this category.
The Chancellor has allocated £1.4bn to HMRC, funding 5,000 new compliance staff over five years. An additional 400 staff will be hired by 2029-30 to tackle offshore tax non-compliance. They use information from 100+ overseas jurisdictions to identify property, investments, or accounts where tax may be due.
Currently, 17,700 investigations are ongoing, with 2,600 lasting 2-5 years and nearly 500 exceeding 15 years. Whilst the process can be lengthy and complex, HMRC feels it is worth it as it recovered £3.7bn from tackling tax non-compliance and evasion among the wealthy in 2024-25 alone.
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Treasury dealt blow as thousands of EV drivers use tax loophole
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Electric vehicle drivers exploited a loophole to secure another year of tax-free motoring, costing the Treasury millions. Early renewals surged by 1,400% compared to the previous year, costing the Treasury about £30 million in lost revenue.
Around 300,000 electric car owners renewed their registrations early with the DVLA before April 2025. This allowed them to avoid the new Vehicle Excise Duty (VED) charge of £195 per year that applies to EVs registered after 2017 once their first year exemption ends.
The National Audit Office (NAO) criticised the DVLA for failing to anticipate the rush. It argued that better planning could have helped the Treasury forecast the impact before ending EV tax exemptions.
Ministers plan to introduce a new "VED+" system in 2028. This will be a 3p-per-mile charge where drivers estimate mileage and pay upfront. If they drive fewer miles, unused credit rolls over. If they exceed the estimate, they must pay extra. Treasury figures suggest a typical EV driver could be £250 worse off per year under this scheme. The reform is intended to replace declining fuel duty revenues as more motorists switch to electric.
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Many risk paying tax twice due to multiple HMRC letter demands
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HMRC has sent multiple tax demand letters to some taxpayers this year. The first letter did not include tax owed on savings interest. A second "simple assessment" letter did include savings interest but also repeated the tax already demanded in the first letter.
This risks taxpayers paying twice if they don't realise they've already settled part of the bill. The issue should only affect those who received a 2024/25 simple assessment before October this year.
HMRC says it only sends simple assessment letters after receiving savings interest data from banks. The letters are meant to explain clearly how much is owed and how to pay. They are designed for people who owe tax but don't need to file a full self-assessment return.
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Snail farms discovered in London offices in tax avoidance scheme
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Westminster City Council officers found crates of snails in empty central London offices whilst investigating property owners allegedly avoiding tax. The owners claimed they were running "snail farms" to exploit business rate exemptions. There is a tax law loophole whereby agricultural buildings and fish farms are exempt from business rates if they are viable commercial firms.
The council described the scheme as "ludicrous" and called for a general clause against business rates avoidance to stop similar tactics. It has asked the Insolvency Service to consider banning directors involved from future company directorships.
The council estimates it has lost around £368,000 due to this avoidance scheme. Four such "farms" have already been liquidated for non-payment of levies and legal action is underway to wind up two more.
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December Questions and Answers
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Q: If I sell my rental property to my tenants at a discount, will Capital Gains Tax (CGT) be calculated on that price or the market value?
A: The answer primarily depends upon your relationship with your tenants. If they are not deemed to be "connected persons" (i.e. not relatives, business partners or part of a disguised gift arrangement), HMRC should base CGT on the actual sale price of the property.
However, if the discount is unusually steep or looks like an attempt at tax avoidance, HMRC could use the market value instead to calculate CGT. Either way, reporting and paying CGT on residential property sales must be done within 60 days of completion.
Q: Can I gift £50,000 worth of Premium Bonds to my young grandchildren, to reduce what will have to be paid in Inheritance Tax (IHT)?
A: You can buy Premium Bonds for grandchildren under 16, but they must be held in the child's name through a parent/legal guardian. Once they turn 16, they can manage the account themselves.
Whilst the prizes from Premium Bonds are tax-free, the initial gifting of the £50,000 does not remove the money from your estate immediately. Unless the gift qualifies for exemptions (e.g. £3,000 annual allowance or gifts from surplus income), it remains a Potentially Exempt Transfer (PET). PETs only become IHT-free if you survive seven years after making the gift.
Q: I've recently moved to being self-employed and am working from home. Are there any tax reliefs I can get?
A: Self-employed individuals working from home can claim part of their heating and household bills as business expenses. It is worth noting that employees required to work from home may also qualify for tax relief, but not if they simply choose to do so.
Only work-related costs (e.g. business phone calls, gas/electricity for your work area) are allowable. Items with mixed personal and business use (e.g. rent, broadband) are excluded.
You can claim through Self-Assessment tax returns (deadline: 31 January) and can do so for the current tax year and the previous four years. There are two approaches:
- Flat rate: £6 per week, or simplified expenses (£10-£26 per month depending on hours worked - minimum of 25 hours).
- Actual costs: Proportion of bills based on business use (e.g., 1/5 of a £1,000 electricity bill if one of five rooms is used as an office = £200 claim).
- If you would like help calculating your tax relief, please get in touch with us to discuss your personal circumstances in more detail.
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1st
- Corporation Tax payments are due for companies with a year-end of 28th February
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 November.
22nd
- Deadline for employers operating PAYE to pay HMRC electronically, for November.
31st
- Corporation Tax Returns (CT600 form) are due for companies with a year-end of 31st December.
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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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