Author: f28admin

Could simplified expenses save you time and money?

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Self-employed people can choose to use simplified expenses to calculate certain business costs using flat rates rather than working out their actual expenses.

The system can save time and make record keeping easier, but it will not necessarily produce the best tax position. It is therefore worth comparing the flat rates with the actual costs before deciding whether it suits your business.

Simplified expenses are available to sole traders and partnerships that have no companies as partners. They cannot be used by limited companies or partnerships involving a limited company.

Flat rates can be used for certain vehicle costs, working from home and living at business premises. Other expenses must generally be calculated using the actual costs.

For vehicles, the 2026–27 rate for cars and goods vehicles is 55p per business mile for the first 10,000 miles, falling to 25p per mile thereafter. Motorcycles qualify for 24p per mile.

For working from home, the monthly flat rate is £10 for 25 to 50 hours, £18 for 51 to 100 hours and £26 for 101 hours or more.

Businesses operating from premises that are also the owner's home can also use flat rates to account for private use, depending on the number of people living there.

Records of business mileage, home-working hours and people living at business premises should still be kept. Using HMRC's simplified expenses checker can also help compare the flat-rate method with claiming actual costs before making a decision.

Source:HM Revenue & Customs| 07-09-2026

Are you paying your staff the correct minimum wage?

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Employers must make sure their staff receive at least the National Minimum Wage or National Living Wage rate that applies to them. The correct rate depends on the worker's age and, in some cases, whether they are an apprentice.

Since 1 April 2026, workers aged 21 and over are entitled to the National Living Wage of £12.71 an hour. The rate for workers aged 18 to 20 is £10.85, while workers under 18 are entitled to minimum of £8 an hour. 

Apprentices also have a minimum rate of £8 an hour, but this does not apply throughout their apprenticeship. An apprentice is entitled to the apprentice rate if they are under 19, or if they are 19 or over and in the first year of their apprenticeship.

Once an apprentice aged 19 or over has completed the first year of their apprenticeship, they become entitled to the minimum wage rate for their age. For example, a 21-year-old apprentice in their first year is entitled to £8 an hour, but after completing that first year they must receive at least £12.71 an hour.

Employers who fail to pay the minimum wage can face significant financial penalties. HMRC can require arrears to be repaid and impose penalties of up to 200% of the underpayment, subject to the applicable rules. Serious cases can also result in criminal prosecution.

Employers should therefore review rates regularly, particularly when employees have a birthday or apprentices reach the end of their first year.

The minimum wage rates change every 1 April, so payroll systems should be updated promptly to avoid underpayments.

Source:HM Revenue & Customs| 07-09-2026

Nearly 660 employers named for minimum wage failures

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The Government has named nearly 660 employers for failing to pay workers the National Minimum Wage, highlighting how costly National Minimum Wage compliance failures can become.

The latest naming round, published on 3 September 2026, involved around £4 million being repaid to more than 27,000 workers. Employers were also issued with penalties totalling £7 million.

The key point for employers is that minimum wage compliance is not simply a matter of comparing an employee's hourly rate with the statutory minimum.

For workers aged 21 and over, the National Living Wage is £12.71 an hour from April 2026. The rate is £10.85 for those aged 18 to 20 and £8.00 for workers under 18 and qualifying apprentices.

Problems can still arise where the stated hourly rate appears correct.

Employers need to consider the actual pay received for minimum wage purposes and all working time. Certain deductions can reduce minimum wage pay, while unpaid activities such as opening or closing premises, compulsory training, changing into required clothing or carrying out security checks can also create problems.

Errors may also arise where employees are expected to buy items connected with their employment.

Small mistakes repeated across several employees and over a period of time can therefore become significant liabilities.

Employers who underpay workers may have to repay arrears and face financial penalties. Public naming can also cause reputational damage.

This is a good time to carry out a simple review.

Check payroll rates, particularly after birthdays that move younger employees into a higher age band. Review deductions, working-time arrangements and any employee expenditure connected with work.

Businesses employing apprentices should also make sure the apprentice rate is being used correctly.

Most employers intend to pay staff properly. The difficulty is that the rules are more complex than they first appear.

A short review now could identify an innocent error before it becomes an expensive one.

Source:Other| 06-09-2026

Could company dividend rules be changing?

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The Government has announced plans to consider major changes to the rules governing when companies can make distributions to shareholder.

As part of a wider corporate reporting overhaul announced on 6 September 2026, the Government is considering replacing the existing rules on distributable profits and capital maintenance with a solvency-based regime. A consultation opened on 7 September and runs until 30 November 2026.

This is only a proposal, so companies must continue to follow the current rules.

At present, a company cannot simply pay a dividend because it has enough cash in the bank.

Broadly, dividends must be paid out of profits available for distribution, usually established by reference to the company's relevant accounts. Directors therefore need to consider accumulated realised profits and losses before declaring or paying a dividend.

This can create confusion in owner-managed companies.

A business might have £100,000 in its bank account but still be unable to pay a lawful dividend if it does not have sufficient distributable reserves. Equally, a profitable company may have adequate reserves but insufficient cash to make a sensible payment.

The Government is now considering whether a solvency-based approach could replace the existing system.

Exactly how this would work remains to be seen, and businesses should not assume that the current rules are about to disappear.

For directors, the practical message is straightforward.

Before paying a dividend, confirm that sufficient distributable reserves exist, ensure the appropriate accounts support the payment and complete the necessary company paperwork.

Directors should also consider whether the company can afford the distribution after allowing for Corporation Tax, VAT, PAYE, loan repayments and other commitments.

The rules may eventually become simpler, but until the law changes, a healthy bank balance is no substitute for checking that a dividend is legally available.

Source:Other| 06-09-2026

Received a P800 from HMRC?

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HMRC is currently carrying out its annual reconciliation of PAYE for the 2025-26 tax year. Between June and November, HMRC calculates the Income Tax paid by individuals and checks whether the correct amount has been collected. Where HMRC identifies a difference, it may issue a tax calculation letter, known as a P800.

If you receive a P800, do not automatically accept that HMRC’s calculation is correct. You should check the figures against your own records, including your employment and pension income, tax deducted and any other relevant income or tax reliefs. Errors or missing information can affect the calculation and could result in either too much or too little tax being shown as due.

HMRC provides an online service that allows taxpayers to check how much Income Tax they paid for the year ended 5 April 2026. The calculation can also be checked through the HMRC app.

A P800 may show that you have overpaid tax and are due a refund, or that you have underpaid and need to pay additional tax. In some cases, the P800 will allow you to claim a refund or pay the tax owed online.

If you are unsure whether the figures or tax calculation are correct, we can review your P800 and advise whether any action is needed.
 

Source:HM Revenue & Customs| 31-08-2026

Is your VAT control system strong enough?

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A strong VAT control system should clearly identify who is responsible for VAT, document the processes involved and regularly check that controls are working. HMRC also recommends keeping procedures up to date when the business, its systems or the VAT rules change.

Businesses should also review how VAT data moves through their systems. This includes checking tax codes, customer and supplier information, VAT reporting and the use of manual adjustments. For larger businesses, HMRC recommends a VAT risk register to record risks, controls and how their effectiveness is tested.

It is also important to check that controls are working as intended. This could include reviewing a sample of transactions, checking VAT calculations and reconciliations, and investigating any unusual or unexpected results. Any errors or weaknesses identified should be recorded and followed up to reduce the risk of the same problem happening again.

The guidance also covers Making Tax Digital, including ensuring that VAT records are complete and accurate and that digital links between systems work correctly.

While the guidance is aimed particularly at larger and more complex businesses, it provides useful points for any VAT-registered business to consider when reviewing their VAT control system.
 

Source:HM Revenue & Customs| 31-08-2026

UK employers with overseas employees

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UK employers with employees who normally work overseas may have PAYE and National Insurance obligations when those employees come to the UK to carry out their duties in the UK on a short-term basis.

Employers should consider the position whenever an overseas employee visits the UK to work. The fact that the employee remains employed and paid by an overseas company does not, by itself, mean that there is no UK PAYE obligation. In some circumstances, the UK company hosting the employee may be responsible for operating PAYE.

There are arrangements that can help employers with the normal PAYE requirements for qualifying short-term business visitors. For example, an EP Appendix 4 arrangement may allow a UK host employer not to operate PAYE where the relevant conditions are met, including where a double taxation agreement applies and no UK Income Tax liability ultimately arises. National Insurance needs to be considered separately, as an Appendix 4 arrangement does not cover NICs.

Where PAYE is required but it is impractical to operate it in the normal way, an EP Appendix 8 arrangement may be available for certain short-term business visitors. This allows the employer to report and pay the relevant tax after the end of the tax year, subject to the conditions of the arrangement.

If you have overseas staff working in the UK, we can help you make sure your payroll processes are correct. 

Source:HM Revenue & Customs| 31-08-2026

Summer VAT relief has ended

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The temporary 5% reduced rate of VAT introduced for certain children’s meals, tickets and family attractions ended on 1 September 2026. The relief applied from 25 June 2026 and was intended to reduce the cost of selected activities and services for families during the summer holidays.

The relief covered qualifying children’s meals supplied by restaurants, cafés and similar establishments for consumption on the premises, as well as children’s tickets for cinemas, theatres, shows, concerts and exhibitions. It also applied to admission charges for certain family attractions, including theme parks, amusement parks, zoos, museums, soft play centres and observation attractions.

Businesses should now ensure that any relevant supplies made from 2 September 2026 are treated under the normal VAT rules. Tickets purchased during the relief period for admission on or after 2 September are subject to the standard 20% rate. Businesses should also review advance payments and ensure that VAT has been accounted for correctly based on the relevant time-of-supply rules.

The relief did not apply to all family-related purchases. For example, takeaway meals, sports activities and separately supplied goods or services remained subject to their normal VAT treatment. Businesses should therefore retain appropriate records and continue to use the existing VAT guidance when determining the correct liability for their supplies.

Source:HM Treasury| 31-08-2026

Could company distribution rules change?

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The tax rules concerning what constitutes a distribution for tax purposes have remained largely unchanged since Corporation Tax was introduced in 1965. HMRC has recently published a consultation looking at possible changes to bring the rules more closely into line with modern commercial practices.

The consultation considers seven areas where the existing rules may create differences in tax treatment or uncertainty. The aim is to make the rules clearer and more consistent, while reducing unintended differences in tax treatment and the risk of errors and non-compliance.

The areas being considered include reductions of share capital, demergers, distributions from non-UK companies, loans to participators, purchases of own shares and the Transactions in Securities rules.

The consultation is mainly focused on shareholders within the charge to Income Tax, including individuals and trusts. The proposals are not intended to affect corporate shareholders directly.

HMRC also wants to ensure that genuine commercial activities and legitimate company reorganisations are not adversely affected and that the wider implications for growth and investment are taken into account.

For companies and their shareholders, the proposals are worth watching. They could ultimately affect the tax treatment of a number of transactions between companies and their owners, including capital reductions, company purchases of own shares and some company reorganisations.

At this stage these are proposals for consultation rather than confirmed changes to the tax rules.

The consultation closes on 14 September 2026. The government will then consider the responses and publish a summary. Further consultation may take place before any changes are introduced.

Source:HM Revenue & Customs| 31-08-2026

Predevelopment costs on major developments

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Businesses planning major infrastructure and development projects should be aware of a new government consultation on the tax treatment of predevelopment costs.

The consultation follows the conclusion of recent litigation at the Supreme Court. The Court found that certain early-stage surveys and studies for offshore wind farms did not qualify for plant and machinery capital allowances because they were not sufficiently closely connected to the provision of the plant.

This could affect businesses incurring significant costs before construction begins and mean that some predevelopment costs are not deductible from business profits. This could include surveys, environmental assessments, feasibility work and other studies needed to decide whether and how a project should proceed. 

The consultation is particularly focused on understanding the predevelopment costs businesses incur, how well businesses understand the tax treatment following the Supreme Court judgment and whether the tax treatment of these costs affects business and investment decisions.

The government says it is not currently minded to change the tax treatment of these costs, but the consultation could lead to changes if the evidence shows that the current treatment creates significant problems for investment or the UK’s competitiveness.

Businesses with major projects should therefore consider how their early-stage costs are being treated and keep clear records of what the costs relate to. The consultation closes on 21 September 2026.

Source:HM Treasury| 31-08-2026

When a discretionary bonus becomes enforceable

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Where an employee is promised a discretionary bonus as an incentive, an employer may be held liable for the full figure if the preconditions have been met and the chain of authorisation is fully satisfied. Indeed, a recent ruling by a tribunal has made it clear that employers cannot unilaterally alter the preconditions or quantum of a bonus once the agreed terms have been met and approved.

The contention arose after a global cloud hosting platform introduced a bonus incentive scheme, which, according to the presentation slide deck, offered sales staff a discretionary bonus of "up to 1%" of revenues derived from invoicing any new client over the first twelve months of the contract, subject to the approval of the Sector Lead Head (SLH). Soon after this offer was made, the claimant secured a major contract with a prominent retailer, whereupon the line manager formally emailed the SLH to recommend the full 1% commission. The SLH duly authorised the bonus in a recorded ‘memo’. However, the senior management baulked at the prospective payout of £516,082 and sought to retroactively apply a £150,000 bonus cap. While the initial claim for the unlawful deduction of wages was dismissed on the ground that no legal entitlement had crystallised, this was overturned on appeal, as the objective terms of the bonus scheme had been clearly outlined, met, and approved by the designated authority.

Crucially, once the SLH had authorised the bonus, the claimant's entitlement to 1% of the first year’s revenues had legally materialised, and the employer had no legal right to cap the bonus or insist upon additional management sign-offs. Thus, discretionary bonus schemes do not automatically grant employers unrestricted authority to alter payment terms at their whim, as, once an employer has established a discretionary bonus framework, communicates its specific terms to an employee, and subsequently exercises its discretion to approve the award, a binding legal obligation has been formed. As a consequence of this landmark ruling, employers should review all bonus incentive schemes to ensure that they do not inadvertently create any unanticipated obligations.

Source:Other| 01-09-2026

Company accounts are going fully digital

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An important change is coming to the way companies file their annual accounts.

From 1 April 2028, all UK-registered companies will be required to file their annual accounts with Companies House using commercial software. The existing web and paper filing routes for company accounts will close.

The change will affect companies that prepare and file their own accounts as well as accountants filing on behalf of clients.

There are other changes on the way too.

Small companies and micro-entities will be required to file a profit and loss account with Companies House. However, they will have the option of preventing this information from being published on the public register. Details of how this opt-out will operate are still to be confirmed.

The option to file abridged accounts will also disappear, and companies claiming exemption from audit will face strengthened eligibility statement requirements.

Although April 2028 may seem some distance away, businesses that currently prepare their own accounts using the Companies House online service should be particularly aware of the change.

They will eventually need suitable commercial software or will need to arrange for an accountant or other professional to file the accounts for them.

Companies already using accounting software should also check whether their existing package will support the new filing requirements.

There is no need for businesses to make immediate changes, but this is one of those developments worth knowing about well in advance.

Source:Other| 31-08-2026

How Is Your Business Performing?

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The latest figures from the Office for National Statistics suggest that conditions remain challenging for many UK businesses.

In July 2026, 15% of trading businesses reported an increase in turnover compared with the previous month. However, 22% reported that turnover had fallen.

Economic uncertainty remains an important concern, while businesses employing ten or more people were particularly likely to identify labour costs as a challenge. Energy costs are also moving back up the agenda, with 61% of businesses expressing some degree of concern about energy prices in early August.

These national figures are interesting, but the more useful question is how your own business compares.

Has turnover increased during the past year? More importantly, has profit kept pace?

Are higher wages, energy bills and other costs gradually reducing your margins?

And if costs are increasing, have your selling prices been reviewed recently?

It is easy to become accustomed to gradual changes in business performance. A small reduction in margin or steady increase in overheads may not appear significant from month to month, but the cumulative effect can be considerable.

Which makes this a good time to review your latest management figures and compare them with the same period last year.

Look particularly at turnover, gross profit margin, payroll costs and overheads.

If something has changed significantly, understanding why it has changed is the first step towards deciding what to do about it.

Source:Other| 31-08-2026

Evidence required to support business expense claims

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Self-employed individuals can deduct allowable business expenses from their income when calculating taxable profits. However, businesses must keep accurate records and evidence to support the costs being claimed.

HMRC requires taxpayers to keep proof of business expenses, although evidence does not usually need to be submitted with a self-assessment tax return. Records should be retained and made available if HMRC requests them as part of a compliance check.

Evidence should show the nature of the expense, the amount paid and that the cost relates to the business. This may include receipts, invoices, bank statements, contracts or other supporting documents. Where an expense has both business and private use, records should also demonstrate how the business proportion has been calculated.

Allowable expenses can include costs such as office expenses, travel, insurance, marketing, professional fees, staff costs and business premises costs. However, personal expenses cannot be claimed, and only the business element of mixed-use costs can be deducted.

Businesses should also ensure they use the correct treatment for larger purchases. Under traditional accounting, equipment, machinery and vehicles may need to be claimed through capital allowances rather than as day-to-day expenses. Under the cash basis, most equipment and machinery can be deducted as an expense, although cars are generally dealt with through capital allowances.

Source:HM Revenue & Customs| 23-08-2026

Benefits of claiming the Annual Investment Allowance

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Businesses investing in qualifying assets may be able to claim the Annual Investment Allowance (AIA) and deduct the full cost of eligible purchases from their profits before tax. This can help by reducing the amount of taxable profit in the period the investment is made.

The AIA can generally be claimed by sole traders, companies and partnerships where all the partners are individuals, on most plant and machinery up to the available allowance. The current AIA limit is £1 million, meaning many businesses can claim immediate relief on significant investments rather than spreading the tax relief over several years.

Qualifying purchases may include items such as machinery, equipment and certain business assets. However, the AIA cannot be claimed on business cars, assets previously owned for another reason before being used in the business or items given to the business.

The allowance is claimed in the accounting period when the asset is bought. Businesses should ensure they use the correct purchase date, which may depend on when contracts are signed or payments become due.

If a business does not want to claim the full amount of AIA, for example because it has low profits, it may choose to claim writing down allowances instead or split the claim between AIA and other capital allowances.

Source:HM Revenue & Customs| 23-08-2026