Firms urged to settle overdue tax swiftly as some companies across the UK have begun receiving letters from HMRC.

HMRC is warning that the tax authority may exercise its revived powers to recover overdue tax directly from their bank or building society accounts.

These letters mark the first wave of firms contacted under the revived Direct Recovery of Debts (DRD) process. HMRC paused DRD during the COVID-19 pandemic but reinstated it earlier in 2025, entering a “test and learn phase.” The renewed use remains tightly controlled and is initially limited to a small number of businesses.

Under DRD, HMRC may recover tax debts of £1,000 or more directly from eligible accounts, provided the debt is firmly established, the appeal windows have passed, and other recovery methods, including repeated contact attempts, have been unsuccessful. Before funds are seized, HMRC will conduct a face-to-face visit to confirm identity, explain the debt and discuss alternative options such as a payment plan.

Businesses that receive such a letter — or suspect they might soon — should consider contacting HMRC promptly to arrange a “time to pay” agreement and avoid direct recovery.

Talk to us about your business.

After months of dispute between ministers and peers, the Government has accepted a six-month qualifying period before most employees gain protection from unfair dismissal.

The move clears the way for the Employment Rights Bill, following the House of Lords’ opposition to plans to introduce unfair dismissal rights from the first day of employment. Currently, staff generally need two years of continuous service before they can bring an unfair dismissal claim, so the six-month threshold still represents a significant expansion of rights.

The compromise follows extended talks with employer groups, unions and other stakeholders. Under the agreement, the unfair dismissal provisions in the Bill will be scaled back, allowing it to reach Royal Assent on schedule and keep the Government’s timetable for wider reforms.

From April 2026, statutory sick pay and paternity leave are set to become day-one rights, alongside the launch of the new Fair Work Agency. Ministers argue that millions of workers, including many on low pay, will benefit, while warning that delays to the Bill would have pushed these measures back.

Business representatives have also emphasised that employers require time to adjust their policies, systems and contracts to the new regime. Smaller organisations, in particular, are expected to review their recruitment, probation and performance management arrangements over the next two years.

The six-month qualifying period for unfair dismissal is not expected to take effect before 2027, based on previous Government statements. Further guidance is likely to be provided once the Bill has completed its passage and secondary legislation is published.

Talk to us about your business.

Practical steps to stay in control.

Borrowing can fund growth, smooth seasonality and bridge large orders. Problems start when visibility slips, costs jump or deadlines are missed. The goal is simple: know your obligations, keep headroom and act early.

This guide sets out practical steps for you to follow: how to build a 12-week cash view, set a rational payment order, handle late payers, and engage lenders and HMRC before issues escalate. It also outlines short-term cash actions, when to consider formal options and the habits that reduce reliance on expensive borrowing. Use it as a checklist, review monthly and adjust to your model.

Get a clear view of your position

A 12-week rolling cashflow, updated weekly, is the single most useful tool. Forecast inflows and outflows, then add simple stresses — for example, sales down 10% or receipts arriving 30 days late. If the forecast shows a crunch, act before it hits.

Keep this routine tight.

• Aged receivables and payables: review by value and age; tackle the largest and oldest items first.
• Loan covenants and headroom: recalc ratios, undrawn limits and earliest breach dates under a downside case.
• Obligation calendar: map VAT, PAYE, corporation tax, rent, utilities, scheduled loan repayments and insurance, with reminders set 10 working days ahead.

Assign ownership for chasing, negotiating and paying. Note actions, dates and outcomes. A short, weekly review turns debt control into a habit.

Know today’s costs and rules

Anchor decisions to current rates and thresholds.

• Bank Rate:4% (as at 6/11/2025).
• HMRC late payment interest: Bank Rate plus 4% from 6 April 2025; repayment interest is Bank Rate minus 1% with a 0.5% floor. From April 2027, penalties for late payment of self assessment and VAT will also increase, alongside extra investment in HMRC’s debt-management teams.
• Statutory interest on late B2B invoices: 8% above Bank Rate, plus fixed recovery costs, where contract terms don’t set a different rate.
• VAT registration threshold: £90,000 rolling 12-month taxable turnover (from 1 April 2024). Also, if taxable turnover is expected to exceed £90,000 in the next 30 days.
• Business rates multipliers (England, 2025/26):9p small business, 55.5p standard. From April 2026, business rates multipliers are scheduled to fall following the latest revaluation, with additional reliefs and a new high-value rate; check current bills and forecasts when planning beyond 2025/26.

In practical terms, HMRC arrears can now cost more than many bank products. Clear or schedule tax debts promptly and keep all filings up to date.

Prioritise payments with a clear logic

There isn’t a single correct order for every business. Prioritise by legal risk and operational impact, and write your rationale down so you can explain decisions to stakeholders.

A sensible order often looks like this.

1. Tax arrears (PAYE/NIC, VAT, corporation tax): interest accrues daily and enforcement escalates. If you anticipate difficulty, approach HMRC early for a Time to Pay arrangement.
2. Secured lending and fixed charges: missed payments risk covenant breaches and enforcement over pledged assets; discuss waivers or resets before a breach.
3. Energy and critical suppliers: protect operations with realistic, written schedules and regular updates.
4. Other trade creditors and landlords: be transparent and consistent; keep to any plans you propose.
5. Director/shareholder loans: consider tax treatment and avoid repayments that strain cash.

Review the order monthly or when conditions change.

Reduce late customer payments, calmly and consistently

Late payment is a persistent source of cash pressure. Government proposals now include hard caps on payment terms and new fining powers for persistent late payers, so tightening internal discipline is a sensible pre-emptive step.

Use a light-touch framework, as follows.

• Terms: keep standard terms short (14–30 days).
• Invoice quality: issue same day, ensure POs are correct and support e-invoicing formats that customers accept.
• Chase rhythm: reminder on due date, firmer follow-up at +7 days, final notice at +14 days – then apply statutory interest and costs where appropriate.
• Credit limits: set limits for new or higher-risk accounts; lift only after an on-time track record.
• Early payment options: offer early-settlement discounts where margins permit, or use selective invoice finance for peaks.

Keep a short log of conversations and promises. Partial cash now usually beats a larger promise later.

Strengthen cash in the short term

When pressure builds, work both sides of the cash equation.

Bring cash forward

• Focus on the top 10 overdue balances over 60 days. Call, agree a plan, confirm in writing and diarise follow-ups.
• Consider invoice finance or factoring for predictable debtors. Check total cost, recourse rules, concentration limits and any debenture requirement.

Defer some outflows, sensibly

• Stage larger supplier payments with written agreements.
• Switch annual costs like insurance to monthly where the uplift is reasonable.
• Reduce stock to current demand; clear slow-moving lines to release cash.
• Cancel non-essential subscriptions and standing orders.

Choose the right funding tool

• Overdrafts and revolving lines for seasonal swings.
• Term loans for defined investments.
• Asset-based lending against receivables, stock or plant.
• Growth Guarantee Scheme (currently scheduled to run to April 2030): available via accredited lenders; useful where security is limited. Pricing and eligibility vary.

Speak to lenders and HMRC before a breach

Silence erodes confidence. If your forecast shows a risk of missing a payment or breaching a covenant, communicate early with a plan.

With lenders, share a short pack that includes:

• year-to-date performance and brief commentary
• a 12-month cash forecast with base and downside cases
• covenant look-ahead and proposed mitigations
• a clear request, such as temporary covenant reset, interest-only period or amortisation holiday, with a suggested review date.

What to do with HMRC

• Call the Payment Support Service before a deadline is missed.
• Have figures ready, explain causes of arrears and propose a schedule you can keep.
• Keep all future filings on time and pay new liabilities as they fall due, or HMRC may cancel the arrangement.

When formal restructuring may be appropriate

If debts cannot be met as they fall due, regulated advice protects you and preserves options. Early action is best.

The main tools to discuss with an insolvency or restructuring professional are as follows.

• Company moratorium (Part A1): an initial 20 business days’ protection from certain creditor actions while you explore a rescue.
• Company voluntary arrangement (CVA): a binding plan to repay a proportion of debts over time while trading continues.
• Restructuring plan (Part 26A): a court-supervised process that can bind dissenting creditor classes where fairness tests are met.
• Administration: protection while administrators aim to rescue the business, sell it as a going concern or achieve a better outcome for creditors than liquidation.
• Liquidation: an orderly wind-down if rescue isn’t viable.

Directors’ duties sharpen near insolvency. Keep minutes, seek advice and avoid wrongful trading by acting to minimise creditor losses.

Build habits that make borrowing safer and cheaper

Debt sits more comfortably on strong day-to-day controls. The following habits reduce the need for expensive borrowing and lower risk.

Pricing and margin

Review pricing regularly, especially when input costs rise. Small, timely increases can materially reduce reliance on working capital facilities.

Terms of trade

Use short terms as standard. Deploy longer terms only when priced into the contract or backed by insurance.

Supplier strategy

Avoid single points of failure; dual-source where possible to preserve negotiating leverage. Negotiate early-payment discounts when cash allows; measure benefits against alternative uses of cash.

Stock and work-in-progress

Tighten reorder points and rationalise stock-keeping units (SKUs). Faster stock turns mean less cash tied up and lower borrowing needs.

Credit insurance

Consider trade credit insurance for large or concentrated exposures. Balance premiums against expected loss and any uplift in borrowing capacity it enables.

Governance

Hold a monthly cash and debt review to track:

• net debt and undrawn headroom
• any HMRC arrears
• days sales outstanding and days payables outstanding
• top 10 overdue receivables
• forecast versus actual cash.

Short, frequent adjustments usually beat large, infrequent ones.

Market signals to watch

External conditions shape payment behaviour and funding access. Through 2025, registered company insolvencies in England and Wales have remained elevated compared with long-run averages, which implies continued pressure across supply chains. Surveys also report persistent concern about B2B payment delays. Policy focus on late payment has increased, with stronger reporting and enforcement measures advancing. Together, these signals support a cautious approach to customer concentration and an emphasis on cash discipline.

If cash is tight, act today

Use this short checklist to move quickly and deliberately.

• Update the 12-week forecast with conservative assumptions and identify the first pinch point.
• Prioritise payments by legal and operational impact; document your approach.
• Contact HMRC to explore Time to Pay if needed and keep filings current.
• Speak to lenders before any breach; request specific, time-bound adjustments.
• Accelerate collections on the largest overdue invoices; consider selective invoice finance.
• Freeze non-essential spending, stage large supplier payments and switch to monthly where sensible.
• Keep minutes of key decisions and seek regulated advice early if the forecast shows debts cannot be met when due.

Frequently asked questions

What’s the best order to pay creditors?
Prioritise by legal and operational impact. In most cases, deal with HMRC and secured lenders first, then energy and critical suppliers, then other trade creditors. Put realistic schedules in writing and stick to them.

Can I charge interest on late-paying customers?
Yes. Unless your contract sets a different rate, UK law allows statutory interest at 8% above Bank Rate on late B2B invoices, plus fixed recovery costs.

What finance options are available now?
Overdrafts and revolving lines suit seasonal swings; term loans fund defined investments; asset-based lending can unlock cash against receivables, stock or plant. The Growth Guarantee Scheme is currently expected to run until April 2030 via accredited lenders, subject to eligibility and pricing.

How costly is it to fall behind with HMRC?
From April 2025, late payment interest is charged at Bank Rate plus 4%. That’s usually higher than secured borrowing, so tax debts can become expensive surprisingly quickly. If you know you’re going to struggle to pay, it’s better to talk to HMRC as early as possible. A Time to Pay arrangement won’t reduce the interest charged, but it can stop penalties escalating and help you spread payments in a way that’s manageable for your cashflow.

What if the business may no longer be viable?
Stop taking on new credit, seek regulated advice immediately and consider formal options such as a moratorium, CVA, restructuring plan or administration. Document decisions and act to minimise losses to creditors.

How we can help

Debt control improves quickly when there is a shared view of the numbers and clear ownership of next steps. The fastest wins typically come from a 12-week cash forecast, a disciplined approach to overdue invoices, and early conversations with HMRC and lenders where pressure is building.

From there, we can help you with the following.

• Review your cashflow, borrowing mix and debt service profile against current rates and covenants.
• Build a payment plan that prioritises legal exposure and operational continuity, with written schedules you can meet.
• Tighten invoice terms, chase processes and credit limits to reduce late payments without damaging customer relationships.
• Compare funding options, including overdrafts, term loans, asset-based lending and any relevant government-backed routes, so you choose the right tool for the job.
• Prepare lender and HMRC packs that set out the position, the plan and the evidence that lenders and officials expect to see.
• Assess early warning signs for formal processes and introduce regulated specialists where a moratorium, CVA, restructuring plan or administration might preserve value.

Looking ahead

If you anticipate difficulty meeting tax or loan payments, contact us before any deadline passes. More options remain open when action is early, filings are up to date and proposals are realistic. If your forecast suggests that debts cannot be met as they are due, seek advice immediately. Directors’ duties sharpen near insolvency and timely decisions protect both the business and its stakeholders.

Want to stabilise cashflow? Reach out to us.

Practical steps to pass on wealth tax-efficiently.

Intergenerational wealth planning is most effective when tax, investment, family governance and timing work together. This guide sets out practical options using current UK rules and allowances. It explains how to combine annual exemptions and larger lifetime gifts, where trusts and family investment companies can help, and why pensions continue to be central after the lifetime allowance changes.

It also covers portfolio tactics for capital gains, opportunities for business and agricultural reliefs, and the role of structured philanthropy. For internationally mobile families, we highlight the shift to the new foreign income and gains regime and the move towards residence-based inheritance tax (IHT) exposure, so timing and residence decisions can be taken with eyes open.

Set clear goals before you optimise tax

Start by writing down the outcomes you want over a 10–20 year horizon.

• Who should benefit, when and with what guardrails?
• What income does the donor need to retain, now and in later life?
• Which assets are suitable for lifetime gifts and which are better held to death?
• What level of administrative complexity, cost and investment risk is acceptable?

Agree these principles with family members who will be involved. It reduces friction later and guides choices between gifts, trusts, pensions, companies and philanthropy.

Lifetime gifting: Use exemptions first

Lifetime gifts reduce the taxable estate and can move growth to the next generation.

Core exemptions – simple, repeatable

• Annual exemption: Give up to £3,000 each tax year (carry forward one year if unused). Small gifts up to £250 per recipient are separate. Wedding gifts are exempt up to £5,000 (child), £2,500 (grandchild) or £1,000 (others).
• Normal expenditure out of income: Unlimited gifts from surplus income are immediately IHT-exempt if they are part of a pattern, come from income (not capital) and do not reduce your standard of living. Keep clear records of income, spending and regular gifts.

Potentially exempt transfers (PETs): Gifts to individuals are outside IHT if the donor survives seven years. If death occurs within seven years, taper relief can reduce tax on the gift after year three. PETs remain a mainstay for large transfers where control via trusts is not required.

Practical tips

• Prioritise assets with strong growth prospects so future gains occur outside the estate.
• Consider capital gains on disposal; use the £3,000 capital gains tax (CGT) exemption each year and re-base asset costs across the family where appropriate.
• Document intent and keep a simple gift ledger; it speeds probate and reduces HMRC queries.

Trusts: Control, protection and targeted reliefs

Trusts can separate economic benefit from control, protect vulnerable beneficiaries and support long-term governance. However, relevant property trusts face entry (20%), 10-yearly and exit charges above available nil-rate band (NRB) and share the donor’s £325,000 NRB across related settlements. Trusts remain powerful, but should align with clear purposes (education, housing, protection) and be sized for expected charges.

Residence nil-rate band (RNRB) planning: Keep an eye on estate values around £2m due to tapering of the RNRB. In some cases, lifetime gifts that bring the estate below £2m can restore some or all of the £175,000 RNRB on death.

Business and agricultural reliefs: Qualifying business property and certain AIM/unquoted shares can secure 100% or 50% IHT relief after a two-year holding period, subject to trading tests and excepted asset rules. Relief is generous but not automatic; due diligence on trading status and evidence of ownership periods is essential. From 6 April 2026, a combined £1m allowance for the 100% rate of business and agricultural property relief applies per individual, with the unused allowance transferable to a spouse or civil partner. Amounts above £1m get relief at the rate of 50%.

Family investment companies: Where do they fit?

Family investment companies (FICs) can help retain control, centralise investment management and pass value via growth shares to heirs, with transfers taxed under CGT/IHT rather than income. They work best when:

• you plan to retain capital, not distribute heavily in the near term (to avoid double taxation)
• you have a clear share class design (for example, voting “founder” shares, non-voting growth shares for heirs)
• you accept ongoing company compliance and dividend extraction rules.

FICs don’t attract specific IHT reliefs, but can sit alongside trusts (such as a trust holding growth shares) to combine control with protection. Obtain corporate, tax and legal advice before implementation.

Pensions: Still central to intergenerational planning

Pensions continue to be a tax-efficient wrapper for growth and income, with added estate-planning features.

Contributions and reliefs

• Contribute up to £60,000 (subject to earnings), with carry-forward available from the previous three years. Tapering applies from adjusted income £260,000, down to a £10,000 minimum. If you have flexibly accessed defined contribution (DC) benefits, the money purchase annual allowance (MPAA) caps DC contributions to £10,000.
• From April 2029, NIC relief on pension contributions made via salary sacrifice will be capped at £2,000 a year, which may reduce the appeal of very large sacrifice arrangements.

New allowances replacing the lifetime allowance

• Lump-sum allowance (LSA) £268,275 caps tax-free pension commencement lump sums across all schemes.
• Lump-sum and death-benefit allowance (LSDBA) £1,073,100 caps tax-free lump sums, including certain death benefits; amounts above these limits are taxable at the beneficiary’s marginal rate when taken as lump sums. Transitional protections may adjust these figures for some individuals.

Death benefits

• Generally, where death occurs before age 75, beneficiary drawdown or lump sums are free of income tax; on/after 75, they are taxed at the recipient’s marginal rate. From 6 April 2027, most unused pension funds and certain death benefits will fall within the estate for IHT. Budget 2025 confirms new rules allowing executors to ask schemes to withhold up to 50% of taxable death benefits for up to 15 months to meet IHT, and to discharge executors from IHT on pension rights discovered after HMRC clearance.. Review nominations and estate liquidity well before that date.

Planning pointers

• High earners should test the affordability of maximising allowances in the years before retirement, using carry-forward where available.
• Coordinate pension withdrawals with ISA funding and broader gifting strategy.
• Keep your expression of wishes up to date so scheme administrators can pay benefits quickly and as intended.

Charitable giving: Efficient tools for impact

Philanthropy can advance family values and reduce tax.

• Relief is now focused on UK charities: Gift Aid and, from 2025/26, the main IHT charity exemptions apply to direct gifts to UK charities and qualifying clubs.
• Gifts of quoted shares, land or property to charity attract income tax relief at market value and no CGT, in addition to IHT relief for lifetime and death-bed gifts.
• Donor-advised funds (DAFs) provide a flexible alternative to setting up a charity, allowing an immediate tax deduction followed by staged grants over time under your family’s guidance.
• If you support non-UK charities or use cross-border structures, review your plans – IHT relief will generally be limited to direct gifts to UK charities from late 2025/early 2026.

Consider including charitable legacies in your will. Where 10% or more of the net estate passes to charity, the estate may qualify for the 36% reduced IHT rate.

Entrepreneurial and growth-capital reliefs

High-net-worth individuals who back early-stage companies can combine succession aims with growth capital.

• Seed Enterprise Investment Scheme (SEIS): 50% income tax relief on up to £200,000 per year, partial CGT reinvestment relief, minimum three-year holding, high risk and strict qualifying rules.
• Enterprise Investment Scheme (EIS): 30% income tax relief up to £1m (or £2m where at least £1m is in knowledge-intensive companies), CGT deferral or exemption may be available, minimum three-year holding.
• Venture capital trusts (VCTs): Currently 30% income tax relief on new subscriptions up to £200,000 a year, scheduled to reduce to 20% for investments from 6 April 2026, with dividends and gains remaining tax-free if conditions are met and shares are held at least five years.

These vehicles are illiquid and higher risk; use them to complement, not replace, diversified core assets.

Property and portfolio design for multi-generational aims

Property choices: Consider how much housing wealth you want embedded in the taxable estate. Downsizing, family co-ownership structures or gifting deposits can align homes with succession goals. Where the RNRB applies, ensure the will passes a qualifying interest in the main residence to direct descendants and watch the £2m taper threshold. From 2028, owners of English residential properties over £2m will face a High Value Council Tax Surcharge, which may influence decisions on holding or restructuring high-value homes.

Tax-aware portfolio withdrawals: In retirement, many high-net-worth households draw ISAs first (tax free), then pensions, then general investment accounts. For intergenerational aims, this order may flip: keeping pensions invested (subject to the 2027 IHT change) while using ISA and general investment account funds to support gifts or trust funding can sometimes improve the family-level outcome. Revisit this annually. The Autumn Budget 2025 increases tax rates on dividends, savings income and (from 2027) property income, which may tilt the balance further towards using pensions and ISAs as long-term wrappers.

CGT management: Use the £3,000 exemption each year; spread disposals across spouses/civil partners to use two allowances and two basic-rate bands where possible. Consider bed-and-ISA or bed-and-spouse tactics to re-base holdings and improve future flexibility.

Cross-border families after the 2025 reforms

The new foreign income and gains (FIG) and residence-based IHT rules mean domicile is less relevant. Planning now focuses on:

• timing of UK residence and the first four-year window for FIG
• the long-term resident IHT test, which brings worldwide assets into scope after sustained UK residence
• the treatment of offshore trusts and whether historic structures still meet your objectives.

Inbound or returning families should build a residence, remittance and IHT roadmap at least a year before moving. Outbound families should understand the tail period for continued UK IHT exposure after departure. Budget 2025 adds further offshore anti-avoidance rules, including for temporary non-residents and some historic excluded property trusts, so existing cross-border structures should be reviewed in detail.

Wills, letters of wishes and family governance

Tax efficiency fails if legal documents do not reflect your intent. Review the following.

• Wills: Keep them current. Consider flexible provisions (such as discretionary trusts, powers of appointment).
• Letters of wishes: Provide guidance to trustees and executors; update after major life events.
• Powers of attorney: Ensure trusted people can act if capacity is lost.
• Executor preparedness: Maintain a secure asset and liability register, plus contact details for advisers.

A short annual review avoids the common problem of stale documents and missing paperwork.

Practical checklist for the next 90 days

• Update your net worth schedule and cashflow, including expected gifts and bequests.
• Confirm beneficiary nominations on pensions and life assurance.
• Review use of IHT exemptions (annual £3,000, small gifts, marriage gifts) and set up regular gifts out of income with records.
• If your estate is near £2m, model the RNRB taper and consider gifts to restore relief.
• Re-check trust holdings against trading tests for business relief, and the new £1m APR/BPR allowance and transfer rules.
• Maximise pension funding within the £60,000 allowance (or tapered/MPAA limit), and align with the LSA/LSDBA framework.
• For cross-border families, map your status under the FIG regime and residence-based IHT.
• Align charitable giving with Gift Aid and, if useful, explore DAFs.
• Recent anti-avoidance changes tighten the IHT treatment of some offshore and agricultural structures and the way trust exit charges are calculated, so older arrangements should be reviewed.

Bringing it together: A model pathway

Effective wealth transfer is rarely about a single tactic. Results come from a clear destination, steady use of annual allowances and selective use of structures where they add control or protection. Keep pensions, ISAs and general investments working together; use gifting to move future growth outside the estate; and revisit your plan each year as rules, markets and family needs evolve. For cross-border families, plan residence and timing early so UK tax outcomes reflect choice, not chance.

If you would like help prioritising the next actions for 2026, we can model options against your objectives, test sensitivities and prepare a simple plan that sets out what to do this quarter, what to defer and what to monitor for future opportunities.

If you want practical, tailored guidance, reach out to us.

The UK economy is expected to experience another subdued year in 2026, with growth forecasted to decline below 1%. The downgrade came a few weeks before the Chancellor delivered her Budget.

A further hit may come from the Office for Budget Responsibility (OBR). On Budget day, the OBR was expected to reduce its estimate of the UK’s potential growth after reassessing productivity. Officials are likely to trim the assumed annual productivity gains by 0.3 percentage points, which would lower projected tax revenues by approximately £21bn over the remainder of the parliament.

This year’s stronger outturn was flattered by a 3.7% surge in business investment. That rebound is not expected to last: investment growth is forecast to slow sharply to 0.8% in 2026, removing a key support for output.

Conditions in the labour market are also cooling. Unemployment is forecast to peak at around 5% next summer. As slack builds, pay growth is expected to moderate from recent highs, easing back to roughly 3.5% by the end of 2025 and to around 3% by mid-2026.

The Institute of Directors reports a steep fall in business confidence, with its optimism gauge dropping to a record low of -74 in September and only nudging to -73 in October. Many small and medium-sized firms report that cost pressures have risen faster than revenues over the past year, and while those strains are beginning to ease, they continue to be a drag on hiring and investment.

While some recent forecasts now point to a slightly brighter outlook, businesses should still plan on the basis that growth in 2026 is likely to remain subdued, with tight investment and a softer labour market keeping trading conditions challenging.

Talk to us about your business.

A new survey has indicated that most businesses and agents see little benefit in Making Tax Digital for income tax (MTD IT), despite rising awareness.

The Administrative Burdens Advisory Board’s 2025 Tell ABAB report found awareness of MTD IT increased to 46.4% in 2025 from 33.3% in 2024, yet respondents largely expect higher costs and time pressures, with a majority anticipating no benefits. The survey received 3,146 responses, 77% from businesses and 23% from agents.

The report’s findings arrive ahead of mandation from April 2026 for sole traders and landlords whose 2024/25 self assessment includes combined gross income from self-employment and property above £50,000. HMRC has begun notifying affected taxpayers by letter, with the first batch sent to those who filed returns by the end of August 2025. Further mandation letters are scheduled for February and March 2026, and letters prompting unrepresented taxpayers were planned for late November 2025.

While the ABAB report notes growing familiarity with MTD, many respondents remain sceptical about net gains and flag wider concerns around administrative burdens. Businesses preparing for 2026 should review eligibility, ensure compatible record-keeping, and consider software and process changes well in advance of the start date.

Talk to us about your taxes.

HMRC has started contacting tax agents to check whether companies correctly claimed relief relating to directors’ loan accounts.

The letters ask agents to review filings where relief from tax was claimed on the basis that a loan to a participator would be repaid within the permitted timeframe. If the anticipated repayment did not occur, agents are being asked to help clients correct returns and settle any resulting liabilities.

The focus is on company tax returns that reduced or reclaimed the temporary charge on loans to participators, often applied where balances were expected to be cleared after the year end. HMRC’s outreach follows earlier compliance activity on directors’ loans, including one-to-many letters and updates in recent Agent Updates, signalling sustained attention on this area.

Companies and their advisers should confirm whether repayments were actually made, verify dates against the statutory window and ensure disclosures align with the final position. Where errors are identified, voluntary amendments can limit interest and potential penalties. Keeping clear audit trails for repayments, write-offs or novations, and reconciling year-end positions to subsequent events, will help support any HMRC review.

Clients with outstanding directors’ loan balances, or historic claims based on expected repayments, should speak to their adviser promptly to assess exposure and agree the next steps.

Talk to us about your taxes.

Employers are being asked to spend £6bn a year on staff health support to tackle Britain’s growing worklessness.

In a government-commissioned review ahead of the Budget, Charlie Mayfield, former chair of John Lewis and leader of the Keep Britain Working review, said businesses must play a central role in halting the rise in ill health, which is pushing millions out of work.

Mayfield called for a step change in occupational health to reduce the number of people who fall out of employment each year. Ministers are increasingly concerned by the sharp rise in working-age adults leaving the labour market due to health conditions, with young adults driving much of the increase.

About one in five working-age people – more than nine million – are now “economically inactive”, meaning they are neither in a job nor looking for one. For almost three million, long-term sickness is the main reason, the highest level on record.

The review estimates the overall cost of this “quiet but urgent crisis” at up to £85bn a year, through lost output, higher welfare spending and extra pressure on the NHS. Its focus, however, is on prevention and retention: keeping people in work through better workplace support. If adopted across the workforce, the recommendations could generate benefits of up to £18bn a year for the national economy and public finances.

The government says more than 60 employers, including British Airways, Nando’s and Tesco, will lead a three-year vanguard programme, working with regional mayors and small firms to test and scale stronger workplace health approaches.

Talk to us about your business.

Must be done by the next Confirmation Statement date for the company you are connected to due after 19^th November 2025 if you are a director.

Must be done between the 1st and the 14th date of your birth month if you are a PSC but NOT a director.

This guide will tell you:

• The 3 ways you can identify yourself.
• The documents and information you will need for each of the 3 options
• A step-by-step guide to each of the 3 options
• What you need to do when you have been issued a personal code.

Option 1: Verify your ID with Companies House using GOV.UK mobile phone app (Free):

You will need:

GOV.UK One login account

Smartphone with GOV.UK Login app installed

ONE of the following photo ID:

• UK passport
• non-UK passport with a biometric chip
• UK photocard driving licence
• UK biometric residence permit (BRP)
• UK biometric residence card (also called a BRC)
• UK Frontier Worker permit (FWP)

Options 2: Verify your ID with Companies House by answering security questions (Free):

You will need:

GOV.UK One login account

ONE of the following photo ID:

• UK passport
• non-UK passport with a biometric chip
• UK photocard driving licence
• UK biometric residence permit (BRP)
• UK biometric residence card (also called a BRC)
• UK Frontier Worker permit (FWP)

OR

UK bank or building society account (you will need the details)

Questions are checked against Experian credit record and will be regarding, bank accounts, credit cards, mortgages.

Option 3: Verify your ID with Companies House by Post Office (£12.75 payable to the Post Office)

You will need:

GOV.UK One login account

ONE of the following photo ID:

• UK passport
• non-UK passport with a biometric chip
• UK photocard driving licence
• UK biometric residence permit (BRP)
• UK biometric residence card (also called a BRC)
• UK Frontier Worker permit (FWP)

Once you have decided on your chosen method of ID verification proceed as follows:

• UK One login.

If you don’t already have one, you will need to create a login for GOV.UK One Login:

If you aren’t sure whether you have one try and sign-in using the link below and if your email address doesn’t have an account, they will tell you.  If you already have an account go to step 2)

Tip: this is a personal email to you and isn’t related to your company.

Tip: If you have a Companies House account use the email address associated with that account.

Tip: you will be guided to set up additional log in security (2 factor authentication) during this process so pick to receive log in codes either by email or text, whichever is easier for you.

Follow this link to create a GOV.UK One Login

https://signin.account.gov.uk/sign-in-or-create

• Verify your ID with Companies house.

Get your ID ready and prepare:

You will need your login email address and password for GOV.UK One

You will need one of the following:

• UK passport
• non-UK passport with a biometric chip
• UK photocard driving licence
• UK biometric residence permit (BRP)
• UK biometric residence card (also called a BRC)
• UK Frontier Worker permit (FWP)

Then the following depending on which method you are going to verify with (your choice)

For GOV.UK app verification:

Smart phone with the GOV.UK login app installed (free to download for apple and android phones)

For security question verification:

You will need your ID to be a passport or UK driving licence.

These will be based on your financial data and recent history so make sure you know what, if any loans you have, when you applied for them, details of mortgage etc.

For Post Office verification:

You will need your ID to be a passport or UK driving licence.

Once you have assembled the required documents and information you are ready to verify your ID. 

Please read the notes below before clicking the link.

When you click the link at the end of these notes you will be asked to click “Verify” and you will be taken to your GOV.UK One to log in.

You will need to verify your address for Companies House and confirm your ID has not been verified.

You will then be guided to choose the method of verification by answering a series of questions:

It will ask what ID you have available and whether it is ready to use.

You will be asked if you have a smartphone:

If you answer YES, you will be guided to verify your ID using the GOV.UK app and your form of ID.

Once verified you will be issued with a personal code.

If you answer NO you will then be asked if you wish to verify your ID another way, and you should answer YES to that question.

You will then be asked how you would like to prove your ID:

If you wish to prove your ID using security questions then click to enter either your UK driving licence details or UK passport details.

Follow the instructions to enter either your driving licence details or your passport details and confirm your home address.

Companies House will get your information from Experian.  This can take a few seconds.

You will then be asked 3-5 security questions regarding your financial situation and history.

Once answered correctly you will be verified and will be issued with a personal code.

If you wish to prove your ID using the Post Office then click to Prove your identity another way.

Follow the instructions to choose “In person at a Post Office”.

You will be asked to enter the details of either your driving licence or passport.

You will be sent a verification letter by email, and this must be taken to the Post Office along with the original document you used for ID in the previous step.

The post office will verify your ID and inform Companies House.

Companies House will be in touch via email once your ID is verified and will issue you a Personal code.

Verify your ID with Companies House using the following link:

https://www.gov.uk/guidance/verify-your-identity-for-companies-house

IN ALL CASES, ONCE YOUR ID IS VERIFIED YOU WILL BE ISSUED WITH A PERSONAL CODE.  PLEASE SEND US THE CODE TO ENABLE US TO FILE ON YOUR BEHALF AND KEEP IT SAFE.

IF YOU HAVE TROUBLE VERIFYING YOUR ID.. YOU MAY MAKE AN APPOINTMENT TO DO IT AT OUR OFFICES WITH SOME ASSISTANCE…THERE WILL A CHARGE FOR THIS SERVICE of £75.00 plus VAT.

Building a resilient savings plan.

Irregular income, no employer sick pay and responsibility for your own tax bills make cash planning more important when you work for yourself. Yet many people have little to fall back on. The Financial Conduct Authority (FCA) reports that one in 10 UK adults has no cash savings, and a further 21% have less than £1,000 available for emergencies. In its 2024 Financial Lives survey, the FCA also found that 24% of adults (around 13.1 million people) had low financial resilience.

This guide sets out a practical framework for building, protecting and optimising a savings plan.

Set a clear cash reserve target

How much to hold

A common rule of thumb is three to six months of essential personal spending. For the self-employed, aim higher: six to 12 months is sensible, especially if your income is seasonal or you have dependants or fixed business overheads. Use two reserves.

• Personal emergency fund: Rent or mortgage, utilities, food, transport, childcare, debt repayments, insurance premiums.
• Business buffer: A separate pot to cover tax, national insurance (NI) and essential business costs (software, equipment leases, insurance, freelance support).

How to calculate it

1. List the essentials, both personal and business.
2. Work out the average irregular costs by looking back 12 to 18 months.
3. Do a stress test by modelling a lean quarter with 20-40% lower income and checking the reserve can absorb it.
4. Ring-fence the reserve in instant-access or notice accounts. Avoid mixing with day-to-day funds.

Where to keep it

• Easy-access cash for the first three months of needs.
• Notice accounts for the next three to nine months if you want a higher rate and can tolerate waiting, for example, 30-90 days, to withdraw.
• Premium Bonds can complement cash for near-instant access, though returns are not guaranteed. Hold core emergency cash in interest-bearing accounts first.

Price in your 2025/26 tax and NI from day one

Budgeting for tax stops savings from being raided. Transfer a fixed percentage of every invoice into a separate “tax pot” so the money is there when payments fall due.

Key income tax bands (England, Wales, Northern Ireland)

• Personal allowance: £12,570.
• Basic rate 20%: Income above the personal allowance up to £37,700 (so higher-rate threshold above £50,270).
• Higher rate 40%: £37,701 to £125,140.
• Additional rate 45%: Over £125,140.

The personal allowance tapers away by £1 for every £2 of income above £100,000 and is lost completely at £125,140. Thresholds remain frozen in 2025/26.

Why it matters: Frozen thresholds and wage growth have pushed more people into higher bands. HMRC expects more than 7m higher-rate taxpayers this year due to “fiscal drag”.

Self-employed national insurance (2025/26)

• Class 4 NI: 6% on profits between £12,570 and £50,270, then 2% above £50,270.
• Class 2 NI: Treated as paid for entitlement purposes if profits are at or above the small profits threshold (you do not pay it in cash).

Payments on account and deadlines

If your last self assessment bill was over £1,000 (and less than 80% of your tax was collected at source), HMRC usually requires payments on account.  Both the January and July payment are each 50% of the prior year self-assessment tax payable amount.

• 31 January: First payment on account for the current tax year, plus any balancing payment for the previous year.
• 31 July: Second payment on account.

Build these dates into your cashflow so your emergency fund is not used for taxes.

Interest and penalties

Late or under-payments attract interest and possible penalties. With more savers exceeding allowances, the Financial Times notes HMRC is writing to taxpayers about untaxed interest; if you think you owe tax, contact HMRC to avoid penalties and interest (reported at 8.5% in that coverage).

Make full use of your tax-free savings allowances

ISA allowances (2025/26)

• Overall ISA allowance: £20,000 across cash, stocks & shares, and innovative finance ISAs.
• Lifetime ISA (LISA): £4,000 annual limit within the £20,000 cap, with a 25% government bonus (conditions and withdrawal rules apply). HMRC confirms the £20,000 limit for 2025/26.

Using ISAs protects interest, dividends and gains from tax, which reduces admin and preserves your personal savings allowance for any cash held outside wrappers.

Personal savings allowance (PSA) and starting rate for savings

Outside ISAs

• PSA: £1,000 of savings interest tax-free for basic-rate taxpayers, £500 for higher-rate, £0 for additional-rate.
• Starting rate for savings: Up to £5,000 of interest at 0%, but only if your non-savings income is below £17,570 (2025/26). Every £1 of other income above the personal allowance reduces this band by £1.

Practical tip: If one partner has lower non-savings income, holding more of the family’s taxable cash in that person’s name can preserve the 0% starting rate and PSA. (Transfers must be genuine ownership changes.)

Dividends outside ISAs

• Dividend allowance: £500 for 2025/26. Above that, dividend tax rates apply according to your band.

Pensions: Long-term savings with tax relief

Pension contributions can play two roles for the self-employed: long-term investing and tax-efficient smoothing of your taxable income.

2025/26 pension limits and allowances

• Annual allowance is £60,000 (subject to tapering for very high incomes).
• The lifetime allowance is abolished. Instead, two lump-sum caps apply when taking benefits.
  • Lump sum allowance (LSA): £268,275.
  • Lump sum and death benefit allowance (LSDBA): £1,073,100.

Personal contributions normally receive tax relief at your marginal rate. For higher earners, a well-timed contribution can reduce exposure to the 40% band or help restore some personal allowance where income is just over £100,000.

Carry forward rules may let you use unused annual allowance from the previous three tax years if you had pension membership then. This can be valuable after a strong trading year.

Liquidity warning: Pensions are for the long term. Keep your emergency fund outside your pension so you can access cash when needed.

Protect your income against shocks

Self-employed people do not qualify for statutory sick pay (SSP). If illness or injury stops you working, there is no employer safety net. Government guidance confirms self-employed workers are not eligible for SSP.

Insurance options to consider

• Income-protection insurance can replace a portion of earnings if you cannot work due to illness or injury, after a chosen waiting period.
• Critical-illness cover pays a lump sum on diagnosis of specified conditions.
• Life insurance provides for dependents if you die.
• Business interruption/overheads cover can help with fixed costs.

These policies are not savings products, but they protect your savings plan by reducing the chance that you will need to drain your reserves during a long absence from work.

Parental leave and maternity allowance

Self-employed parents are not entitled to statutory maternity pay, but maternity allowance (up to £187.18), may be available for up to 39 weeks if eligibility criteria are met (including self-employment in at least 26 of the 66 weeks before the due date and minimum earnings). Paying or being treated as having paid Class 2 NI for at least 13 weeks can affect entitlement levels.

Build your plan: Step-by-step checklist

1. Open separate accounts: One for day-to-day spending, one “tax pot” and one “emergency fund”. Automate transfers on every client payment (for example, 25-35% into the tax pot depending on your band and NI, and a fixed amount into the emergency fund).
2. Target a reserve: Set a six to 12-month goal and break it into monthly milestones. Treat it like a bill.
3. Use wrappers: Fill the £20,000 ISA allowance if possible; prioritise cash ISA for emergency funds and stocks & shares ISA for long-term goals. Consider a LISA if you meet the age and property criteria.
4. Optimise taxable interest: Place any non-ISA cash where it fits PSA and the 0% starting rate, especially for the lower-income partner. Review after each tax-year change.
5. Plan pension contributions: Aim for regular monthly payments, with top-ups near year-end if profits are stronger than expected. Use carry forward where appropriate.
6. Review insurance: Price income protection and critical illness cover. Balance premiums with your reserve size and risk tolerance. Note that without SSP, you rely on savings, benefits subject to eligibility or insurance.
7. Prepare for payments on account: If relevant, add the 31 January and 31 July amounts to your cash forecast.
8. Track interest and dividends: With rates still elevated for many accounts, more people breach the PSA; keep records, and if you think you owe tax, contact HMRC to avoid penalties and interest.
9. Rebalance quarterly: Check progress, refill the emergency fund after any use and adjust transfers if income changes.
10. Document everything: Keep a simple spreadsheet or cashflow tool listing invoices, due dates, reserves, ISA and pension contributions, and tax forecasts.

Practical scenarios

A. Profits fluctuate throughout the year

Create a baseline monthly transfer to the tax pot and emergency fund from every payment received. In stronger months, add a top-up; in weaker months, keep the baseline. This smooths progress and avoids relying on a year-end lump sum.

B. Approaching higher-rate tax

If total income exceeds £50,270, consider:

• adding pension contributions to manage your band
• moving interest-bearing cash into ISAs, and
• checking whether your partner’s PSA and starting-rate band can be used more efficiently.

C. Earning near £100,000

Income between £100,000 and £125,140 effectively faces a 60% marginal rate due to the withdrawal of the personal allowance. Pension contributions can help reduce adjusted net income in this range. Media analysis indicates a rising number of people affected by this “tax trap”.

D. Saving for a first home or later life

A LISA can be attractive if you qualify (age limits apply), thanks to the 25% bonus on up to £4,000 a year, but withdrawals for non-qualifying reasons incur a charge. Keep emergency cash outside the LISA.

Choosing accounts and investment mix

Cash for short-term needs

For the emergency fund and tax pot, prioritise UK banks and building societies protected by the Financial Services Compensation Scheme (FSCS) up to the relevant limits. Look at:

• instant access for the first three months of needs
• notice accounts for the next tranche if the rate is meaningfully higher
• fixed-term accounts are only for surplus cash you won’t need during the term.

Investing for goals five years or longer

• Pensions and stocks & shares ISAs allow investment in diversified funds or portfolios.
• Volatility is normal in markets; match risk to your time horizon and capacity for loss.
• Keeping too much long-term cash may leave returns behind inflation after tax unless held in wrappers.

Tip: Review fees and platform charges annually; costs compound.

Managing risk without an employer safety net

Health and income shocks

Because you cannot claim SSP, think about:

• income protection with a waiting period that fits your emergency fund size (for example, 8-26 weeks)
• critical-illness cover as a bolt-on if you want a lump sum for treatment, adaptations or clearing debt
• emergency fund discipline – If you must use it, pause investing until you rebuild it.

Family changes

If you are planning a family, check maternity allowance eligibility early and how NI records affect it. Voluntary Class 2 NI may increase entitlement in some cases.

Staying compliant and reducing admin

• Keep accurate records of interest and dividends outside ISAs. With more people crossing PSA limits, HMRC is issuing letters based on bank data, though these don’t always match perfectly; get ahead of any underpayment.
• Reconcile quarterly and check that your transfers into the tax pot track your profit trend, not just revenue.
• Use calendar reminders for 31 January and 31 July, and for VAT and CIS if relevant.
• Check your NI record annually to confirm qualifying years for state pension and benefits.

Your action plan

1. Set targets: Decide your emergency fund size (months of spending) and the monthly contribution required.
2. Automate: Split every client receipt into spending, tax and savings pots.
3. Maximise wrappers: Fill ISAs first, then pensions as affordable, using carry forward if needed.
4. Optimise interest: Place non-ISA cash to use the PSA and starting-rate band where available.
5. Insure wisely: Review income protection and related cover to backstop the plan.
6. Budget for tax: Forecast your 31 January and 31 July payments and keep the pot topped up.
7. Review quarterly: Adjust contributions as profits change and refill the emergency fund after any withdrawals.
8. Ask early: If you receive an HMRC letter about savings interest or think you may owe tax, penalties, and interest can mount.

Final word

A resilient savings plan means you can take time off when you are ill, manage tax bills without stress and invest for the future on your terms. Start with the cash reserve, automate transfers, make the most of ISAs and pensions, and review quarterly. If your circumstances change – income rising into a new tax band, a new mortgage or family plans – update your plan to stay on track.

Self-employed? Talk to us to help build your financial security.