Author: Helen Whitehouse

The UK new car market reached a significant milestone in 2025, with registrations exceeding two million for the first time since the pandemic began.

A total of 2,020,373 new cars were registered, marking the third consecutive year of growth. However, the figure remains well below the 2.3m vehicles sold in 2019.

Electric vehicles (EVs) accounted for 473,340 of those registrations, representing a 23.4% market share. While this was a notable increase from 2024, it still fell short of the Government’s 28% target under the Zero Emission Vehicles (ZEV) Mandate. The mandate requires manufacturers to meet annual EV sales thresholds or face financial penalties.

The Society of Motor Manufacturers and Traders (SMMT) warned that the industry is relying on heavy discounts, often worth several thousand pounds per vehicle, to stimulate demand. It described this approach as unsustainable, arguing that consumer appetite is not keeping pace with regulatory ambitions.

Although the ZEV Mandate includes flexibilities, such as emissions credit trading and fleet-wide emissions reductions, these were further relaxed in April following industry pressure. At the same time, potential fines for non-compliance were reduced.

Government support has included a £2bn Electric Car Grant Scheme, offering up to £3,750 per vehicle, alongside continued investment in charging infrastructure. However, plans announced in the Autumn Budget to introduce a per-mile tax on EVs risk dampening demand.

The Office for Budget Responsibility estimates incentives could add 320,000 EV sales over five years, but the new tax may reduce sales by 440,000 overall. Transport Minister Keir Mather said Government action was driving uptake, with EV sales up nearly 24% year-over-year.

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What directors need to do.

 

Companies House has started rolling out mandatory identity checks for directors and people with significant control (PSCs). These checks form part of a wider programme of Companies House reform under the Economic Crime and Corporate Transparency Act 2023, designed to improve the reliability of information on the public register and reduce the misuse of UK companies.

 

This guide explains who needs to verify, how the process works in practice, what you need to do for your own roles and what happens if you miss your due date.

What is changing and why it matters

Historically, Companies House accepted information largely on trust, with limited verification at the point of filing. Recent reforms give Companies House stronger powers to query and reject information, remove false or misleading content, and take a more active role as a gatekeeper of the register.

 

Companies House reports that, in the last year covered by its 2024 to 2025 annual report, it used new powers to remove suspicious information and combat registered office abuse, impacting over 100,000 companies (including striking off companies where necessary).

 

Identity verification is one of the centrepieces of this reform programme. The aim is straightforward: to make it harder for people to register companies, become directors or declare control using false identities.

Key dates and the transition period

Identity verification became a legal requirement from 18 November 2025. Companies House describes this as the start of a 12-month transition period, giving companies time to ensure directors and PSCs verify and then connect their verified identity to each role by the relevant due dates.

 

What this means in practice.

• There is no single one-day deadline for everyone. Your due date depends on your role and your filing cycle.
• Companies House will show due dates on the public register for each role you hold (displayed on the people tab).
• Companies House also states it will email companies directly before the confirmation statement filing deadline to explain what must be done.

 

If you act for multiple companies (or hold multiple roles), you should assume you will need to manage more than one deadline and process.

Who needs to verify their identity?

Companies House guidance explains that you need to verify if you are any of the following:

• a company director
• the equivalent of a director (including members, general partners and managing officers)
• a director of an overseas company registered in the UK
• a person with significant control (PSC)
• an authorised corporate service provider (ACSP) (a Companies House authorised agent)
• (in due course) other filing roles, as Companies House expands the regime.

 

Companies House also notes it will introduce identity verification later for people who file at Companies House, limited partnerships, corporate directors, corporate limited liability partnership (LLP) members and officers of corporate PSCs.

 

The two steps you must complete

A point that often gets missed is that the regime has two separate steps.

Companies House sets these out as the following.

1. Complete an identity verification check successfully and receive a unique identifier called a Companies House personal code.
2. Provide an identity verification statement to Companies House to confirm the identity is verified (this includes supplying your personal code) for each relevant role.

In other words, verifying once is not always the end of the job. You then need to use your personal code to connect your verified identity to each director/PSC role you hold, in the way Companies House requires.

Ways to verify your identity

Companies House allows two routes.

1. Verify online using gov.uk One Login (free)

Companies House states the online route uses gov.uk One Login and is free of charge. Depending on your circumstances, gov.uk One Login may guide you through one of the following methods:

• using an app
• answering online security questions
• entering photo ID details online and then attending a participating Post Office (where directed).

 

Government communications around the rollout also reference the Post Office option as additional support for people who need help, while keeping the process digital end-to-end.

 

2. Use an ACSP (may charge a fee)

An ACSP is an AML-supervised organisation or individual (for example, accountants, solicitors, company formation agents) that registers with

Companies House to carry out identity verification on behalf of others. Companies House guidance notes that ACSPs may charge for this service.

 

If you already use an agent to file for you, the ACSP route can be practical, particularly where the person verifying cannot use the online route or is based overseas.

 

The Companies House personal code

When you successfully verify, Companies House issues a unique identifier known as your Companies House personal code. It is personal to you, not to a specific company.

 

Companies House guidance and blogs highlight these points.

• You generally verify only once (unless Companies House instructs otherwise).
• You use the code when you file a confirmation statement, get appointed as a director, or become a PSC.
• Keep the code secure and only share it with people you trust who file on your behalf.
• Where an ACSP verifies you, Companies House explains that an email will be sent containing your personal code and notes it is an 11-character identifier.

 

What directors must do, step by step

Step 1: Identify which roles you hold

Start by listing:

• each company where you act as a director
• any roles where you act as the equivalent of a director (for example, LLP member)
• whether you are also recorded as a PSC
• any overseas entity director roles (if relevant).

This matters because Companies House expects you to connect your verified identity to each role in the right way and, in some cases, within a specific time window.

Step 2: Complete identity verification (online or via an ACSP)

Online route (gov.uk One Login)
You will need to set up (or use) a gov.uk One Login and follow the prompts to verify. Companies House and government updates describe the process as designed to be quick and accessible, using app, browser or Post Office routes, depending on what you have available.

 

Government communications provide some useful indicators of what users experienced during testing and early rollout, including:

• an average gov.uk ID checking app completion time of 4 minutes (18 March to 30 June 2025)
• YouGov Business Omnibus findings (sample of 1,007 senior decision-makers) including 60% awareness of the new requirements, 81% support for identity verification, and 73% agreeing directors/PSCs would find it easy to verify.

 

ACSP route
If an ACSP verifies you, you provide approved identity documents to them, and they complete the check and confirm it to Companies House using the relevant service. Companies House explains that ACSPs must verify to the same standard as the Companies House service, and they may charge for doing so.

Step 3: Record and safeguard your personal code

Once you receive your personal code, treat it as a sensitive credential. Companies House explicitly advises keeping it secure and only sharing it with trusted people who file on your behalf.

 

Internal controls that work well in most businesses include:

• storing the code in a secure password manager (or an equivalent controlled record)
• limiting access to those who need it for filings
• keeping an audit trail of when you shared it and with whom.

Step 4: Connect your verified identity to each role by the due date

This step is where many directors will spend their time during the transition period.

Directors (and equivalents): Link via the confirmation statement

Companies House guidance states that directors will need to provide their personal code as part of the company’s next confirmation statement. If you are a director of more than one company, you must do this for each one.

 

Companies House has also said that directors need to verify before filing the next confirmation statement, or the filing will be rejected.

 

PSCs: Link via the PSC verification details service, within a defined period

Companies House rules for PSCs include a time-limited window to provide the personal code, and the timing depends on your situation. Companies House guidance sets out the key scenarios.

 

• If you are both a director and a PSC of the same company:
  • you must provide the personal code separately for each role
  • as a director, you provide it in the company’s confirmation statement
  • as a PSC, you provide it using the PSC verification details service within a 14-day period starting the day after the company’s confirmation statement date.

 

• If you are a PSC but not a director of the same company:
  • you must provide your personal code within the first 14 days of your birth month (Companies House gives an example: if your date of birth is 22 January, the 14-day period begins on 1 January).

 

• If you became a PSC after 18 November 2025:
  • you can provide your personal code when first added to the register, or within 14 days of being added.

 

Companies House also notes you can check the dates of your 14-day period on the Companies House register.

New companies and new appointments

Companies House guidance states that when you register a new company, you will be asked to provide the personal code for each director as part of the registration filing.

 

This makes early verification useful if you plan to incorporate a new company or make new board appointments during 2026.

Overseas companies registered in the UK

If you are an overseas company, Companies House guidance says you must confirm all directors have verified their identity by the anniversary of the UK establishment’s registration.

 

What happens if you do not comply

Companies House’s published approach to non-compliance is direct on the legal position and the likely enforcement pathway.

 

Key points include the following.

• It is unlawful for a director to act as a director without completing identity verification; the company may also break the law if a director (or equivalent) is not verified. PSCs who do not verify may also commit an offence.
• Companies House describes enforcement routes that include prosecution, referral to the Insolvency Service and financial penalties.
• Companies House may take enforcement action where people miss their due dates, including issuing “default” letters and escalating where necessary.
• Even where Companies House does not select a case for prosecution, it notes that directors may still commit an offence for continuing to act without verification, and Companies House may refer cases to the Insolvency Service.
• As a practical filing consequence, Companies House has stated it will reject a confirmation statement if directors have not verified by the time the company tries to file.

 

Extensions for PSCs

Companies House also sets out a limited discretion to extend a PSC’s identity verification due date by up to 14 days, with rules on how extensions work and what happens after repeated extension requests.

 

If you anticipate missing a PSC window (for example, travel, illness or access issues), treat it as urgent and address it ahead of time rather than waiting for the window to close.

Privacy, security and practical handling

A few practical points from Companies House guidance are worth highlighting.

• Use only the approved verification routes; Companies House states you should not post or email identity documents to it.
• Your verified identity connects to your gov.uk One Login if you use the online route, and One Login uses its own privacy notice for how it stores and uses information.
• Companies House explicitly warns that identity verification makes impersonation harder but not impossible, so you should still protect your personal code and remain alert to suspicious activity.

 

Separately, Companies House and the Government Digital Service have reported significant early uptake: over a million people verified their identity for Companies House via gov.uk One Login since April (in the period discussed in the November 2025 update).

 

A preparation checklist that keeps this manageable

Use the checklist below to keep control of the process, especially if you have more than one company or hold both director and PSC roles.

Personal checklist

• Confirm which roles you hold: director, PSC, overseas director, LLP member (or equivalent).
• Verify your identity (online or via an ACSP).
• Store your Companies House personal code securely.
• Identify each company’s next confirmation statement date and plan to provide the personal code as part of that filing.
• If you are a PSC, identify your PSC window and plan the separate PSC submission where required.

 

Company checklist

• Ensure each director has completed verification ahead of the confirmation statement filing.
• Confirm who will submit the confirmation statement (internal team member or agent) and ensure they have the codes they need, handled securely.
• Check the Companies House register people tab for due dates and status indicators where shown.
• For any upcoming incorporations or director appointments, ensure individuals verify early so you can provide personal codes during the filing process.

 

Next steps

If you only take three actions:

1. Verify your identity (online or via an ACSP).
2. Store your personal code securely.
3. Ensure you provide the code in the right place for each role (confirmation statement for director roles, and the PSC service where required).

If you manage several companies, treat this as a mini project: capture roles, due dates and responsible filers in one place, then work through them methodically during the transition period.

 

 

What sole traders and landlords must do before April 2026.

 

Making Tax Digital for income tax (MTD IT) will become mandatory for many sole traders and landlords from 6 April 2026. It will change how you keep records and report income, and it will affect the way you plan your cashflow and manage deadlines. The timetable and thresholds are now confirmed, and the Autumn Budget 2025 has added some easements to the penalty regime rather than delaying the start date.

 

This guide explains who must join in April 2026, what MTD IT actually involves, and the practical steps to take now so you are ready before the 2025/26 tax year ends.

 

MTD IT in a nutshell

MTD IT is a new way for sole traders and landlords to report self-employment and property income to HMRC. Instead of keeping paper records and filing one self assessment tax return each year, you will:

• keep digital records of income and expenses
• send quarterly summary updates to HMRC from compatible software
• make end-of-year adjustments and send a final declaration through that software.

HMRC defines “qualifying income” for MTD as your total gross income in a tax year from self-employment and property, before expenses or tax, and uses that figure to decide your start date.

 

Official business population statistics show there were about 7m individuals in self assessment with self-employment or landlord income in 2023/24. Around 2.9m of these, roughly 42%, have qualifying income above £20,000 and are expected to join MTD IT in phases between 2026 and 2028.

 

MTD does not mean five full tax returns a year. Quarterly updates are short summaries of income and expenses pulled from your software, followed by an annual finalisation instead of today’s single self assessment return.

 

 

 

Who must join and when

MTD IT applies to individuals who file self assessment returns and have qualifying income from self-employment and/or property letting above certain thresholds.

 

The current rules are as follows.

• From 6 April 2026
  You must use MTD-compatible software if your qualifying income from self-employment and property exceeds £50,000 in the 2024/25 tax year.
• From 6 April 2027
  The requirement extends to those with qualifying income above £30,000 in the 2025/26 tax year.
• From 6 April 2028
  It is planned to extend to those with qualifying income above £20,000 in the 2026/27 tax year.

HMRC will look at your latest self assessment return, add up your total turnover from self-employment and property, and use that to decide when you must join MTD. Other income, such as employment, pensions or savings interest, does not count towards the MTD thresholds.

 

Based on 2023/24 data:

• about 864,000 individuals have qualifying income over £50,000 and are expected to join from April 2026
• another 1,077,000 are in the £30,000–£50,000 band and are expected to join from April 2027
• a further 975,000 fall between £20,000 and £30,000 and are due to join from April 2028.

If your qualifying income drops below £30,000 after you have joined, current guidance suggests you remain within MTD unless HMRC confirms otherwise. It is therefore worth treating MTD as a long-term change.

 

What changes for sole traders

If you are a sole trader with qualifying income above the relevant threshold, MTD will change how you track and report your business income.

 

You will need to:

• keep digital records of all business income and expenses in MTD-compatible software
• send four quarterly updates each tax year for each sole-trader business
• make any accounting and tax adjustments in an end of period statement
• finalise your overall tax position through a final declaration by the normal 31 January deadline.

You will still be responsible for:

• registering for self assessment when you start trading
• paying income tax and Class 2/4 national insurance under current rules for the 2025/26 tax year
• managing payments on account and balancing payments.

If you run more than one sole-trader business, you must keep separate digital records and send separate quarterly updates for each business.

 

What changes for landlords

Landlords with qualifying property income above the MTD thresholds will also have to move to digital record-keeping and quarterly updates. HMRC treats UK and overseas property income, and any joint lets, within the scope of MTD where it is taxed through income tax.

 

Key points for landlords

• You must keep digital records of rental income and allowable expenses for each property business.
• If you also trade as a sole trader, you must send separate quarterly updates for your rental business and your sole trader business.
• If you jointly let a property, you can choose to include either all income and expenses for those properties or only your share of the income in quarterly updates, but you must bring all expenses into the end-of-year calculations.
• Type of property does not affect MTD; it is driven by the level of taxable rental income, not by whether the property is a flat, house, furnished or unfurnished.

 

Surveys suggest many smaller landlords still keep manual records. One recent estimate found nearly 70% of landlords with one or two properties still use spreadsheets or paper. For those affected in April 2026, the next few months are an important time to move onto suitable software.

 

Key dates up to and after April 2026

The first mandatory MTD year for the more than £50,000 group will be the 2026/27 tax year, but preparation starts before that. The main dates to bear in mind are the following.

• 31 January 2026
  Deadline to file the 2024/25 self assessment tax return in the usual way.
• 6 April 2026
  Start of the 2026/27 tax year. If your qualifying income for 2024/25 was over £50,000, you must begin using MTD-compatible software from this date.
• 7 August 2026
  Deadline to send your first quarterly update for 6 April to 5 July 2026 (or 1 April to 30 June if you choose calendar quarters).
• 7 November 2026, 7 February 2027, 7 May 2027
  Deadlines for the remaining three quarterly updates for 2026/27.
• 31 January 2027
  You still file a “traditional” self assessment return for the 2025/26 tax year, even if you have started MTD for 2026/27.

From 2027/28, once MTD is fully bedded in, the aim is for you to finalise your tax position for each year directly from your software by the 31 January deadline, using your quarterly updates plus end-of-year adjustments.

 

What the Autumn Budget changed

Autumn Budget 2025 confirmed that MTD IT will start in April 2026 as planned. It did not change the thresholds or timetable but introduced easements and clarified how the penalty system will apply.

 

The main changes are as follows.

• Soft landing for penalties
  If you are required to use MTD IT from 6 April 2026, HMRC will not apply penalty points for late quarterly updates for the first 12 months, although late annual returns can still attract points.
• Extra time before late payment penalties
  All taxpayers in the new regime will have an additional 15 days before a late payment penalty is issued in their first year under the new system, creating a 30-day window to pay tax before penalties apply.
• Further deferrals and exemptions
  Some groups, such as those who receive trust and estates income, individuals who use averaging (for example, some farmers), those eligible for qualifying care relief and certain non-UK resident entertainers, will remain in standard self assessment until at least April 2027, with deputyship cases permanently exempt.

 

These measures aim to ease the transition without changing the core requirement for affected sole traders and landlords to be ready by April 2026.

 

 

Six practical steps to take before April 2026

If your qualifying income is above £50,000, or close to that level, the period between now and 6 April 2026 is the time to prepare. The following steps are a useful checklist.

1. Work out whether you are in scope

Use your latest self assessment figures to:

• total your gross self-employment income
• total your gross rental income (UK and foreign)
• add the two figures together.

If this combined figure for 2024/25 is above £50,000, you are in the April 2026 group. If it is between £30,000 and £50,000, you are likely to join in April 2027, and if it is between £20,000 and £30,000, you are expected to join in April 2028.

 

HMRC provides an online tool to check if and when you must use MTD IT.

2. Review your record-keeping

If you still keep paper records or basic spreadsheets, plan to move to digital bookkeeping software that:

• can capture income and expenses in real time
• is recognised by HMRC as MTD-compatible
• can handle more than one business if you trade and let property.

If you already use software, check with the provider that it will support MTD IT and how the quarterly update process will look in practice.

3. Decide how you want to structure your quarters

HMRC allows you to choose between standard update periods aligned with the tax year and calendar quarters, as long as you meet the same deadlines.

• Standard: 6 April–5 July, 6 July–5 October, 6 October–5 January, 6 January–5 April
• Calendar: 1 April–30 June, 1 July–30 September, 1 October–31 December, 1 January–31 March

Speak to whoever supports your bookkeeping about which option fits your accounting year and internal processes.

4. Clean up existing data

Use the remainder of 2025/26 to:

• reconcile bank accounts, debtor and creditor balances
• check that property income and expenses are complete and correctly categorised
• clear out duplicate or obsolete entries in spreadsheets or old systems.

Starting MTD with tidy opening data will make quarterly updates simpler and reduce the risk of avoidable errors.

5. Plan for cashflow and tax payments

Quarterly updates will give you more regular estimates of your tax bill, based on up-to-date records. HMRC expects this to reduce errors and the overall tax gap.

 

Use these estimates to:

• set aside tax more regularly
• adjust payments on account where appropriate
• identify profitable or loss-making activities earlier in the year.

Autumn Budget 2025 also confirmed an extended freeze on income tax thresholds, which will bring more taxpayers into higher bands over time, so keeping a close eye on estimated liabilities is sensible.

6. Consider voluntary early sign-up

You can choose to sign up early to MTD IT and join the pilot before you are mandated.

 

Early sign-up may help you:

• get used to the software and new processes with more support
• identify any issues before quarterly updates become mandatory
• test how quickly you can produce reliable data after each quarter end.

Take into account that, so far, only a small proportion of those expected to join in 2026 have taken part in the pilot, so software offerings and support are still evolving.

 

Get MTD-ready

MTD IT is no longer a distant policy idea. The start date, thresholds and core rules are set, and Autumn Budget 2025 has confirmed that April 2026 will go ahead, with some easing of penalties rather than a further delay.

 

For sole traders and landlords with qualifying income above £50,000, the rest of the 2025/26 tax year is the time to act. Checking whether you are in scope, choosing MTD-compatible software, tidying your records and planning for quarterly updates now will make the move to MTD far less stressful. If you are unsure about how these rules apply to your situation, seek tailored advice before April 2026 so you can enter the new system on the front foot.

 

Have any MTD questions? We are only a call or email away.

HMRC will stop sending most paper letters from spring as it accelerates its shift to digital communication.

Email alerts will replace automatic postal letters, directing taxpayers to view new documents in their personal tax account or the HMRC app. The change is part of HMRC’s digital by default plan, which aims for 90% of interactions to be online by the 2029/30 tax year and is expected to save £50 million per year in print and postage costs.

Only taxpayers who are digitally excluded, or those who actively opt out, will continue to receive letters by post. HMRC confirmed that anyone already using the HMRC app or a personal tax account will be among the first to move to digital notifications. When logging in, they will be prompted to provide or confirm their email address or mobile number. These details will be used solely to alert users that new correspondence is available in their online account.

HMRC stressed that taxpayers who do not use digital services will continue to receive paper letters. Safeguards will be in place to ensure that the elderly and those with disabilities can rely on traditional communication if needed.

Legislation in the Finance Bill 2025/26 will give HMRC the power to require digital contact details from users of its online services. The rollout will begin in spring 2026 and expand gradually as systems are updated.

HMRC states that the change will free staff to support those who most need help, while enhancing the speed and reliability of communications. Paper versions will remain available and must meet the same clarity standards as digital formats.

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What you need to know about compliance.

 

Preparing for an audit is rarely anyone’s favourite task, but it is part of running a resilient business. HMRC is under pressure to close the tax gap, completing around 316,000 compliance checks in 2024/25 and continues to invest in new staff and technology.

 

Against this backdrop, audits and compliance checks are unlikely to fade away. This guide explains what “audit” means in practice, how the 2025 Autumn Budget and current tax rules shape the compliance environment, and what you can do to prepare your business so that any audit or review is as smooth as possible.

Why audits and compliance matter in 2025/26

Government data shows that small businesses now account for the largest share of the tax gap by customer group, at 60% in 2023/24. Common reasons include errors, record-keeping problems and failure to take reasonable care. HMRC is responding with a mix of “upstream” measures, such as nudges and education, and traditional inquiries. Preventative measures now account for approximately 41% of HMRC’s compliance yield, up from 29% in 2020/21.

 

Overall compliance yield reached an estimated £48bn in 2024/25, up from £41.8bn the previous year, with every £1 spent on compliance bringing in about £23 for the Exchequer. This level of return means HMRC is likely to maintain, and possibly increase, its focus on risk-based reviews, data matching and sector-specific campaigns.

 

For business owners, this does not only mean a higher chance of inquiry. It also highlights the value of strong internal controls, sound governance and up-to-date tax and accounting records.

 

What we mean by a “business audit”

Clients often use “audit” to describe any deep review of their figures, but there are several distinct processes.

• Statutory financial audit
  This is a regulated review of your annual accounts under the Companies Act. Auditors test whether the accounts give a true and fair view and meet UK Generally Accepted Accounting Practice (UK GAAP) or International Financial Reporting Standards (IFRS) requirements.
• HMRC compliance check or tax inquiry
  This is a review of one or more taxes, such as corporation tax, VAT, PAYE or research and development (R&D) relief. HMRC may ask for explanations, source records and supporting documents, and can amend returns or raise assessments if it finds errors.
• Other audits and reviews
  Lenders, investors, regulators or group parents may request their own review, ranging from agreed-upon procedures to a full internal audit.

This guide focuses on statutory audits and HMRC compliance checks, as these affect most companies.

 

Who needs a statutory audit?

From financial years beginning on or after 6 April 2025, a private limited company may qualify for audit exemption if it meets at least two of the following criteria:

• annual turnover of no more than £15m
• assets worth no more than £7.5m
• 50 or fewer employees on average.

If your company meets these thresholds, it is usually treated as “small” and may choose not to have a statutory audit. However, an audit is still compulsory if, at any time in the year, the company:

• is a public company
• is a subsidiary that does not qualify for a group exemption
• carries out regulated activities such as banking, insurance or certain investment services
• has shares traded on a regulated market
• is a master trust pension scheme funder or certain other specified bodies.

Even where an audit is not required by law, it can still be requested. Shareholders who hold at least 10% of the shares (by number or value) can insist on an audit if they make a written request at least one month before the year end. Lenders, investors or potential buyers may also require audited accounts as part of their due diligence.

 

HMRC compliance checks and tax inquiries

HMRC compliance checks are an increasingly common part of the tax system. In 2024/25, HMRC completed about 316,000 compliance checks across all customer groups. These checks range from simple queries handled by letter to full records reviews.

 

Recent analysis shows the following.

• The overall tax gap in 2023/24 was 5.3% of theoretical liabilities, equal to £46.8bn.
• Corporation tax now accounts for about 40% of the tax gap by tax type, with the corporation tax gap percentage rising to 15.8% in 2023 to 2024.
• Small businesses are the largest contributor by customer group, at around 60% of the total tax gap.
• HMRC opened compliance checks into nearly 16% of R&D tax relief claims in 2023/24, underlining the level of scrutiny in this area.

 

HMRC uses data analytics, third-party information and cross-checks between taxes to identify apparent inconsistencies. Examples include:

• high director dividends compared with reported profits
• VAT returns that do not align with accounts or sector norms
• PAYE or Construction Industry Scheme (CIS) returns that suggest employment status risks
• large or unusual claims for reliefs, especially R&D and capital allowances.

For many businesses, a compliance check is not a sign of wrongdoing, but it still demands careful management.

 

How the Autumn Budget shapes the compliance environment

The Autumn Budget 2025 did not change headline rates of income tax, national insurance or VAT, and it left the main corporation tax rate at 25%, in line with the 2024 Corporate Tax Roadmap. The VAT registration threshold remains at £90,000 of taxable turnover (with a deregistration threshold of £88,000).

 

Key points for business owners include the following.

• Higher tax on investment income from 2026/27
  Ordinary and upper rates of dividend tax will increase by 2 percentage points from April 2026, which may influence profit extraction decisions and could feature in forward-looking audit and tax planning.
• Tighter focus on avoidance and non-compliance
  Budget and related HMRC reports highlight further work on promoters of tax avoidance schemes, anti-avoidance rules for company liquidations and strengthened action against directors who use phoenix arrangements or offshore structures to avoid tax.
• Investment in HMRC compliance and debt collection
  Additional funding for compliance teams and digital tools means more cases can be reviewed and debt followed up more quickly.

 

For audits and compliance checks, the message is straightforward: the rules around who must be audited and who must register for VAT are stable in 2025/26, but HMRC’s capacity and willingness to enforce those rules is increasing.

 

Getting audit-ready: Practical steps before any review starts

Whether you expect a statutory audit, a lender review or a possible HMRC inquiry, good preparation makes a real difference. The following habits help your year-end process and reduce the risk of problems.

 

1. Keep complete, timely records

• Use bookkeeping software that captures all sales, purchases and bank transactions.
• Keep digital copies of key documents, including contracts, lease agreements, invoices and payroll reports.
• Make sure you understand how your VAT, PAYE and CIS figures flow from the underlying records.

2. Reconcile regularly
   Monthly or quarterly reconciliations between the ledger and:

• bank statements
• supplier and customer balances
• VAT and PAYE submissions
• stock and work in progress.

3. Document judgments and estimates
   Areas such as revenue recognition, stock valuation, provisions and impairment require management judgment. Keep written explanations of the approach and assumptions used, as auditors and HMRC often ask for this supporting evidence.

 

4. Review director remuneration and dividends
   Check that directors’ salaries, benefits and dividends are supported by board minutes, dividend vouchers and tax calculations. With higher future tax on dividends and close attention on profit extraction, clear documentation is important.

 

5. Maintain clear tax working papers
   For each tax return, retain schedules showing how figures were derived, including reconciliations from accounts profit to taxable profit, capital allowances computations and relief claims. This helps you respond quickly to queries and reduces the risk of misunderstanding.

 

What to expect during a statutory audit

If your company requires, or chooses to have, a statutory audit for a period falling in 2025/26, the process usually follows these stages.

1. Planning meeting
   The audit team discusses your business model, key risks, systems and any changes since the prior year. They agree a timetable, key contacts and requested information.
2. Information request
   You receive a “prepared by client” (PBC) list of schedules and documents to provide before and during the audit, for example fixed asset registers, bank reconciliations, aged debtor and creditor reports and payroll summaries.
3. Fieldwork and testing
   Auditors test samples of transactions and balances, review controls and perform analytical procedures. They may attend stock counts or obtain confirmations from banks and major customers or suppliers.
4. Discussion of findings
   The audit team discusses any errors, adjustments or control observations with you. Many issues can be resolved through additional evidence or minor corrections.
5. Audit report and management letter
   Once the accounts are final, the auditors issue their opinion and, where appropriate, a separate letter setting out control recommendations.

You can make the audit more efficient by agreeing realistic deadlines, allocating an internal contact to co-ordinate responses and keeping communication open if issues arise.

 

What to expect during an HMRC compliance check

An HMRC compliance check normally starts with a letter. The letter explains which tax and period HMRC is looking at, what information it wants and the deadline for a response. In some cases, HMRC may phone first or request a meeting.

 

Typical features of a check include the following.

• Scope
  The check may be “aspect” based, limited to one issue or a full inquiry into an entire return.
• Information requests
  HMRC can ask for records it reasonably needs to check the position, such as invoices, bank statements, contracts, payroll data and supporting calculations. Where records are digital, HMRC may request data downloads.
• Time limits
  HMRC usually has four years to correct careless errors and up to 20 years in cases of deliberate behaviour, although exact limits depend on the tax and circumstances.
• Outcome
  The check may end with no change, an adjustment to tax due, penalties or agreement of a repayment. Penalties depend on behaviour (for example reasonable care, careless, deliberate) and whether you voluntarily disclose errors.
• Rights of review and appeal
  If you disagree with HMRC’s conclusions, you can request an internal review or appeal to the tax tribunal.

 

Responding promptly, providing clear evidence and keeping a full record of correspondence helps to keep the process manageable and supports your position if there is any disagreement.

 

Ongoing compliance habits that reduce audit risk

The same habits that make your year end smoother also reduce the likelihood and impact of inquiries. Consider building the following into your regular operations.

• Annual “health check” of accounts and tax
  Review your trial balance, control accounts and tax workings before year end. Look for unusual trends, missing balances or old unreconciled items.
• Review of high-risk areas
  Pay particular attention to VAT treatment, employment status, director transactions, use of personal assets in the business and any relief claims such as R&D or capital allowances. HMRC sees these as higher risk and has dedicated teams reviewing them.
• Up-to-date statutory books and filings
  Maintain accurate Companies House filings, shareholder records and board minutes. Discrepancies between legal records, accounts and tax returns can raise questions during both audits and compliance checks.
• Clear segregation of duties where possible
  Even in smaller businesses, separating responsibilities for authorising payments, recording transactions and reconciling accounts can reduce error and fraud risk.
• Training for finance and payroll staff
  Make sure staff understand current VAT rules, PAYE reporting, national minimum wage and benefits reporting. HMRC uses educational campaigns and targeted checks in these areas.

 

 

 

Closing thoughts

The 2025/26 tax year sits in a period of steady rules but rising scrutiny. Audit exemption thresholds have increased, yet many companies still need or choose an audit. HMRC’s focus on the tax gap means more attention on small and mid-sized businesses, with compliance activity supported by better data and stronger technology.

 

You cannot remove the possibility of an audit or inquiry, but you can control how ready you are. Consistent records, clear documentation of decisions and regular reviews put you in a strong position if questions arise. If you are unsure how the current rules or Autumn Budget 2025 announcements affect your company, seek tailored advice before year end so that you can approach any future audit with confidence.

 

Preparing for an audit? We can help.

 

The Government has confirmed significant wage increases for workers from 1 April 2026. The national living wage (NLW) will rise by 4.1%, reaching £12.71 per hour for those aged 21 and over.

This increase will benefit around 2.4 million low-paid workers, adding £900 to the annual salary of a full-time worker.

Meanwhile, the national minimum wage (NMW) will rise by 8.5%, reaching £10.85 per hour for 18 to 20-year-olds. This will provide a £1,500 boost for full-time workers, further narrowing the gap with the NLW and progressing towards a unified adult rate. The NMW for 16 to 17-year-olds and apprentices will also increase by 6%, to £8 per hour.

While trade unions welcomed these pay rises, they will also add pressure on businesses, which are already burdened by the £24 billion increase in employers’ national insurance, effective from April 2025.

Paul Nowak, general secretary of the TUC, praised the wage increase as a positive step towards addressing the high cost of living. However, Rain Newton-Smith, CEO of the CBI, expressed concerns about the ongoing tax burden on businesses, warning that the economy risks stagnating if further short-term measures are taken without addressing long-term growth.

Talk to us about your staff costs.

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.