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.

The financial incentives for going green.

 

Greener operations can help control costs and reduce risk. Many organisations are upgrading fleets, equipment and buildings to cut energy use and improve resilience. Official figures show UK greenhouse gas emissions fell by around 4% in 2024, reflecting ongoing shifts in how we power and heat our economy. For smaller firms, practical efficiency steps can trim energy bills by 18-25%, which strengthens cashflow and shortens the payback on upgrades.

 

This guide outlines the tax reliefs, grants and rules that apply in 2025/26. It focuses on how incentives can support investments such as electric vehicles and charging, on-site renewables, energy-saving plant and machinery, and qualifying research and development (R&D). You’ll find clear thresholds and dates so you can plan projects with confidence, plus links to official sources for verification.

 

Why this matters for your bottom line

• Tax reliefs and incentives now cover a wide range of plant, vehicles and property improvements. Used well, they can accelerate payback and improve cashflow. The annual investment allowance (AIA) is permanently set at £1m, covering most plant and machinery purchases, new or second-hand.
• Full expensing for companies gives a 100% first-year deduction on qualifying new main-rate plant and machinery, plus a 50% first-year allowance for special-rate assets. This regime has been made permanent. Cars are excluded.
• Targeted incentives support low-emission fleets, workplace charging, energy-saving installations in residential and charity buildings, and on-site renewables that may be exempt from business rates.

 

The sections below explain each area, what you can claim and where to find the rules.

 

Capital allowances and full expensing

Annual investment allowance (AIA)

• What it is: 100% deduction on qualifying plant and machinery up to £1m per business per accounting period. Applies to most assets except cars. Available to companies and unincorporated businesses.
• Use case: Lighting upgrades, compressors, computer numerical control (CNC) machines, racking, IT equipment, certain heat pumps in commercial premises (as plant) and so on.

Tip: If your spend will exceed £1m, combine AIA with full expensing (applies to companies only, and only for the purchase of new assets) or standard writing-down allowances.

Full expensing and first-year allowances

• Full expensing (companies only): 100% first-year deduction for new main-rate plant and machinery. 50% FYA for new special-rate assets (e.g. integral features). Permanent policy. Cars are excluded.
• Zero-emission cars and charge-points: The government extended the 100% first-year allowance (FYA) for zero-emission cars and electric vehicle (EV) charge-points for expenditure on or after 1 April 2025, now ending 31 March 2026 (corporation tax)/5 April 2026 (income tax). If you plan to buy an electric car or install charge-points, timing matters.

 

Structures and buildings allowance (SBA)

• Rate: Straight-line 3% per year over 33⅓ years on qualifying non-residential construction or renovation. Enhanced 10% rate applies in designated Investment Zone special tax sites while available.

 

Planning notes

• Second-hand assets qualify for AIA and writing-down allowances but not full expensing.
• At the time of writing, full expensing does not generally apply to assets for leasing (with limited exceptions). Check contract terms before committing.

Fleets, company cars and charging

Benefit in kind (BiK) for electric cars (2025/26)

• BiK rate is 3% for zero-emission cars in 2025/26, rising by 1 percentage point per year (announced policy) in later years.
• Low BiK keeps salary sacrifice EV schemes and company-car provision attractive relative to petrol/diesel.

Vehicle excise duty (VED) changes from 1 April 2025

• New EVs registered on or after 1 April 2025: £10 first-year rate, then standard rate £195 from year two.
• EVs registered 1 April 2017 to 31 March 2025: Standard rate £195.
• Expensive car supplement: EVs over £40,000 now pay a supplement each year for five years (amount set in VED tables). Check current VED schedules for your vehicle.

Advisory electricity rate (AER) for EV mileage claims

From 1 September 2025, HMRC split the AER into:

• 8p per mile for home charging
• 14p per mile for public charging.

Employers can pay more if you can show a higher cost per mile.

 

First-year allowances for EV assets

100% FYA for zero-emission cars and EV charge-points runs until 31 March 2026 (corporation tax)/5 April 2026 (income tax) for expenditure incurred on or after 1 April 2025. If you intend to buy new, this window may be valuable.

Grants for workplace charge-points

The Workplace Charging Scheme (WCS) covers up to 75% of costs, capped at £350 per socket, up to 40 sockets per applicant across all sites. Eligibility includes businesses, charities and public sector bodies.

 

Action list for fleets

1. Refresh your car policy and salary sacrifice brochures with 3% BiK for EVs in 2025/26.
2. Review the VED impact for new deliveries after 1 April 2025, including the expensive car supplement where relevant.
3. Update expense and payroll systems to apply the 8p/14p AER split from 1 September 2025.
4. If you plan to install charge-points, consider claiming WCS and align orders to secure the 100% FYA window that runs to spring 2026.

 

VAT reliefs for energy-saving installations (residential and charity buildings)

If you install certain energy-saving materials (ESMs) in residential properties or charitable buildings, the VAT rate is 0% until 31 March 2027. The scope includes solar panels, heat pumps, insulation and, from 2024, some groundworks for heat pumps and certain batteries/smart diverters. The rate then reverts to 5% under current law. This can support employee accommodation, landlord-owned housing or charity projects in your group. Check notice 708/6 for the full list and conditions.

 

Note: This relief does not generally apply to commercial premises; most businesses pay the standard 20% VAT on energy and on commercial energy-saving works (subject to specific reduced-rate rules for low usage and charities).

 

 

Business rates: Reliefs for green investment

• On-site renewables and storage: Eligible plant and machinery used in on-site renewable energy generation and storage (including rooftop solar, wind turbines, battery storage and storage used with EV charging) is exempt from business rates in England from April 2022 until 31 March 2035.
• Heat networks: 100% relief for eligible low-carbon heat networks with their own rates bill, available to 2035.
• Improvement relief (from 1 April 2024): Where qualifying improvements increase your rateable value, you can get 12 months of relief from the higher bill once works are complete (certificate required).

 

Practical point: Installing rooftop solar for self-consumption is a common use case for the exemption. Confirm design and metering with your surveyor so that the correct elements are treated as exempt plant.

Grants and schemes for buildings

• Boiler upgrade scheme (BUS): Provides upfront grants (administered by installers, maximum £7500) for heat pumps and eligible biomass boilers in homes and small/medium non-domestic buildings in England and Wales. If you own qualifying non-domestic properties (up to 45kWth per system), you may be eligible.
• Industrial Energy Transformation Fund (IETF): This closed in July 2025. The planned second Phase 3 competition window will not go ahead, and there is no successor fund currently. Factor this into project plans if you were banking on grant support.

 

R&D tax relief and Patent Box for low-carbon innovation

R&D: Merged scheme and ERIS (from periods beginning on/after 1 April 2024)

• The UK now operates a merged R&D expenditure credit scheme (RDEC-style) at a headline 20% credit rate. The credit is taxable as trading income.
• Enhanced R&D intensive support (ERIS): For loss-making SMEs with R&D intensity of 30% or more (reduced from 40%), an 86% additional deduction plus a 14.5% payable credit on surrendered losses is available. A one-year grace period can protect eligibility if you dip below 30% after qualifying.

 

Where this helps: Process optimisation, electrification, novel storage, low-carbon materials, control systems and software often contain qualifying R&D. Good record-keeping and technical narratives are vital under current HMRC scrutiny. For businesses with qualifying intellectual property (IP) and sustained innovation, consider Patent Box alongside R&D.

Patent Box

• The Patent Box applies a 10% effective corporation tax rate to profits attributable to qualifying patents and specific IP. This remains available and can materially reduce tax on commercialised clean-tech.

 

Plastic packaging tax (PPT)

• PPT applies to plastic packaging manufactured in or imported into the UK that contains less than 30% recycled plastic.
• The rate from 1 April 2025 is £223.69 per tonne (up from £217.85 in 2024/25). Review supply chains and specifications to manage exposure.

 

UK Emissions Trading Scheme (UK ETS) and energy-intensive users

• If your site falls under the UK ETS, keep track of annual cap changes and pricing. Technical guidance was updated in August 2025; the 2025 cap is published by external trackers at 86.7 MtCO₂e. Recent official analysis notes a UK carbon price around £50/tonne at the end of May 2025 (lower than the EU ETS at the time). Policy work on linking the UK and EU systems is ongoing.
• The government has also signalled measures to support energy-intensive industries through levy reductions and network charge discounts under wider industrial strategy workstreams. Keep an eye on sector guidance as eligibility and timing can change.

 

 

 

Common questions

Do leased assets qualify for full expensing?

Not generally. The regime is designed for companies buying new assets to use in their trade, not to lease out (with limited exceptions, such as background plant in buildings). If you’re unsure how your contract is structured, seek advice before ordering.

Can I claim both ERIS and the merged R&D credit on the same expenditure?

No. You can choose to claim under the merged scheme or, if eligible, ERIS on the same spend, but not both.

Are EVs still tax-efficient after VED changes?

For company cars, the low BiK remains a strong incentive even with VED applying from April 2025. For owned vehicles, budget for £10 in year one then £195 from year two and the expensive car supplement where the list price is over £40,000.

Can I get VAT relief on energy-saving works in my office or factory?

General commercial energy-saving works are standard-rated for VAT, but input VAT may be recoverable if they relate to taxable business activities. The 0% VAT relief applies to residential properties and charitable buildings for specified technologies to 31 March 2027.

 

Closing thoughts

Sustainability projects work best when the numbers stack up, and the incentives set out here can help pay for upgrades faster. These reliefs can improve cashflow, shorten payback periods and support long-term planning for fleets, buildings and processes. Because schemes and rates can change, check the latest guidance before placing orders or finalising contracts, mainly where deadlines or phased rates apply. Good records, clear scopes of work and the right contract structures will make claims smoother.

 

Talk to us about your sustainability goals. We are here to help and advise.

 

 

Manufacturing leads and services have stalled as budget pressures build. The UK economy grew marginally in August, as official figures showed a 0.1% rise after a revision, following a 0.1% fall in July.

Manufacturing provided the uplift, expanding by 0.7%, while the much larger services sector was flat.

Growth was 0.3% on a rolling three-month basis in August. The Office for National Statistics said services held steady, and the drag from production eased.

Ministers have prioritised growth ahead of November’s Budget, yet most economists expect only subdued momentum in the months ahead. Many analysts also think tax rises or spending cuts will be necessary to meet the Chancellor’s borrowing rules. Momentum remains fragile overall.

The Institute for Fiscal Studies estimates a £22 billion gap in the public finances. It says Rachel Reeves will almost certainly have to raise taxes to fill it. The Chancellor said that she is considering further measures on tax and spending to ensure the numbers add up.

Internationally, the IMF expects the UK to be the second-fastest-growing advanced economy this year. However, it also forecasts the UK will have the highest inflation in the G7 in both 2025 and 2026, driven by higher energy and utility costs.

The Treasury said the UK has recorded the fastest growth in the G7 since the start of the year, while acknowledging that many people still feel the economy is “stuck”. It said the Budget will focus on helping businesses grow, investing in infrastructure and cutting red tape to get Britain building.

Talk to us about your business.

HMRC’s online service to pay the High Income Child Benefit Charge (HICBC) through Pay As You Earn (PAYE) is now live.

HMRC’s online service to pay the High Income Child Benefit Charge (HICBC) through Pay As You Earn (PAYE) is now live. The service was announced at the Spring Statement 2025 and aims to reduce the need for some taxpayers to complete self assessment solely to settle the charge.

HICBC applies where the claimant or their partner has adjusted net income above the threshold. From the 2024/25 tax year, the threshold is £60,000, with child benefit fully withdrawn at £80,000. The clawback is 1% of the benefit for every £200 income over £60,000.

Previously, HICBC payers reported the charge via self assessment, with limited coding-out through PAYE for amounts under £2,000. Under the new approach, PAYE taxpayers who only file a return to pay HICBC can opt out of self assessment and pay via PAYE instead. To use the service, individuals must first de-register from self assessment; access should be available the following day.

HMRC plans to write to around 100,000 people who appear liable but are not in self assessment. In 2022/23, about 440,000 individuals were liable to HICBC. HMRC notes a risk of two HICBC amounts appearing in one year’s PAYE code where liabilities span 2024/25 and 2025/26, depending on timing.

Households can also opt out of receiving child benefit payments. Registration can still be beneficial, however, as it provides National Insurance credits for non-working parents and triggers a child’s NI number before age 16.

Talk to us about your claims.

HMRC has launched an online checker to help businesses judge whether their projects meet the definition of research and development for tax reliefs before they file a claim.

The tool aims to reduce errors, but it is not mandatory and does not guarantee acceptance.

It works like CEST for IR35: you answer a series of questions and receive a result indicating whether the project contains qualifying R&D. The process takes approximately 10 minutes.

The checker is aimed at first-time claimants and companies with limited experience. However, HMRC expects a ‘competent professional’ to supply or validate several answers. This means someone qualified or experienced in the relevant science or technology, usually involved in the project and aware of baseline knowledge at the start.

The questionnaire has three sections. Section one confirms the project details and whether you tried to solve a scientific or technological problem. Sections two and three require input from the competent professional. They test whether the work sought an advance in knowledge or capability, whether scientific or technological uncertainties existed, what was done to overcome them, and whether the work resolved the issue.

If any response shows the project is ineligible, the tool pauses and explains why. You can amend your answers and continue. At the end, you’ll see a statement that the project includes qualifying R&D or reasons it does not.

You can preview, save, and print the results. The tool does not assess costs or scheme choice, so check HMRC guidance on eligible expenditure separately.

Talk to us about tax reliefs.