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What business owners need to know before borrowing from their company.

 

Many business owners withdraw funds from their companies beyond salary and dividends at some point. It could cover a short-term personal cost, help with a property deposit, or bridge the gap between dividend declarations.

 

That flexibility can be useful, but director’s loan accounts come with tax rules that are easy to underestimate. If the balance is not managed properly, the company may face a section 455 tax charge, the director may have a taxable benefit, and HMRC may challenge repayments that appear to be short-term fixes.

 

The rules matter even more in 2026/27 because the section 455 rate has increased for new loans made from 6 April 2026.

 

This guide explains how director’s loan accounts work, when tax charges arise, and what practical steps can help keep the position under control.

What a director’s loan account records

A director’s loan account, often called a DLA, records money owed between you and your company outside normal salary, dividends, reimbursed expenses or genuine business costs paid personally or by the company.

 

If you put personal money into the company, for example, to cover early trading costs, the company owes you. The DLA shows a credit balance.

 

If you take money out of the company for personal use and it is not salary, a dividend, an expense repayment or another business payment, you owe the company. The DLA shows a debit balance.

 

This distinction matters because most owner-managed limited companies are “close companies” for tax purposes. Broadly, a close company is one controlled by five or fewer participators, or by participators who are also directors. A participator is usually someone with a share or interest in the company, such as a shareholder.

 

The UK had around 2.1 million actively trading companies at the start of 2025, according to government business population estimates, so these rules affect a large number of small and owner-managed companies.

 

Section 455 of the Corporation Tax Act 2010 is designed to stop owners extracting company profits as informal loans instead of taking a salary or dividends, which would normally carry income tax and, in some cases, National Insurance.

When section 455 tax applies

If your DLA is overdrawn at the end of the company’s accounting period, and the balance is not repaid within nine months and one day of the year-end, the company must pay a section 455 tax charge.

 

For loans made on or after 6 April 2026, the rate is 35.75%. This follows the increase in the higher dividend tax rate for 2026/27. Loans made before 6 April 2026 are not automatically brought into the new rate. In many cases, loans made from 6 April 2022 to 5 April 2026 remain within the 33.75% section 455 rate.

 

For example, say your company has a 31 March 2027 year-end, and you take a £40,000 director’s loan in May 2026. If the loan is still outstanding on 1 January 2028, the company will owe section 455 tax of £14,300.

 

That charge is paid by the company, not by the director personally. It is reported through the company’s Corporation Tax return, using the CT600A supplementary pages.

 

Section 455 is not a permanent tax. Once the loan is repaid, released or written off, the company can claim relief. But the timing can still create a real cashflow problem, because the money may sit with HMRC for some time before it can be recovered.

 

A few points are worth noting:

• The rules apply to loans made to participators, which usually means shareholders, and can also catch loans to people connected with them.
• Several small withdrawals can still create an overdrawn loan account. Taking £2,000 a month for personal spending can lead to the same problem as taking a £24,000 loan.
• The charge applies to the company, but the director can also face separate personal tax consequences if the loan is interest-free or written off.

Exemptions worth knowing

Not every company loan gives rise to a section 455 charge. The main exemptions include:

• Loans of no more than £15,000 to a full-time employee or director who does not have a material interest in the company. Broadly, this means they do not hold more than 5% of the ordinary share capital.
• Normal trade credit on business transactions, provided it is settled within the required time limits.
• Loans made by a company whose ordinary business includes money lending.

 

These exemptions are useful, but they are narrow. For most owner-managed companies, the safer working assumption is that an overdrawn director’s loan account can trigger section 455 unless it is cleared properly and on time.

The beneficial loan rules and the £10,000 threshold

Section 455 is not the only issue. If a director owes the company more than £10,000 at any point in the tax year, and pays no interest or pays interest below HMRC’s official rate, the director may have a taxable benefit-in-kind.

 

HMRC’s official rate of interest is 3.75% from 6 April 2025 (reviewed quarterly).

 

Where a taxable beneficial loan exists:

• The director pays income tax on the interest they avoided paying, not on the full value of the loan. HMRC calculates this using its official rate, currently 3.75%.
• The company reports the benefit on Form P11D.
• The company pays Class 1A National Insurance on the benefit, at 15% for 2026/27.

 

This can catch people out because the beneficial loan rules work separately from section 455. A loan might be repaid within nine months of the company’s year-end, avoiding a section 455 charge, but still create a P11D benefit if it exceeded £10,000 during the tax year and was interest-free or low-interest.

 

The simplest way to avoid this is to keep the balance below £10,000 throughout the tax year. If that is not possible, the company can charge interest at or above HMRC’s official rate and make sure the interest is actually paid.

 

A written loan agreement is also sensible. It should set out the amount borrowed, the interest rate, repayment terms and what happens if the balance is not cleared.

Bed and breakfasting: Why quick repayments may not work

HMRC is alert to directors repaying loans just before the deadline, then borrowing the money again shortly afterwards. Two anti-avoidance rules are designed to stop this.

 

The first is the 30-day rule. This can apply where repayments of £5,000 or more are made, and new loans of £5,000 or more are taken within a 30-day period. In broad terms, the repayment can be matched against the new borrowing, leaving the original loan outstanding for section 455 purposes.

 

The second is the arrangements rule. This can apply where at least £15,000 is outstanding before repayment and, at the time of repayment, arrangements exist for at least £5,000 of new loans to be made. There is no simple 30-day escape from this rule.

 

These rules look at the substance of what happened, not just the dates on the bank statement. Repaying a loan with the intention of withdrawing the funds later can fail, even when the timing appears carefully planned.

What happens if a loan is written off

Sometimes, a director cannot repay an overdrawn DLA, and the company considers writing it off. This is possible, but it should not be treated as an easy fix.

 

For a director who is also a shareholder, the written-off amount is usually treated as a distribution for income tax purposes. In 2026/27, dividend tax rates are 10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers and 39.35% for additional rate taxpayers, after the dividend allowance.

 

The dividend allowance remains small (£500), so most of a written-off balance may be taxable.

 

There may also be National Insurance and employment tax points to review, especially where the director is an employee of the company. HMRC’s guidance says written-off employee loans must be reported, with Class 1 National Insurance due on the value of the benefit, though the precise treatment depends on the facts.

 

The company can usually claim relief for section 455 tax once the loan has been repaid, released or written off. But the personal tax cost often makes a write-off an expensive way to clear the position.

Reclaiming section 455 tax

Section 455 is a temporary charge, but the reclaim process is not immediate.

 

A close company can claim relief where the loan has been repaid, released or written off. HMRC confirms that relief cannot be claimed until 9 months and 1 day after the end of the Corporation Tax accounting period in which the loan was repaid, released, or written off.

 

For example, if a company with a 31 March 2027 year-end repays a loan during that accounting period, the earliest repayment date for section 455 relief would normally be 1 January 2028.

 

The company will need details, including:

• The accounting period in which the loan was made.
• The date and amount of the original loan.
• The accounting period in which the loan, or part of the loan, was repaid, released or written off.
• The date and value of the repayment, release or write-off.

 

Partial repayments can lead to partial relief, so the company does not always need to clear the full loan before claiming some tax back.

Repayment allocation: Why records now matter more

The move to a 35.75% section 455 rate creates a practical planning point. Some companies may now have director’s loans made before 6 April 2026 at the 33.75% rate, as well as newer loans made on or after 6 April 2026 at the 35.75% rate.

 

Where repayments are made, it is important to record which loan the repayment clears. This can affect how much Section 455 tax can be relieved, and when.

 

If no allocation is made, HMRC may apply default principles that do not yield the most helpful result for the company. In practice, older borrowings may be treated as repaid first, leaving newer, higher-rate loans outstanding.

 

The point does not need to be overcomplicated. A simple written record at the time of repayment can help. For example, the director could email the company confirming that a specific payment is intended to repay the loan advanced on a particular date.

 

The key is to make the allocation clear before any dispute arises.

Practical steps to stay clear of charges

The rules are technical, but good habits make a big difference.

Keep the DLA up to date

Do not leave the director’s loan account until the year-end accounts are prepared. Review it monthly, especially where the director regularly pays personal costs through the company or draws funds outside payroll.

 

A current DLA balance makes it easier to decide whether to vote a dividend, repay funds, charge interest or adjust drawings before the position becomes costly.

Plan dividends properly

If the company has sufficient distributable profits, a dividend can be used to clear an overdrawn DLA.

 

This must be done properly. The company should have board minutes, dividend vouchers and evidence that profits were available at the time. HMRC can challenge dividends that were not validly declared.

 

A dividend cannot be paid if the company does not have sufficient retained earnings. In that case, the payment may simply worsen the director’s loan position.

Watch the £10,000 threshold

The beneficial loan threshold applies if the total loan balance exceeds £10,000 at any point in the tax year.

 

This means a short spike over £10,000 can still create a reporting point. If the balance is likely to exceed the threshold, decide early whether to charge interest and how it will be paid.

Avoid circular repayments

Repaying a loan just before the deadline and then withdrawing the same funds can trigger the anti-avoidance rules.

 

If the company needs to clear a loan, use a real repayment, a properly declared dividend, a salary or bonus processed through payroll, or another commercial method that reflects the facts.

Put loan terms in writing

A written loan agreement helps show that the company and director intended to create a genuine loan with clear repayment terms.

 

This is especially important for larger balances, repeated withdrawals, interest-bearing loans or situations where the company has more than one shareholder.

Record repayment allocations

When both old and new loans are in play, state which loan each repayment clears. This is now more important because different loans can carry different Section 455 rates.

 

Keep the record with the company’s tax files and board papers.

Act before the year-end

Once the accounting year has ended, the nine-month repayment clock starts. The earlier the DLA is reviewed, the more options are usually available.

 

A year-end review should consider the current DLA balance, likely future drawings, retained profits, dividend planning, payroll options, available cash, and the director’s personal tax position.

Summing up

A director’s loan account is a normal part of many owner-managed companies. Used carefully, it can offer flexibility. Left unchecked, it can create an expensive mix of section 455 tax, benefit-in-kind charges, National Insurance and admin.

 

The increase in the section 455 rate to 35.75% for new loans made from 6 April 2026 makes regular monitoring even more important.

 

If your DLA is overdrawn, you are thinking about taking money from the company, or you want to review the position before the year-end, please get in touch. A short review now can help avoid a much larger tax problem later.

 

We are here to help you. Reach out today if you have any questions.

 

Government borrowing costs have risen sharply as investors react to uncertainty over the future of Prime Minister Sir Keir Starmer.

The effective interest rate on 10-year Government borrowing briefly reached 5.13%, close to levels last seen during the 2008 global financial crisis. Longer-term borrowing also came under pressure, with the 30-year gilt yield hitting 5.81%, its highest level since 1998.

Markets were already unsettled by the Iran war, which has pushed oil prices above $100 a barrel and raised fears of higher inflation. If inflation rises further, investors may expect interest rates to stay higher for longer.

The UK, however, saw borrowing costs rise more sharply than some comparable economies, including France and Germany. Analysts said investors were also concerned that a change in Labour leadership could lead to looser public spending and higher Government borrowing.

Starmer and Chancellor Rachel Reeves have repeatedly committed to strict borrowing rules, describing them as “iron-clad”. But some Labour MPs have questioned whether the current fiscal rules are suitable for long-term renewal.

Government borrowing works through bonds, known in the UK as gilts. Investors lend money to the Government in return for interest, but demand higher returns when they see greater risk.

The pressure has also been felt across financial markets, with bank shares and sterling reacting to concerns about possible tax rises under a future administration. However, as market movements can shift quickly, the broader point is less about one day’s trading and more about investor sensitivity to fiscal policy uncertainty.

Talk to us about your finances.

 

A new survey suggests that British households are bracing for renewed financial pressure as conflict in the Middle East dampens economic confidence.

Consumer confidence in the UK has fallen at its fastest quarterly rate since June 2022, when inflation surged after Russia’s invasion of Ukraine pushed up global commodity prices.

The survey, which tracks measures such as spending intentions and how financially secure people feel, recorded a score of -13 in April. That marks a sharp drop from -1 in January and the weakest reading since autumn 2023.

Confidence in household finances fell across all age groups. Younger people remained more optimistic than older consumers, but the picture among under-35s also weakened. The proportion who said they felt financially healthy fell by 20%, while the share struggling or in difficulty with bills and finances rose by 9%.

Almost 90% of the 2,068 consumers surveyed said they were concerned about the cost of living. Nearly 80% said they planned to reduce spending over the next three months.

Rising fuel costs are also changing behaviour. The proportion of consumers planning to drive less to save money has doubled since January, rising from 12% to 24%.

The Bank of England said that higher UK inflation would be “unavoidable” because of the Middle East conflict, with fuel, food and energy costs likely to rise. ONS figures show CPI inflation rose to 3.3% in March, up from 3% in February and above the Bank’s 2% target.

Job vacancies also fell in April, marking the 30th consecutive monthly decline. However, employers appear to be relying more on temporary staff, with temporary billings rising at their strongest pace in two-and-a-half years.

Talk to us about your finances.

UK construction firms are facing some of the steepest cost increases in almost 30 years, as the war in Iran pushes up fuel, energy and raw material prices.

A closely watched survey of UK construction companies found that input cost inflation rose sharply in April, reaching its highest level since June 2022, when commodity prices spiked after Russia’s invasion of Ukraine. April’s rise in purchasing prices was also among the steepest recorded since the survey began in 1997.

The construction purchasing managers’ index (PMI), a key measure of sector activity, fell to 39.7 in April, down from 45.6 in March. Any reading below 50 indicates contraction, showing that activity across the sector continues to weaken.

The pressure comes at a difficult time for an industry that accounts for around 7% of UK GDP and employs more than two million people. The sector has already been affected by weaker demand, skills shortages and higher operating costs.

Around two-thirds of firms surveyed reported higher cost burdens in April. Many linked this to suppliers passing on higher fuel costs caused by the war, disruption in the Strait of Hormuz, and rising prices for imported materials.

Supply chains are also under strain. Vendor delivery times lengthened at the fastest rate since December 2022, with firms reporting international shipping delays and problems importing materials from the Gulf region.

At the same time, new work is not replacing completed projects quickly enough. Sales decisions are taking longer, and some companies are choosing not to replace staff who leave voluntarily.

Talk to us about your business.

British Steel is set to return to public ownership after Sir Keir Starmer announced plans for new legislation giving the Government powers to take full control of the company.

The Prime Minister said the move would be subject to a public interest test, which will consider issues such as national security, critical infrastructure and economic support.

The decision follows the Government’s intervention at British Steel’s Scunthorpe steelworks in April last year, when it took control from Chinese owner Jingye to prevent the possible closure of the site’s blast furnaces.

Sir Keir said ministers had held talks with Jingye, but a commercial sale had not been possible. He said public ownership was now “in the public interest”.

The announcement was welcomed by the steel industry. Gareth Stace, director-general of UK Steel, said it gave “vital certainty” to British Steel’s 2,700 workers and its customers. He added that retaining domestic production was important for economic growth, national security and resilience.

However, Stace warned that nationalisation should not be treated as the final answer. He said it must mark the start of a clear long-term plan for British Steel, backed by an investment strategy.

The future of Scunthorpe has been closely watched because its blast furnaces are central to the UK’s ability to produce virgin steel. If the furnaces were switched off, restarting them would be difficult and expensive.

The National Audit Office said in March that Government supervision of British Steel had already cost around £377 million. If spending continues at the same rate, it could exceed £1.5 billion by 2028.

No final cost for full nationalisation has been confirmed. An independent valuation is expected to decide whether compensation is owed to Jingye.

Talk to us about your business.

 

How to manage your UK tax position when living or working overseas.

 

Spending time abroad for work has become much more common. You might be moving for a posting, taking a permanent role overseas, working remotely from another country, or returning to the UK after several years away.

 

What often surprises people is how far UK tax can follow them. Leaving the country does not automatically make you a non-UK resident, and becoming a non-resident does not always remove you from the UK tax system completely.

 

This guide explains how UK tax residence works in 2026/27, what can still be taxable in the UK when you live abroad, and the planning points to consider before you leave, while you are overseas, or before you return.

Why residence matters

UK tax residence determines the scope of your UK tax liability. If you are a UK resident, you are generally taxable in the UK on your worldwide income and gains, subject to specific reliefs and treaty rules.

 

If you are a non-UK resident, you are usually taxable only on UK-source income, certain UK gains and a limited range of other items.

 

Getting this wrong can be expensive. If HMRC later decides that you remained a UK resident in a year in which you treated yourself as non-resident, overseas salary, foreign investment income and offshore gains may be subject to UK tax. Interest and penalties can also apply.

 

Residence should therefore be checked before you move, not after the tax return deadline.

The Statutory Residence Test

Since 2013, UK tax residence has been determined by the Statutory Residence Test (SRT). The test works in a fixed order:

1. First, you look at the automatic overseas tests. If you meet one of these, you are a non-UK resident for that tax year.
2. If you do not meet an automatic overseas test, you look at the automatic UK tests. If you meet one of these, you are a UK resident for that tax year.
3. If neither set of automatic tests gives an answer, you apply the sufficient ties test. This looks at how many days you spend in the UK and how many connections, or “ties”, you have here.

 

Day counting is central to the SRT. You are normally treated as spending a day in the UK if you are here at midnight at the end of that day. There are limited exceptions, including some transit days and exceptional circumstances.

 

There is also a deeming rule that can catch repeated short visits where you are present in the UK during the day but leave before midnight. It applies if you were a UK resident in one or more of the three previous tax years, have at least three UK ties for the year, and have more than 30 of these “in but not at midnight” days. Once the rule bites, those extra days count towards your UK day total. For anyone close to the limits, proper day records are essential.

The automatic overseas tests

The automatic overseas tests are the clearest routes to non-residence. You will usually automatically be a non-UK resident for the tax year if one of the following applies:

• You were a UK resident in one or more of the previous three tax years and spent fewer than 16 days in the UK in the current tax year.
• You were not a UK resident in any of the previous three tax years and spent fewer than 46 days in the UK in the current tax year.
• You work full-time overseas for the tax year, with no significant break from overseas work, spend fewer than 91 days in the UK, and work for more than three hours in the UK on fewer than 31 days.

 

The third test is often the most relevant for someone moving abroad for work. It is also one of the easiest to fail by accident.

 

For SRT purposes, full-time overseas work means working “sufficient hours” overseas. Broadly, this is an average of at least 35 hours a week, calculated under detailed rules. A significant break is generally a period of at least 31 consecutive days without overseas work, subject to exceptions such as annual leave, sick leave and other reasonable absences.

 

Small details can matter. A longer return visit to the UK, too many UK workdays, or a break between contracts can change the outcome.

The automatic UK tests

If none of the automatic overseas tests applies, the automatic UK tests come next. You will usually automatically be a UK resident if one of the following applies:

• You spend 183 days or more in the UK in the tax year.
• You have a UK home available for a continuous period of at least 91 days, at least 30 of those days fall in the tax year, you use that home for at least 30 days, and you either have no overseas home or spend too little time (fewer than 30 days) in your overseas home.
• You work full-time in the UK over a 365-day period, with more than 75% of your workdays in that period being UK workdays. All or part of that 365-day period must fall in the tax year, and at least one of those UK workdays must too.

 

The home test is a common trap. Some people assume they have left the UK because they live and work abroad, but they keep a UK property and continue to use it during visits.

 

Selling the UK property, renting it on a commercial long-term basis, or otherwise restricting access may help, but the facts need to be carefully reviewed.

The sufficient ties test

If the automatic tests do not settle the answer, the sufficient ties test applies.

 

This test looks at your UK ties and the number of days you spend in the UK. The more ties you have, the fewer UK days it can take to become a UK resident. The five main ties are:

• Family tie, where you have a UK-resident spouse, civil partner, cohabiting partner or minor child.
• Accommodation tie, where UK accommodation is available to you for a continuous period of at least 91 days, and you spend at least one night there. If the accommodation belongs to a close family member, you need to spend at least 16 nights there in the tax year before it counts as a tie.
• Work tie, where you work in the UK for more than three hours on at least 40 days in the tax year.
• 90-day tie, where you spent more than 90 days in the UK in either of the two previous tax years.
• Country tie, which applies only to “leavers” and is met where the UK is the country in which you spend the greatest number of days.

 

The thresholds are tighter for leavers, broadly people who were UK residents in one or more of the previous three tax years, than for arrivers.

 

This is why two people can spend the same number of days in the UK and reach different residence outcomes. Their history and UK ties may differ.

Split year treatment

The default UK tax rule treats a tax year as wholly resident or wholly non-resident. That can feel odd where someone leaves or arrives partway through the year.

 

Split year treatment can divide the tax year into a UK part and an overseas part. Income and gains are then taxed according to the part of the year in which they arise.

 

There are eight sets of circumstances where split year treatment may apply. They cover different leaving and arriving situations, including starting full-time work overseas, ceasing to have a UK home, accompanying a partner who starts full-time work abroad, starting to have a UK home, and starting full-time work in the UK.

 

For someone leaving the UK for an overseas job, the most common route is starting full-time work overseas.

 

Split year treatment is not automatic. You must meet the conditions of a specific case and report the position correctly on the SA109 supplementary pages of your Self Assessment return.

What remains taxable when you are a non-resident

Becoming a non-UK resident does not switch off UK tax completely. UK tax may still apply to:

• Rental profits from UK property.
• UK employment income for duties physically performed in the UK.
• UK pensions depend on the type of pension and the relevant double tax treaty.
• Gains on UK property or land, including direct and some indirect disposals.
• Certain UK-source investment income, although special rules can limit the UK tax due in some cases.

 

Non-residents disposing of UK property or land usually need to report the disposal to HMRC within 60 days of completion, even if there is no tax to pay, a loss is made, or they are already in Self Assessment.

 

UK rental income also needs care. Non-resident landlords may need to register under the Non-Resident Landlord Scheme. Under that scheme, the letting agent or tenant can deduct tax from rents (at a rate of 20%) unless HMRC gives approval for rent to be paid gross.

 

A further point is “disregarded income”. This can limit the UK tax due on certain UK dividends, savings income and other passive income for non-residents. However, claiming the treatment can mean losing the UK personal allowance, so the calculation needs care.

 

Where the same income is taxable in both the UK and the overseas country, a double tax treaty may decide which country has primary taxing rights and how double taxation is relieved. Treaty wording varies, so the position should be checked before the income arises.

National Insurance and social security

Income tax residence and National Insurance do not follow the same rules.

 

If you work abroad, you will usually pay social security contributions in the country where you work. However, you may need to continue paying UK National Insurance if you are posted overseas by a UK employer or if a social security agreement applies. GOV.UK says you may need a certificate to show that you continue to pay UK National Insurance.

 

For work in a country with a social security agreement with the UK, this may involve a certificate of coverage. For some EU, EEA and Swiss situations, an A1 certificate may be relevant.

 

The rules depend on where you work, who your employer is, how long you expect to be overseas, and whether your move is temporary or permanent.

 

Voluntary National Insurance also changed from 6 April 2026. For 2026/27 onwards, GOV.UK says people cannot pay voluntary Class 2 National Insurance contributions for time abroad. Class 3 contributions may still be possible, but new applications generally require either 10 continuous years of UK residence or 10 qualifying years on your National Insurance record.

 

This is a major change from the previous position, so anyone moving abroad should check their State Pension record and NI options before leaving.

The four-year FIG regime for new and returning UK residents

For people arriving in the UK, or returning after a long period abroad, the foreign income and gains regime is now a key planning point.

 

From 6 April 2025, the remittance basis was abolished. The old domicile-based system has been replaced by a residence-based system. UK residents are taxed on the arising basis on their worldwide income and gains, unless a specific relief applies.

 

The new foreign income and gains regime, often shortened to the FIG regime, allows qualifying new residents to claim relief on eligible foreign income and gains arising during their first four years of UK residence.

 

To qualify, you generally need to be in one of your first four UK tax years of residence after at least 10 consecutive tax years of non-UK residence.

 

Two points are especially important.

 

First, claiming FIG relief means losing the UK personal allowance and the annual exempt amount for capital gains tax for that tax year. The tax savings from foreign income and gains must be weighed against the allowances lost.

 

Second, the four-year window runs from the first year of UK residence. If you do not claim in one of those years, you cannot carry that year forward.

 

For former remittance basis users, the Temporary Repatriation Facility may also be relevant. It allows certain pre-6 April 2025 foreign income and gains to be designated and brought to the UK at a reduced tax rate. The published rates are 12% for designations made in 2025/26 and 2026/27, rising to 15% for 2027/28. The facility is temporary and will close after 5 April 2028.

The temporary non-residence rules

The temporary non-residence rules are an important trap for people who leave the UK and later return.

 

Broadly, if you leave the UK and return after a short period of non-residence, certain income and gains realised while you were non-resident can be taxed when you become a UK resident again. These rules are designed to prevent people from becoming non-residents briefly to extract profits, realise gains, or take certain payments outside the UK tax net.

 

The rules can apply to:

• Capital gains on assets owned before departure.
• Certain dividends from close companies, including many owner-managed companies.
• Certain pension lump sums and pension flexibility payments.
• Certain distributions made on the winding up of a close company.

 

One recent change is worth flagging. The November 2025 Budget closed the “post-departure trade profits” carve-out for dividends and distributions from close companies. For individuals returning to the UK on or after 6 April 2026, all such dividends received while temporarily non-resident are within the rules, regardless of when the underlying profits arose.

 

The key period is usually five complete tax years of non-residence. This is not the same as simply spending five calendar years overseas.

 

For example, leaving partway through a tax year and returning partway through the fifth later tax year may not be enough. The exact dates matter.

 

The practical point is simple: a short move abroad to take dividends, sell assets, or access pension funds tax-free is unlikely to work if you later return to the UK within the temporary non-residence period.

Record-keeping

The burden of proving your residence usually sits with you.

HMRC can ask questions years later, and records created at the time are far more useful than reconstructed notes. Useful records include:

• A day-by-day log of UK arrivals and departures.
• Flight, train and ferry bookings.
• Boarding passes and passport stamps where available.
• Accommodation records in the UK and abroad, including leases, utility bills, council tax records and tenancy agreements.
• Employment contracts, timesheets and work calendars.
• A clear record of UK workdays and overseas workdays.
• Family records where a spouse, partner or children remain in the UK.
• Evidence that a UK home was unavailable, such as a long-term tenancy agreement.

 

For most people, a simple spreadsheet updated each time they travel is enough. It should record the date, country, whether they were in the UK at midnight, and whether they worked for more than three hours in the UK that day.

Planning points before you leave

Before moving abroad, it is worth checking:

• How many UK days you can spend here without becoming a UK resident.
• Whether your work pattern satisfies the full-time overseas work test.
• Whether your UK home creates a problem.
• Whether you can claim split year treatment.
• How UK duties will be taxed.
• Whether UK rental income needs Non-Resident Landlord Scheme registration.
• What happens to your National Insurance and social security position
• Whether the overseas country will tax your income, gains or pension.
• Whether a double tax treaty changes the answer.

 

It is also worth checking whether your move affects your employer. Remote work from another country can create payroll, social security, employment law, immigration and corporate tax issues for the business, not just personal tax points for the employee.

Planning points before you return

Before returning to the UK, consider:

• Whether the FIG regime is available.
• Whether you have been a non-UK resident for at least 10 consecutive tax years.
• Whether temporary non-residence rules could tax income or gains realised while abroad.
• Whether foreign assets should be sold, retained, or restructured before UK residence resumes.
• Whether overseas income will arise before or after you become a UK resident.
• Whether offshore funds contain pre-6 April 2025 foreign income and gains that may qualify for the Temporary Repatriation Facility.
• Whether your UK arrival date should be delayed or brought forward.

 

Timing can make a large difference. A return on 5 April and a return on 6 April can fall in different UK tax years, which may change the tax outcome.

Final thoughts

Working abroad can be tax-efficient with good planning. Without it, it can lead to unexpected UK and overseas tax, double reporting, National Insurance problems, and difficult conversations with HMRC.

 

The biggest decisions usually need to be made before the move, not after it. These include when to leave, what to do with a UK home, how many days to spend in the UK, whether to claim split year treatment, how to manage UK duties, and when to return.

 

If you are planning to work overseas, are already abroad and unsure how UK tax applies, or are thinking about coming back to the UK, please get in touch. A short review early on can save time, tax and worry later.

 

If you need any advice, we are here for you. Speak to us.

 

Review systems, suppliers and processes before the deadline.

 

E-invoicing has moved from a back-office improvement to a planning issue for UK businesses. The government has said that all VAT invoices will need to be issued as e-invoices from April 2029. In practice, that mainly affects business-to-business and business-to-government VAT invoices, rather than ordinary business-to-consumer sales. The detailed UK roadmap and standards are still being developed, which means there is time to prepare, but it also means businesses should start with the basics rather than wait for the final rulebook.

 

For many SMEs, the sensible response is not to rush into a full system change. It is to get the foundations right now: invoice data, VAT treatment, software capability, customer and supplier records, approval steps, and payment controls. A business that tidies those areas early will be in a much stronger position when the UK regime is finalised.

 

That matters because e-invoicing is often misunderstood. In HMRC research published in March 2026, 59% of VAT-registered SMEs said they were familiar with e-invoicing, but only 29% said they actually used it. The same research found that the most common invoicing method was still PDF or email, followed by paper or physical mail. That gap matters because sending a PDF by email is not the same as structured e-invoicing.

What e-invoicing actually means

The government’s definition is clear. E-invoicing is the digital exchange of invoice information directly between buyers’ and suppliers’ financial systems, even where those systems are different. The result is an invoice that can be written into the buyer’s finance system automatically, without manual rekeying. HMRC’s research also describes an e-invoice as one that is issued, transmitted and received in a structured format, which allows automatic electronic processing.

 

That distinction is the starting point for readiness. If your team creates an invoice in one system, saves it as a PDF, emails it over, and the customer then re-enters the data manually, you may have a digital document, but you do not have end-to-end e-invoicing. That process still creates room for manual error, delay, disputes over missing information, and extra work at both ends.

 

For SMEs, that means the question is not just whether invoices are digital. It is whether the invoice data can move cleanly from one system to another in a usable format. Businesses that understand this early will make better software and process decisions.

Why SMEs should care before 2029

It is easy to treat 2029 as distant. For most businesses, that would be a mistake. E-invoicing affects more than tax compliance. It touches order processing, billing accuracy, approvals, credit control, supplier relationships, purchase ledger workflows, and cash collection.

 

Government documents published over the past year have repeatedly linked e-invoicing with lower admin, faster processing, fewer errors and better cashflow. In the official consultation response, respondents highlighted efficiency gains, automation, faster payment processing, improved compliance and fewer errors. The government has also said that stronger standards should make it possible for businesses using different providers to issue and receive e-invoices automatically when trading with other UK VAT-registered businesses.

 

The cashflow point is worth pausing on. Late payment remains a serious UK business issue. In the government’s March 2026 response on late payments, businesses were estimated to be owed £26 billion in late payments at any given time, with an average of £17,000 per affected business. More than 1.5 million businesses are affected each year, and affected firms spend an average of 86 hours a year chasing overdue payments.

 

E-invoicing will not solve late payment on its own. A customer who pays slowly can still pay slowly. But a cleaner invoicing process can remove some of the avoidable friction that holds payment up: incorrect fields, missing purchase order numbers, mismatched VAT treatment, duplicate entry, disputed invoice dates, or delays in routing an invoice to the right person for approval.

 

There is also a fraud angle. The government’s Fraud Strategy 2026-2029 warns that criminals impersonate legitimate organisations in supply chains by intercepting emails and sending fake invoices. It says mandatory e-invoicing is intended in part to reduce interception risks by moving invoices through secure digital systems.

 

So the business case is broader than “getting ready for HMRC”. It is about building a billing process that is faster, cleaner and harder to interfere with.

The UK position in the 2026/27 tax year

For the current 2026/27 tax year, the VAT standard rate remains 20%. The VAT registration threshold remains £90,000 and the deregistration threshold remains £88,000. Businesses above the registration threshold must register for VAT, while businesses below it may still choose to register voluntarily.

 

This is important because the planned e-invoicing mandate is tied to VAT invoices. The consultation response says the smallest businesses that are not required to register for VAT, and do not choose to register, will not be obliged to adopt e-invoicing because the mandate is for VAT invoices. Even so, some businesses below the threshold may still need to adapt in practice if larger customers or suppliers expect structured invoicing as part of their own systems.

 

There is also a wider digital direction in UK tax administration. From 6 April 2026, Making Tax Digital for Income Tax applies to sole traders and landlords with qualifying income over £50,000, with lower thresholds following in later years. That is separate from e-invoicing, but it points in the same direction: more structured digital records, more software-led processes, and less tolerance for patchy manual systems.

Where many SMEs are starting from

The good news is that many SMEs already have part of the infrastructure they need. The Longitudinal Small Business Survey 2024 found that 80% of SME employers used accountancy software and 62% used electronic invoicing or related tools. Usage was higher in larger SMEs than in micro businesses.

 

At first glance, that seems to sit awkwardly with HMRC’s finding that only 29% of VAT-registered SMEs use e-invoicing. The most likely explanation is that businesses use the phrase “electronic invoicing” in different ways. Some mean structured system-to-system invoicing. Others mean generating invoices digitally and sending them by email. That is exactly why SMEs need to get specific when they review their current process.

 

For many businesses, the real starting point is not technology. It is clarity. You need to know what your current invoicing process does, what data it produces, where errors creep in, and whether your software can exchange invoice data in a structured way with the systems your customers and suppliers actually use.

 

Practical steps SMEs can take now

1. Map your current invoicing process properly

Start with a simple process review. Look at how sales invoices are raised, approved, sent, chased and matched to payment. Then do the same for purchase invoices coming in.

 

Ask basic questions:

• Where is invoice data first created?
• Who checks VAT treatment?
• How often are invoices held up because a field is missing?
• Do customers reject invoices because of format or purchase order issues?
• How many steps still depend on a person retyping data?

 

This exercise usually shows where the real work sits. In many SMEs, the bottleneck is not the accounting package itself. It is the quality of source data and the number of manual handoffs around it.

2. Separate document format from data format

Many businesses think they are further along than they are because invoices are already created digitally. That is useful, but it is not the same as structured exchange.

 

A PDF is designed for a person to read. A structured e-invoice is designed for systems to read and process automatically. When you speak to software providers, make sure the discussion stays at data level. Ask how invoice information is created, transmitted, received and validated, not just how it looks on screen.

 

3. Review your customer and supplier master data

E-invoicing only works well when the underlying records are clean. This is one of the least glamorous parts of the project, but it has a direct impact on billing success.

 

Check:

• legal entity names
• trading names
• VAT numbers
• billing addresses
• delivery addresses
• purchase order requirements
• contact details
• payment terms
• reference fields used by key customers

 

If those records are inconsistent, e-invoicing will quickly expose the weakness. A structured system is less forgiving than a manual one.

4. Check your VAT logic and invoice content

A business does not need to wait for 2029 to improve VAT accuracy. Review whether your invoicing process consistently applies the correct VAT rates, exemption treatment, reverse charge rules, and invoice wording where needed.

 

The government has linked e-invoicing with better tax accuracy and fewer VAT errors. That benefit will only appear if the tax logic in the source system is correct in the first place.

 

For SMEs with mixed supplies, partial exemption issues, international customers, or sector-specific VAT treatments, this review is especially useful. It is better to fix tax coding now than try to correct it after new processes are embedded.

5. Talk to your software providers early

Your accounting or ERP provider should be able to explain where its e-invoicing roadmap sits today. The UK has not yet published all the final standards, but the consultation response makes clear that interoperability and common standards are central to the policy direction. It also refers to international frameworks such as Peppol and standards such as EN16931 in the discussion around compatibility.

 

When you speak to providers, ask practical questions:

• Can the software send and receive structured e-invoices?
• What formats or networks does it support today?
• How will it handle UK roadmap changes when they are confirmed?
• Can it validate invoice fields before sending?
• How does it handle exceptions and rejected invoices?
• Can it work with your existing stock, order and payment systems?
• What will onboarding customers and suppliers involve?

 

Do not buy on marketing language alone. Ask for a live explanation of how the data moves.

6. Prioritise the customers and suppliers that matter most

Not every trading relationship needs the same level of attention at the same time. Start with the businesses that account for the largest invoice volumes, the highest values, or the most frequent disputes and delays.

 

A phased approach usually works best. If a small number of customers account for most of your outbound invoice value, test readiness there first. On the purchase side, look at suppliers where invoice handling is time-consuming or where approvals often get stuck.

 

The point is to build a manageable pilot, not to redesign every process in one go.

7. Tighten your approval and exception handling

Even with structured invoicing, some invoices will still fail validation, arrive with missing references, or need manual review. SMEs should decide now how those exceptions will be handled.

 

Set out clear ownership for:

• invoice validation failures
• disputed charges
• missing purchase order numbers
• credit note requests
• duplicate invoices
• supplier changes to bank details
• blocked payments

 

This is also where fraud controls matter. Email remains an easy route for invoice interception and fake bank detail requests. Stronger approval rules and independent bank detail checks are still needed even if e-invoicing becomes more common.

8. Link invoicing to payment performance

Readiness should not be measured only by whether an invoice can be sent in a new format. Measure whether the process improves payment outcomes.

 

Track items such as:

• time from job completion to invoice issue
• percentage of invoices rejected first time
• average days to approval
• average days to payment
• number of invoice disputes
• credit notes caused by invoicing errors
• staff time spent on rework and chasing

 

This helps turn e-invoicing from a compliance topic into a commercial one.

9. Train the team that actually uses the process

Finance should not own this alone. Sales, operations, customer service, procurement and IT all affect invoice quality. A missing PO number may come from sales. Wrong pricing may come from operations. Supplier bank detail changes may sit with procurement. System access may sit with IT.

 

A short training session on invoice data standards, approval rules, fraud checks and escalation points can prevent a lot of avoidable friction later.

10. Keep watching the UK rules, but do not wait for every detail

The government has said the UK will publish a roadmap and develop standards ahead of the 2029 mandate. That means businesses should monitor official updates, but it does not mean sitting still. The work that matters most now, clean data, good VAT treatment, software capability, process ownership and supplier/customer engagement, will still be useful whatever the final model looks like.

What to do next

The best way to think about e-invoicing is not as a single deadline in 2029. It is a gradual move towards cleaner business data and less manual work. For SMEs, that is a useful discipline whether the immediate driver is compliance, payment speed, fraud reduction or internal efficiency.

 

A business does not need a perfect future-state design to begin. It needs a realistic view of how invoices move through the organisation today, where data breaks down, which systems need to talk to each other, and which customers or suppliers should be tackled first.

 

In the current 2026/27 tax year, the immediate task is preparation, not panic. Review your invoicing process. Check software capability. Clean up master data. Test VAT logic. Tighten controls. Start conversations with key customers, suppliers and software providers. By the time the UK’s detailed roadmap is fully in place, businesses that have done that work should be in a much stronger position to adapt with less cost and less disruption.

 

Looking for guidance? Speak to us.

 

Simple ways to use the reliefs available on qualifying gifts.

 

Giving to charity is often driven by values rather than tax planning, but the tax treatment still matters. Used properly, the available reliefs can make a donation go further, lower your tax bill, or both. HMRC’s latest charity tax relief statistics show that tax reliefs for charities and donors were worth about £6.7 billion in the year to April 2025, including £1.7 billion of Gift Aid paid to charities.

 

For individuals, the main UK reliefs sit in four areas: Gift Aid, Payroll Giving, gifts of shares or property, and gifts left in a will. Each works differently. In some cases, the charity gets the tax benefit. In others, you claim it yourself. The right route depends on what you are giving, how often you give, and your tax position in the 2026/27 tax year.

Start with Gift Aid

For most people, Gift Aid is the first thing to check. If you make a qualifying donation under Gift Aid, the charity can claim an extra 25p for every £1 you give, at no extra cost to you. To use it, you need to make a Gift Aid declaration to the charity, and that declaration can cover current and future donations as well as donations made in the previous four years.

 

Gift Aid is simple, but it is not automatic. You should only sign a declaration if you have paid enough UK income tax or capital gains tax to cover the amount the charity will reclaim. HMRC says your Gift Aid donations in a tax year must not be more than four times the tax you have paid in that year. If a charity reclaims more tax than you have paid, HMRC can ask you to pay the difference.

 

That point catches people out, especially retirees, students, and anyone whose income is low but who still wants to tick the Gift Aid box. Dividend income and savings income can also create misunderstandings if little or no tax is actually due because they may be covered by the dividend/savings allowance. Before using Gift Aid, it is worth checking whether you have paid enough qualifying tax in the year of the donation.

 

It is also worth knowing what does not qualify. Gift Aid is not available where the payment is really for goods or services, where the donor gets a benefit above the permitted limits, or where the donation is made through Payroll Giving. Shares are also outside Gift Aid because they have their own relief rules.

When higher and additional rate taxpayers can claim more

Gift Aid does not stop with the charity’s 25p uplift. If you pay tax above the basic rate, you may be able to claim extra relief yourself. HMRC says you can claim back the difference between the tax you paid on the donation and the tax reclaimed by the charity, either through your Self Assessment tax return or by asking HMRC to amend your tax code. HMRC also says the same route applies if you live in Scotland.

 

The standard example is straightforward. If you donate £100 under Gift Aid, the charity treats that as a gross donation of £125 after basic-rate tax relief. HMRC’s example says a 40% taxpayer can then claim back £25. HMRC’s 2026 charitable giving helpsheet adds that a 45% taxpayer can claim back £31.25 on the same grossed-up donation.

 

This is where many donors leave money on the table. They tick the Gift Aid box, assume the tax work is done, and do not make their own claim. If you already complete a tax return, it is worth reviewing your Gift Aid payments before filing. If you do not complete a return, HMRC says you can still claim by contacting them and asking for your tax code to be amended.

 

There is also a timing point that can help. HMRC allows Gift Aid donations made in the current tax year to be treated as if they were made in the previous tax year, provided you claim through your tax return by the filing deadline and the donations qualify. That can be useful if you want relief sooner, or if you paid higher-rate tax in the previous year but not in the current one.

Gift Aid and adjusted net income

Gift Aid can also matter for people whose income is close to key tax thresholds. HMRC’s adjusted net income guidance says that if you made a Gift Aid donation, you deduct the grossed-up amount, what you paid plus the basic-rate tax, from your net income. In practice, every £1 donated under Gift Aid reduces adjusted net income by £1.25. HMRC uses adjusted net income when working out both the Personal Allowance and the High Income Child Benefit Charge.

 

That can make a difference if your income is near the point where your Personal Allowance starts to fall away. For the 2026/27 tax year, the standard Personal Allowance is £12,570 and the income limit for that allowance is £100,000. The allowance falls by £1 for every £2 of income above that level. A Gift Aid payment can therefore do more than support a charity, it can also reduce the income figure used in that calculation.

 

A simple example shows why this matters. If your adjusted net income sits between £100,000 and £125,140, every £1 above £100,000 reduces your Personal Allowance by 50p. For taxpayers in England, Wales and Northern Ireland, that creates an effective 60% marginal income tax rate in this band, so bringing adjusted net income down can be especially valuable. If you donate £800 under Gift Aid, the grossed-up amount is £1,000. That means your adjusted net income falls by £1,000, not £800. If that £1,000 sits in the Personal Allowance taper band, the donation may help restore some Personal Allowance as well as giving the usual higher-rate Gift Aid relief.

 

For some people, the same issue comes up with Child Benefit. HMRC’s own example shows Gift Aid reducing adjusted net income for High Income Child Benefit Charge purposes. The exact saving depends on your income and household position, but the point is simple, Gift Aid can affect more than just your donation receipt.

Payroll Giving can be better for regular donors

If your employer or pension provider runs a Payroll Giving scheme, this can be a clean way to make regular donations. Under Payroll Giving, the donation is taken from your wages or occupational pension before Income Tax is deducted. You still pay National Insurance on the amount donated, but you do not pay Income Tax on it.

 

The saving depends on your tax rate. For most UK taxpayers, donating £1 through Payroll Giving costs 80p for a basic-rate taxpayer, 60p for a higher-rate taxpayer and 55p for an additional-rate taxpayer. In Scotland, the figures are different because the Scottish Income Tax bands are different. For 2026/27, a £1 donation would cost 81p for a starter-rate taxpayer, 80p for a basic-rate taxpayer, 79p for an intermediate-rate taxpayer, 58p for a higher-rate taxpayer, 55p for an advanced-rate taxpayer and 52p for a top-rate taxpayer. That means Scottish taxpayers in the 45% advanced-rate band should also be flagged here, because they get relief worth 45p on every £1 donated through Payroll Giving.

 

That makes Payroll Giving particularly useful for people who give monthly and want the tax relief applied immediately, rather than claiming later. It also reduces paperwork because the relief is given through payroll rather than after the event. HMRC’s 2026 charitable giving helpsheet says that if you use Payroll Giving, you do not enter those donations separately on your tax return, because the pay figure on your P60 or P45 already reflects the deduction.

 

There are limits to bear in mind. Payroll Giving depends on your employer or pension provider offering a scheme, and you cannot use it to donate to a community amateur sports club. It is therefore a useful option, but not a universal one.

Giving shares, land or property

Cash donations get most of the attention, but gifts of shares, land, buildings or property can be much more tax-efficient in the right circumstances. If you donate land, property or shares to charity, including selling them for less than market value, you can get relief from both income tax and capital gains tax.

 

The capital gains tax point is often the most valuable part. If you donate qualifying shares or property directly to charity, you do not have to pay capital gains tax on the gift. That can be more efficient than selling the asset yourself, paying tax on the gain, and then donating cash from what is left.

 

There can also be income tax relief. You can reduce your taxable income by the value of the donation in the tax year when you make the gift or sale to charity. HMRC’s 2026 charitable giving helpsheet says that for shares and securities the relief is usually based on market value at the time of the gift, plus incidental costs such as brokers’ fees or stamp duty, less any benefits or consideration you receive. Similar rules apply to gifts of land and buildings, with legal fees included as an example of incidental costs.

 

These reliefs are more technical than Gift Aid, so records matter. HMRC says you should keep the documents relating to the transfer and, for land, the charity’s certificate confirming the interest accepted. If a charity asks you to sell land or shares on its behalf, you can still claim relief, but you need to keep records of both the gift and the charity’s request.

 

One point often missed is that Income Tax relief on gifts of land, property or shares is not available for donations to community amateur sports clubs. That restriction only applies to this type of relief, not to ordinary Gift Aid on cash donations.

Leaving gifts to charity in your will

Charitable giving can also form part of estate planning. A gift to charity in your will is deducted from the value of your estate before inheritance tax is calculated. That means the gift itself is exempt from inheritance tax.

 

There can be an extra tax benefit if charitable legacies are large enough. If 10% or more of your net estate is left to charity, the Inheritance Tax rate may be reduced. HMRC’s calculator and Inheritance Tax guidance put the reduced rate at 36%, compared with the normal 40% rate.

 

For the 2026/27 tax year, the nil-rate band remains £325,000 and the residence nil-rate band remains £175,000, with the residence nil-rate band taper starting at £2 million. HMRC’s latest guidance says these thresholds stay fixed until 5 April 2031. The same guidance says qualifying estates can continue to pass on up to £500,000, and a surviving spouse or civil partner can, in some cases, pass on up to £1 million where unused bands are transferred.

 

This part of the tax system is more specialised than Gift Aid, but it is worth reviewing if charitable giving is already part of your plans. For some estates, the 10% rule changes the net amount received by both family and charity less than people expect, because the reduced Inheritance Tax rate offsets part of the gift. HMRC provides a calculator specifically for this purpose.

A few common mistakes

The first common mistake is assuming that ticking the Gift Aid box is the end of the process. It is not; if you pay tax above the basic rate, you may still need to make your own claim.

 

The second is using Gift Aid when you have not paid enough qualifying tax in the year. HMRC can recover the shortfall from you, so it is worth checking before you sign the declaration.

 

The third is overlooking non-cash options. If you hold investments or property that have risen in value, donating the asset directly can sometimes be more tax-efficient than selling it and donating cash, because the direct gift can attract both income tax relief and capital gains tax relief.

 

The fourth is claiming relief for a body that does not qualify. Since the rules changed, UK charitable tax reliefs are restricted to qualifying UK charities and UK community amateur sports clubs (CASCs). From April 2024, non-UK charities and CASCs no longer qualify for UK charitable tax reliefs under these rules.

Choosing the right route

For a one-off cash donation, Gift Aid is usually the obvious starting point. For regular giving from earnings or an occupational pension, Payroll Giving may be more efficient because the tax relief is given straight away. For someone with shares or property standing at a gain, a direct gift can be worth exploring. For longer-term estate planning, a charitable legacy in a will may reduce the taxable estate and, in some cases, cut the Inheritance Tax rate as well.

 

The main message is that charitable tax relief is broader than many people think. Gift Aid is only one part of it. The most useful route depends on whether you are giving cash, income, investments or part of an estate, and whether you want the benefit to go mainly to the charity, to you, or to both.

 

Before the end of a tax year, it is worth reviewing your donations, checking whether all Gift Aid claims are valid, and deciding whether any higher-rate relief has been missed. If you are considering larger gifts of shares, property or part of your estate, the rules are detailed enough to justify getting advice before you act.

 

Want tailored advice? We’re ready to help.

 

 

 

UK consumers have reduced travel spending for the first time in five years, reflecting growing concern about living costs and global instability.

Data from Barclays shows overall card spending rose by just 0.9% year on year in March, slightly down from 1% in February. Within that, travel spending fell by 3.3%, marking the first decline since March 2021. Many households are delaying overseas trips or choosing UK-based breaks instead.

Spending dropped across several travel categories, including travel agents, airlines, and public transport. In contrast, hotel and accommodation spending edged up by 1.2%, supported by increased domestic bookings over the Easter period.

Wider economic concerns are influencing behaviour. Ongoing tensions in the Middle East have led around one in seven adults to delay major purchases or build savings in anticipation of rising energy costs. Although the UK energy price cap fell by 7% in April, it is expected to rise sharply in July due to higher wholesale prices.

Essential spending increased modestly by 0.5%, with fuel spending up 1.6%, its first rise in over a year, driven by higher oil prices. Discretionary spending growth slowed to 1.1%, though clothing and entertainment remained resilient.

Consumer confidence presents a mixed picture. While most people feel secure in their household finances, optimism about the broader UK and global economy has declined. Meanwhile, retail sales grew strongly, rising 3.6% year on year, led by a notable increase in food spending.

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A report from the Institute for Fiscal Studies has found that the UK Government’s Help to Buy scheme largely benefited higher earners.

Introduced in England in 2013, the scheme aimed to support first-time buyers who lacked financial help from family or friends. It did this through two main policies: a mortgage guarantee scheme that enabled buyers to secure mortgages with a 5% deposit, and an equity loan scheme that offered a Government-backed loan of up to 20% on new-build homes, rising to 40% in London for part of the scheme.

At its peak in 2014/15, Help to Buy supported around one in five first-time buyer purchases in England. However, the IFS concluded that it made only a limited difference to overall housing affordability and had minimal impact on social mobility.

One key issue identified was that the scheme applied only to new-build homes, which are relatively scarce in many regions. This limited its reach, particularly in high-cost areas such as London and the South East. As a result, buyers in cheaper regions, often with higher incomes, were more likely to benefit.

The report also found that income-based mortgage lending limits meant many participants were already close to their borrowing capacity. In some cases, buyers still relied on last-minute financial support from family, reducing the scheme’s effectiveness.

Critics argue that Help to Buy contributed to rising house prices by increasing purchasing power. Supporters, including Shadow housing secretary, James Cleverly, maintain it helped thousands onto the property ladder and supported housebuilding.

The equity loan scheme is now closed to new applicants in England and Scotland, with Wales due to follow. The mortgage guarantee scheme remains in place across the UK.

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