HMRC has announced that the introduction of mandatory payrolling for most Benefits in Kind (BiKs) will be delayed by one year, until 6 April 2027. This extra time will allow employers and payroll providers to make the necessary preparations for this significant change in how benefits are taxed and reported.

Implementation Timeline

To support the transition, HMRC has outlined a phased timeline, so you can make preparations accordingly:

Action	Timescale
HMRC will consider all feedback received from impacted stakeholders to support HMRC’s drafting of legislation, guidance and technical specifications	April – Autumn 2025
Draft legislation to be published alongside draft guidance for consultation	Autumn 2025
Initial software technical information to be made available to software developers for feedback	December 2025
Responses to the consultation of draft legislation and guidance to be considered	February – April 2026
Updated legislation and guidance to be published	July 2026
Primary and secondary legislation to be laid before Parliament	In line with 2026 Finance Bill timings
Real time information technical specifications to be published	Second half of 2026
Voluntary registering for the payrolling of loans and accommodation in April 2027 to 2028 to go live	November 2026
Voluntary registering for the payrolling of loans and accommodation in April 2027 to 2028 to close	April 2027
Mandating payrolling of BiKs planned to go live	April 2027

Reporting Requirements

Under the new system, BiKs and expenses will be reported through the Full Payment Submission (FPS) process in real time. This shift removes the need for most P11D and P11D(b) forms. To accommodate the change, HMRC expects to introduce over 100 new data fields in FPS submissions, ensuring comprehensive reporting. The Basic PAYE Tools will be updated accordingly ahead of April 2027.

Calculation Process

The calculation process for payrolling BiKs will largely mirror existing voluntary methods. Employers must divide the annual cash equivalent of a benefit by the number of pay periods. If the value is not known at the start of the tax year, a reasonable estimate must be used.

When the value of a benefit changes during the year, the remaining amount should be recalculated and spread over future pay periods. If a BiK is identified late, it can still be added during the tax year without amending previous payments.

For certain benefits, such as fuel cards or accommodation where final values are unavailable within the year, a separate reporting process will apply, with details due by 6 July and Class 1A NICs payable by 22 July after year-end.

Penalties and Compliance

During the first year of mandatory payrolling, HMRC will not apply penalties for reporting errors unless there is evidence of deliberate non-compliance. However, late filing and late payment penalties, as well as interest, will still apply.

Existing penalties for P11D and P11D(b) returns will remain in place where they are still required—particularly for benefits not included in payrolling. Further details on penalties from 2028/29 onwards will be provided in due course.

Registration Requirements

Employers will not need to register to payroll most BiKs from April 2027. HMRC will automatically remove related adjustments from employee tax codes ahead of the change. However, employers wishing to payroll loans and accommodation will still need to register, with the service expected to go live in November 2026. Those who wish to voluntarily payroll benefits before April 2027, must continue to register as currently required.

Considerations

Several specific situations have been addressed by HMRC. For example, employees may face first-year cash flow issues if they are taxed on both historic and current-year benefits. In these cases, HMRC may allow underpayments to be spread over multiple years to ease financial pressure.

In cases where taxing BiKs would exceed 50% of an employee’s pay, employers can either opt out of payrolling that employee and revert to P11D reporting or carry forward the excess tax within the same year. Any remaining tax not collected in-year will be handled via HMRC’s year-end reconciliation or through self-assessment.

Where employees or directors receive no income, employers must still report BiKs through FPS and pay any applicable Class 1A NICs. The FPS will reflect zero income and earnings, and uncollected tax will be reconciled after the tax year.

For employees on non-monthly pay cycles (e.g., weekly, fortnightly, four-weekly), the cash equivalent of benefits must be appropriately spread across the number of pay periods. Employers should be mindful of years with 53 pay periods, adjusting calculations accordingly.

Employee Involvement

There is no requirement to show BiKs on payslips and there are currently no plans to introduce this. Employees can access their benefit details through their personal tax account or via the HMRC app, which employers should encourage them to use.

Employers will still be responsible for issuing a statement to employees by 1 June following the end of each tax year, confirming which benefits were provided and their values.

Next Steps

If you have any questions and/or would like advice on the above topic, please contact us at: hello@dixcartuk.com or your usual Dixcart contact.

The transition to mandatory payrolling is a major operational shift. Employers are encouraged to begin preparing systems and processes now. Further updates from HMRC are expected in the coming months.

 

We are frequently asked by our clients about the often-difficult topic of exit and succession planning. 

This gives rise to several practical issues, especially where a trade sale is not likely, or the existing management team are perhaps not in a position to be able to raise sufficient funds to affect a traditional “Management Buy Out”.

One Solution that is often overlooked is an Employee Ownership Trust (EOT).

An EOT can be used to acquire between 51% and 100% of a trading company’s shares which are then held on trust for the benefit of all the company’s employees, on the same terms.

Unlike traditional employee share schemes, which give rise to direct employee ownership, the EOT allows for indirect employee ownership overseen by selected employee Trustees.

EOT’s have been shown to promote better business performance, greater commitment, and productivity from employees with increased staff loyalty, lower staff turnover and absenteeism. They also allow staff members to benefit from being involved in the management and future direction of the business.

Benefits to the Shareholder

• The sale by the existing business owner of over 51% of his/her shares in the company to a qualifying EOT, would be Capital Gains Tax (CGT) and Inheritance Tax (IHT) free.  This can prove to be a valuable relief given that the Business Asset Disposal relief limit for the reduced 10% rate of CGT is only £1 million;
• A market is created for the shares that might not otherwise exist;
• Unlike in a liquidation situation (which is often the only choice for small business owners to realise the value of the business), the company can continue to operate, and the shareholders and employees can still be part of that business;
• Typically, the sale of shares in a company to an EOT is funded by a mixture of existing cash, from within the company, and external loan instruments;
• It avoids the need for often complex and expensive negotiations when selling to a third party.

Benefits to the Company and Employees

• A trading company owned by an EOT is able to pay cash bonuses of up to £3,600 per annum to all employees (on a ‘same terms’ basis);
• These bonuses will be tax-free but will be subject to National Insurance Contributions (NIC’s);
• The company gets corporation tax relief on these tax-free bonuses;
• There are benefits in terms of increased staff motivation and job retention, as set out above.

Summary and Additional Information

An EOT can provide a tax-beneficial way for shareholders to realise value and to involve employees in the company that they work for, although the structuring and funding of an EOT requires careful consideration.

If you would like to find out more about how an EOT may benefit you and your business, please contact us: hello@dixcartuk.com.

FICs are companies limited by shares (an “Ltd” or “Limited”) and often established by parents and/or grandparents (“Founders”) to benefit themselves and their family, as shareholders. The popularity of FICs has increased over recent years, and they are viewed as a corporate alternative to the more common discretionary trust.

An FIC owns assets such as property, which generate income and capital gains, which can be distributed to the family shareholders over time.

Assets generally come from the Founders themselves, either through a loan or a direct transfer into the FIC. Each shareholder owns a different class of shares (often referred to as “alphabet shares”), gifted to them by the Founders.

Generally, the Founders’ shares will have the usual rights to vote and receive dividends but not capital, whereas the gifted shares will only have the rights to receive dividends and capital, but not to vote.

This ensures that the Founders have the sole right to make decisions regarding the FIC, at both shareholder and board level, including decisions relating to dividend payments.

What are the Benefits of Establishing an FIC?

FICs allow individuals to transfer assets from their personal estates into a corporate structure, where they—acting as the sole voting shareholders (Founders)—retain control over those assets, including decisions about the board’s composition. This setup enables them to generate a controlled and ongoing source of income for themselves and their family over time.

If the Founders lend money to the FIC, the loan can be gradually repaid using the FIC’s post-tax profits, alongside any dividends distributed from its earnings. This arrangement can offer the Founders a continuous stream of income.

Alternatively, if the loan’s capital is no longer required, the Founders may choose to gift its value to other family members. This would remove the loan’s value from their taxable estate for Inheritance Tax purposes, provided they survive for seven years following the date of the gift.

There are a number of potential tax advantages when using FICs, including Inheritance Tax, but these will vary depending on the size of the investments/loans, the assets held by the FIC, and the personal circumstances of the Founders. It is therefore very important to speak with a tax specialist from the outset, who can provide guidance on the tax merits of an FIC, tailored to the specific circumstances and objectives of each prospective Founder. .

Limited companies also offer the great advantage of flexibility. This is ideal for FICs where family structures, objectives and other considerations, are changing regularly. Examples of such flexibility, include shares being transferred, new shares being issued with different rights, and changes to the composition of the board of directors.  All of which can be decided by the Founders.

How are FICs Set Up and Managed?

FICs need bespoke articles of association and a shareholders’ agreement, before any assets are put into the FIC and before any “alphabet shares” are transferred to family members.

These documents will detail how the FIC will be run, how dividends will be declared, when meetings are to be held, the rights of the shareholders, including voting rights, and rights on the issue, and transfer of shares.

The operation of the FIC extending from its day to day activities to amending its constitution, will remain at the absolute discretion and control of the Founders.

Additional Information

To find out how an FIC might be of benefit to you, and for assistance in establishing an FIC appropriate to meet your needs, please contact Paul Webb at: hello@dixcartuk.com.

From 6 April 2025, the UK will move to a new residence-based system for Inheritance Tax (IHT), marking one of the most significant shifts in the taxation of wealth in recent decades. These changes will affect not only long-term UK residents, but also internationally mobile individuals who may have previously relied on their non-domiciled status for IHT planning.

What Is Changing?

At present, UK IHT is based on domicile. UK domiciliaries are taxed on their worldwide assets, while non-doms are only subject to IHT on their UK situs assets, unless they become “deemed domiciled” after 15 years of UK tax residence.

From 6 April 2025, the domicile test will be replaced. Under the new rules:

• Individuals who have been UK tax resident for at least 10 out of the previous 20 tax years will become long-term residents and fall within the scope of UK IHT on their worldwide estate.
• Long term resident individuals who leave the UK will continue to be exposed to UK IHT on their worldwide assets for a period ranging from 3 to 10 years, depending on how long they were UK resident before departure.

What About Trusts?

The treatment of Trusts will also change. From 6 April 2025, settlor interested trusts will no longer provide protection from UK taxation on income or gains arising within them when the settlor no longer qualifies for the FIG regime. While there will remain an element of IHT protection, these Trusts will be brought within the UK’s relevant property regime.

This means:

• Trusts will be subject to IHT charges of up to 6% every 10 years on the value of the assets within the Trust
• An additional exit charge may apply when capital is distributed.
• Once in the relevant property regime, a further pro rata exit charge will apply if and when the settlor ceases to be a long-term UK resident.

It could take seven full 10-year cycles of IHT charges at 6% for the tax payable by a Trust to exceed the IHT payable if the same assets were held personally and taxed at 40% on death. Nonetheless, the administrative burden and cashflow impact of these periodic and exit charges should not be underestimated.

Broader Changes on the Horizon

Alongside the shift to residence-based taxation, further IHT reforms are expected in the coming years:

• From 6 April 2026, the Government plans to introduce a cap on Business Relief and Agricultural Relief, limiting 100% relief to the first £1 million of qualifying assets.

From 6 April 2027, unused pension funds will also become subject to IHT on death,

What Does This Mean in Practice?

Now that the new rules are in force, many long-standing estate plans and asset-holding structures must be reassessed under the new regime.

This includes:

• Reviewing the relevance and efficiency of existing offshore Trusts.
• Reassessing asset ownership between family members and across jurisdictions.
• Ensuring clear documentation for residency status and historic Trust arrangements.

The new residence-based approach brings complexity, particularly for internationally mobile individuals and non-doms who previously relied on the excluded property regime. While the window for new planning has now closed, it remains important to ensure that existing structures are compliant and do not trigger unnecessary tax exposure under the new rules.

Final Thoughts

The move to a residence-based IHT regime represents a fundamental change in how the UK taxes wealth at death. For those with international lives or assets, this is a key moment to take stock. For more information on this or to speak to one of our experts, please use our enquiry form or email us at hello@dixcartuk.com.

At Dixcart, we work closely with individuals and families to provide clear, tailored advice in light of changing legislation.

Gifting assets during your lifetime can be an effective estate planning tool—but it must be done carefully to avoid unexpected inheritance tax (IHT) consequences.

One of the most common traps is a Gift with Reservation of Benefit (GWROB). This arises where an individual gives away an asset, typically a property, but continues to benefit from it. A classic example would be gifting your home to your children and continuing to live in it rent-free.

Why It Matters?

Under UK rules, a GWROB means the asset is still considered part of your estate for IHT purposes, regardless of legal ownership. In practice, this can result in the asset being taxed on death, defeating the objective of making the gift in the first place.

Can It Be Avoided?

Yes, in some cases. Common exceptions include:

• Paying full market rent for continued use of the gifted asset.
• Gifting to a spouse or charity, which are exempt from IHT.
• Shared occupation: If you give away part of your home and continue to live in it with the new co-owner (e.g. your child), and you each occupy your respective share without deriving a benefit from the other’s portion, a GWROB may not apply. The conditions here can be technical and should be reviewed carefully.

These scenarios must be properly structured and documented to ensure the gift qualifies as genuine in the eyes of HMRC.

What If You’ve Already Made a Gift with Reservation?

If you have already gifted an asset but still benefit from it (for example, continuing to live in a property you have transferred), there may still be planning opportunities.

Releasing a reservation, such as moving out of the property or beginning to pay market rent, can stop the GWROB from applying going forward. However, doing so creates a new potentially exempt transfer (PET) at the time the benefit is given up. If the individual dies within seven years of that point, the PET becomes chargeable to IHT.

It is also worth noting that double charges relief may apply where both the original gift and the retained benefit could theoretically be taxed, ensuring the value is not taxed twice, but usually at the higher amount.

Illustration – Avoiding GWROB by Paying Market Rent

Mr and Mrs James gift their London home to their adult children but continue to live in the property. To avoid the gift being caught by the GWROB rules, they agree to pay their children a full market rent, reviewed annually. The rental income is declared by the children as part of their income tax return.

As long as the arrangement is properly documented and the rent reflects true market value, the property will not be treated as part of Mr and Mrs James’s estate after seven years—potentially saving significant IHT.

A Brief Note on Upcoming IHT Changes

The Spring Budget 2024 announced a shift from a domicile-based IHT system to a residence-based regime, effective from April 2025. This means long-term UK residents, regardless of domicile, may be subject to IHT on their worldwide estate.

This change will bring many more individuals, especially internationally mobile families, within the UK IHT net. As such, gifting strategies (and their interaction with GWROB rules) may become more relevant and should be reviewed in light of the evolving tax landscape.

Next Steps

Gifting can be a powerful part of your estate strategy, but the rules around GWROB are complex. If not handled correctly, a well-intended gift could have unintended tax consequences.

If you are considering passing assets to family members, especially property, we recommend speaking to one of our advisers first by emailing us at hello@dixcartuk.com. At Dixcart, we assist clients with structuring lifetime gifts in a way that aligns with both tax efficiency and family intentions.

Private Residence Relief (PRR) is one of the most valuable tax reliefs available to individuals in the UK. It can exempt all or part of the gain made on the sale of your home from Capital Gains Tax (CGT). But while the concept seems straightforward, the rules can be complex, especially when the property has not been your only, or full-time, residence throughout ownership.

This article outlines how PRR works, who qualifies, and what you need to consider if you’re selling (or gifting) a property.

What Is Private Residence Relief?

PRR provides relief from CGT when you dispose of a property that has been your main or only residence during your period of ownership. In many cases, this means that the entire gain on sale is exempt.

To qualify, you must:

• Own the property;
• Have lived in it as your main home (not just visited);
• Not have let it out (other than under permitted lettings relief);
• Not have used it wholly for business purposes.

How Much Relief Can You Get?

If the property has been your only or main residence throughout your entire period of ownership, any capital gain arising from a disposal will typically be fully exempt from CGT.

Where the property has not been your main residence throughout the full period of ownership, the gain is apportioned based on:

• The period it was your main residence;
• Plus the final nine months of ownership (which qualifies automatically, even if you no longer live there).

For example:

If you owned a house for 10 years and lived in it as your main home for 6 years, then rented it out for 4 years before selling it, you could be entitled to relief for 6 years plus 9 months, meaning 69 months out of 120 months (10 years) would be exempt.

The remaining gain would be chargeable and may be subject to lettings relief if applicable.

Lettings Relief

Lettings relief used to be a generous exemption, but since April 2020 it is now only available if you were in shared occupation with your tenant. In most cases, this means the scope of lettings relief is very limited.

If available, it can exempt up to £40,000 of gain (or £80,000 for couples) attributable to the let portion of the property.

Nomination of Main Residence

If you own more than one property, you may choose which one should be treated as your main residence for PRR purposes by making a nomination to HMRC. This must be done within two years of acquiring the second property.

The choice does not have to be based on where you spend most of your time—you simply need to demonstrate some level of occupation and interest.

The rules can be complex, and so professional advice should be sought in this respect.

Gifting a Property

Gifting a property to a family member (e.g. your adult children) still counts as a disposal for CGT purposes, and the same PRR rules apply. If the property was your main home throughout, PRR may exempt the gain. But if it was not, a CGT charge could arise—even if no money changes hands.

This is particularly relevant in lifetime giving or estate planning contexts.

Pitfalls to Watch For

• Gaps in occupation: Time abroad or in a second home can reduce the exempt period.
• Delays in moving in: If you buy a house but do not move in promptly, this period may not qualify.
• Business use: Using part of your home exclusively for work (e.g. a photography studio) could restrict relief.
• Non-residents: Since 6 April 2015, non-residents are within the CGT net for UK property and can only claim PRR for periods where they met the UK day-count and presence conditions.

Planning Ahead

Private Residence Relief is generous but not automatic. Clear records, well-timed nominations, and careful planning around lettings, gifting, or emigration can all make a difference.

If you are considering selling or gifting a property, particularly one that has not always been your main home, professional advice can help you:

• Calculate potential gains;
• Identify available reliefs;
• Plan the disposal for optimal tax efficiency.

Reporting Residential Property Gains

You need to report the sale and any CGT due within 60 days of the completion date if the sale was completed on or after 27 October 2021. This can be done through HMRC’s online system.

When reporting the gain, you will need to provide details such as the property address, date of acquisition, date of sale, purchase price, sale price, and costs related to the purchase and sale.

Where the return is not filed within 60 days of the date of completion, an automatic late filing penalty of £100 will apply.

More information on reporting residential property gains can be found here: 60-days to Report Residential Property Gains – A Reminder.

How We Can Help

For more information on this or to speak to one of our experts, please use our enquiry form or email us at hello@dixcartuk.com.

At Dixcart, we work with individuals, families and trustees to navigate property disposals and ensure that available reliefs are claimed. If you are unsure whether PRR applies to your situation, or want to plan a future disposal, our private client team would be happy to help.

Spring Statement 2025

Chancellor of the Exchequer, Rachel Reeves, remained true to her word by refraining from announcing any tax changes in the 2025 Spring Statement.

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The Spring Statement confirmed that there will be no additional tax increases beyond those previously disclosed. However, new measures aimed at tackling tax avoidance and evasion are set to generate an additional £1 billion in savings.

While the speech itself did not introduce further details, HMRC has since released press statements outlining a series of consultations on various tax-related matters. These initiatives aim to enhance compliance, improve administrative efficiency, and ensure fair tax practices. The key areas under review include:

• Tighter Regulations on Tax Advisers: Proposals are being considered to bolster HMRC’s authority in dealing with professional tax advisers who facilitate non-compliance. The suggested changes would enable swifter and stronger action against those aiding in tax evasion or avoidance.
• Expanding Advance Clearances in R&D Tax Reliefs: HMRC is considering widening the use of advance clearances for R&D tax reliefs. This move seeks to minimise error and fraud while providing greater certainty to businesses and improving the overall customer experience.
• Enhancing Data Quality for Tax Administration: A consultation is being launched to refine the quality of data acquired through HMRC’s bulk data-gathering powers. The goal is to streamline tax administration, ensuring that taxpayers can pay the correct amount more efficiently.
• Strengthening Behavioural Penalties: HMRC is exploring options to simplify and reinforce penalties for inaccuracies and failures to notify. These changes aim to create a fairer and more effective system that encourages compliance.

More details of the specific measures can be found in our Statement Summary.

To find out how we can help your business, or if you have any questions regarding the 2025 Spring Statement, please contact us.

Salary sacrifice is a Government-backed initiative designed to help both employers and employees reduce their tax liabilities. Through this arrangement, an employee agrees to exchange a portion of their salary for non-cash benefits, which results in a lower gross salary. Consequently, both the employee and employer pay reduced National Insurance contributions (NICs).

Why Salary Sacrifice Is Key Amid Rising NI Costs

Changes to National Insurance (NI) were announced during the 2024 Autumn Budget and are set to have a big impact on employers across the UK in 2025. Chancellor Rachel Reeves disclosed employer NI contributions will rise, while the earnings threshold at which employers start paying NI will drop, starting from the 2025/26 tax year. As a result, salary sacrifice has taken on renewed importance as a strategic way to offset these rising costs while helping employees grow their pension savings.

Benefits of Salary Sacrifice

Employee Benefits:

• Lower National Insurance contributions: Employees benefit from reduced NICs, allowing them to keep more of their earnings.
• Lower tax liability: By reducing their taxable salary, employees can lower their overall income tax burden.
• Access to valuable benefits: Employees can receive non-cash benefits that they might otherwise struggle to afford.

Employer Benefits:

• Reduced National Insurance costs: Employers save on NICs because the sacrificed salary is not subject to these contributions.
• Enhanced employee satisfaction: Offering salary sacrifice can improve employee retention and job satisfaction, as it is often seen as a valuable workplace perk.
• Competitive recruitment edge: Employers who provide salary sacrifice schemes can attract top talent by offering a more comprehensive benefits package.

Common Non-Cash Benefits

A range of non-cash benefits can be used in salary sacrifice arrangements, including:

• Pension contributions: Employees can contribute more to their pension while benefiting from tax and NIC savings.
• Cycle-to-work schemes: Employees can acquire bicycles and accessories through salary sacrifice.
• Childcare vouchers: These can be used to pay for registered childcare services, up to a tax-free limit.

Salary Sacrifice and Workplace Pensions

One of the most common uses of salary sacrifice is contributing to workplace pensions. Instead of receiving a portion of their salary, employees agree to have this amount directly added to their pension fund. This approach lowers their take-home pay but increases their retirement savings while reducing their tax and NIC liability.

Employers can implement a salary sacrifice scheme by modifying the terms of an employee’s contract, requiring the employee’s consent. This arrangement is a straightforward way to minimise tax costs while enabling employees to retain more of their earnings.

Employers using salary sacrifice should take specialist employment advice on how best to adapt employment contracts. For further details, please contact Dixcart Legal: hello@dixcartuk.com.

When Salary Sacrifice Cannot Be Used

There are limitations to salary sacrifice arrangements, including:

• Tax and NIC limits: The arrangement cannot lower an employee’s pay below income tax or NIC thresholds.
• Minimum wage restrictions: An employee’s salary cannot fall below the National Minimum Wage after salary sacrifice.
• Pension auto-enrolment compliance: Employers must still meet the minimum pension contribution requirements.

Considerations Before Opting for Salary Sacrifice

While salary sacrifice provides significant financial advantages, it may impact elements linked to an employee’s salary. Important factors to consider include:

• Effect on other benefits: Overtime pay, bonuses, and redundancy calculations may be affected.
• Loan or mortgage applications: A lower gross salary may impact affordability assessments for lenders, though a confirmation letter from the employer can help clarify earnings.
• Reduced flexibility: Salary sacrifice agreements may be binding for a fixed period, limiting employees’ ability to adjust their finances.

Summary

Employees should ensure that any salary sacrifice arrangement is clearly documented in their contract. Frequent changes between salary and non-cash benefits could also impact tax and NIC advantages. By understanding the terms and long-term benefits, both employers and employees can make informed decisions about salary sacrifice schemes.

If you have any questions and/or would like advice on the above topic, please contact us at: hello@dixcartuk.com or your usual Dixcart contact.

Making Tax Digital (MTD) for Income Tax is a HMRC initiative to streamline tax reporting and move recording and reporting income and expenses, if you are either self-employed and/or receive property income, towards a fully digital tax system. This means you will be required to maintain digital records, submit quarterly updates digitally, and submit a final declaration that includes any other income as well as the final business profit/loss.

Who is Effected and What is Qualifying Income?

MTD will affect all sole traders and/or landlords. The date you are required to comply with MTD depends upon the level of your qualifying income. When considering thresholds (detailed below), it is income (not profit) that is taken into account. If multiple sources of relevant income are held, such as trading and rental income, then the income sources are combined to determine if you have exceeded the threshold.

Mandation from 6 April 2026 will be based upon the amounts reported on an individual’s self-assessment tax return for the year ending 5 April 2025. MTD will eliminate the need for a self-assessment tax return.

Key Dates and Thresholds

The key dates and thresholds for reporting under MTD are:

• 6 April 2026: For individuals with gross business turnover and/or rental income of more than £50,000;
• 6 April 2027: For individuals with gross business turnover and/or rental income of more that £30,000;
• 6 April 2028: For individuals with gross business turnover and/or rental income of more than £20,000.

Exemptions from MTD

MTD requirements will not apply to the following:

• Individuals who do not have a UK National Insurance Number.
• Non-UK resident taxpayers in respect of their relevant foreign income i.e. foreign businesses. However, they will need to comply with MTD for their UK self-employment and property income.
• Foster carers.
• Trusts, estates, non-resident companies and trustees of registered pension schemes.
• Those subject to an insolvency procedure.
• Digital exclusions for people where it is not practical for them to use digital tools or electronic communication due to age, disability, religion or any other reason.

Digital Records and Quarterly Submissions

MTD will necessitate that individuals acquire software that is compatible with HMRC’s systems. The software should be used to keep digital records, submit quarterly records of income and expenditure to HMRC, and provide a final declaration. The software used by Dixcart is fully compatible with these requirements. Under MTD, a minimum of four quarterly submissions will be required for each accounting period and for a business that follows the tax year (6 April to 5 April), the quarterly reports for the 2026/27 financial year would need to include at least the following:

• 1^st Submission: To cover the period from 6 April 2026 to 5 July 2026 – Due by 7 August 2026.
• 2^nd Submission: To cover the period from 6 July 2026 to 5 October 2026 – Due by 7 November 2026.
• 3^rd Submission: To cover the period from 6 October 2026 to 5 January 2027 – Due by 7 February 2027.
• 4^th Submission: To cover the period from 6 January 2027 to 5 April 2027 – Due 7 May 2027.

How to Prepare?

If you are expected to come under MTD from 6 April 2026, then it is important to assess whether you have suitable digital records in place. This will depend upon how you currently maintain your business or rental records and your first step should be to find a suitable record-keeping solution.

If you have multiple sources of income, you will need to know how to manage the records for each one, as you will need to keep separate digital records and separate submissions for each business. However, you will not be required to use the same system for every source and the right solution could depend upon your own particular circumstances and types of income.

You can start to keep digital records at any time, and we recommend doing so  before your MTD start date. This will allow you to become familiar with the record-keeping system that best suits your needs.

How We Can Help?

The above article does not cover all aspects of MTD. Dixcart will be able to help review your position, confirm your mandation date, and discuss how to approach both record-keeping and quarterly reporting requirements before MTD becomes mandatory. If you would like to discuss this in more detail and learn how we can assist you, please contact the Dixcart office in the UK at hello@dixcartuk.com.

HMRC’s R&D Disclosure Service

Companies can now use a new online service introduced by HMRC on 31 December 2024 to disclose errors that have mistakenly been made when claiming R&D tax relief. This service is intended for unintentional errors and is not applicable to deliberate or fraudulent claims. Here’s a summary of how this service works:

Who Can Use the Service?

A disclosure can be made by the company secretary, a director or by someone acting on the company’s behalf (e.g., an agent). If the agent making the disclosure is not the company’s authorised agent, the company will need to complete HMRC’s standard form as part of the disclosure. For more detail regarding this form and its completion please get in touch.

Eligibility Criteria:

Companies can utilise this service if they:

• Have overclaimed R&D tax relief.
• Are unable to amend their tax return due to the expiration of the amendment period.
• Need to repay overpaid tax credits or additional Corporation Tax resulting from the overclaim.

How to Use the Service?

To make a disclosure, companies should:

1. Prepare the Disclosure: Gather all relevant information regarding the overclaimed amount.
2. Calculate Amounts Owed: Determine the additional Corporation Tax or overpaid tax credits to be repaid, including any interest and applicable penalties.
3. Submit the Disclosure: Use HMRC’s online form to provide details of the overclaim and the calculated amounts.
4. Make Payment: After submission, arrange payment for the owed amounts as instructed by HMRC.

Potential Consequences of Waiting for HMRC Contact

If HMRC identifies the error before the company discloses it voluntarily, the company may be liable for extra interest on the unpaid tax. Penalty charges could also be higher since voluntary disclosure usually results in reduced penalties due to the company’s cooperation or HMRC may decide to open a criminal investigation.

Penalties are calculated based on the nature of the error. By waiting for HMRC to discover the error, the company risks being treated more harshly, especially if HMRC views the delay as a sign of non-compliance or concealment.

Conclusion

Companies that identify errors in their R&D tax relief claims should act promptly to disclose and rectify these mistakes. It is advised that the company/agent seeks professional tax advice first to ensure that they have the necessary information.

Dixcart can help facilitate this process. For detailed guidance, please contact Karen Dyerson, Richard Catlin or your usual Dixcart contact on hello@dixcartuk.com.

Client Situation

A client who is a social media influencer has incurred significant costs for both back and cosmetic surgeries. She argues that the cosmetic surgery is necessary for her industry and the back surgery is needed to enable her to sit for extended periods during video shoots. How should these expenses be treated for tax purposes?

General Principles

First, it is crucial to determine the purpose of the expenditure. The key question is: what is the taxpayer’s motive for the surgeries? If the expenditure is incurred solely for business reasons, then it may qualify as an allowable expense under the “wholly and exclusively” test. However, if the expenditure serves dual purposes (both personal and business), it is unlikely to be deductible.

Back Surgery

According to HMRC, medical expenses aimed at ensuring or restoring good health generally have a dual purpose—both personal and business—making them non-deductible. However, there are exceptions. For example, in the Parsons case, a stuntman successfully claimed the cost of a private knee operation and other treatments as business expenses, as they were deemed necessary to return to work quickly.

Cosmetic Surgery

Cosmetic surgery costs are more complicated. HMRC guidance states that if the purpose of cosmetic surgery includes a personal desire to improve appearance, it is unlikely to be deductible. The case of Daniels, where a dancer successfully claimed expenses for various beauty treatments, suggests that if there is compelling evidence that the expenditure is solely for business purposes, it might be allowable.

Summary

Determining the tax treatment of surgery costs is not always straightforward. Business owners should assess whether the expenses are incurred wholly and exclusively for the business (if there is a dual purpose, the expense is not deductible) and should carefully document the reasons for the expenditure so evidence can be provided to HMRC if challenged.

As is always the case, tax advice cannot be taken soon enough, so please contact your usual Dixcart contact to discuss each specific case: hello@dixcartuk.com.

Introduction

The talk around the taxation of non-domiciled individuals in the UK has been a hot topic for a few years in the press and more recently in the political arena. In March, the previous government announced a new proposal, effectively scrapping the exiting remittance basis regime and replacing it with a residence-based system. Following a lot of debate, a general election, and a new government, the new rules have now been finalised.

As with most UK tax laws, they are not simple, and this article is not intended to set out every element of the new rules in detail, but rather help answer some common questions that are on the non-dom community’s lips. For more information on the new regime, and other announcements in the Budget of 30 October 2024, please visit our Autumn 2024 Budget Summary here.

Below is a hypothetical example of an individual whose situation closely mirrors that of many non-doms currently living in the UK.

Mrs Non-Dom

Mrs Non-Dom (known as ND by her friends and family) has lived in the UK for 12 years, having been born overseas to non-UK parents, making her a non-UK domiciled (non-dom) under the current rules. She has enjoyed living in the UK enjoying the great food and even better weather. She is a member of the promoter family of an overseas listed entity and owns 10% of the shares worth the equivalent of $100 million. Each year she receives a dividend of $1 million and has bank accounts with $5 million in them, paying $250,000 interest per year. 

Before moving to the UK, she took some great advice and created a healthy pot of clean capital to live off. She has claimed the remittance basis in her UK tax returns and has lived off her clean capital.

A few years after arriving in the UK, she settled a non-UK Trust with some of her non-UK assets and is a discretionary beneficiary of the Trust along with her spouse and children. She also owns 100% of the shares in a non-UK company which has some passive investments.

Current position

As a remittance basis user, she has only been paying tax on her UK source income and gains as well as the UK’s remittance basis charge.  ND has correctly segregated her clean capital from new income and gains, and these have not been remitted into the UK.

Her Trust is an excluded property Trust meaning the assets held within the Trust are protected from inheritance tax at the time she becomes deemed domiciled after living in the UK for 15 years.

The income and gains generated in her investment company are not taxable for her in the UK as she claims the remittance basis.

Position post 5 April 2025

As she has already been tax resident in the UK for more than 4 years, she will not be eligible for any benefits under the new FIG regime. As a result, her overseas dividend and interest will be taxable in the UK from 6 April 2025.

As a settlor interested Trust, the tax position of the Trust will now follow her UK tax position.  While she remains a UK tax resident, the income and gains in the Trust will be taxable.  The underlying assets will also now fall into her UK estate for inheritance tax purposes as she has been resident in the UK for more than 10 years.

The income and gains generated by the investment company will also now be taxed directly. The value of the company itself will also fall into her UK inheritance tax estate, as will all of her overseas assets as she has been UK tax resident for more than 10 years.

What steps can she take?

Income and gains

She will be able to benefit from the proposed Transitional Provisions which will firstly allow her to designate pre-6 April 2025 income and gains and pay 12% UK tax on them (with no foreign tax credit) up to 5 April 2027, and then 15% for the following tax year. It will also mean any assets sold at a gain post 6 April 2025 can be rebased to April 2017.

This may mean she will want to bring some income forward (where possible) to before the new tax rules take effect so they can then be used in the UK at a lower tax rate under these transitional provisions.

She should also consider the position of any assets she is considering selling. Each position will be subjective, and the financial and commercial aspects of the decision should not be ignored, but some may be better sold before 6 April 2025 (and then designated under the transition provisions at the 12%/15% rates) or some may be better sold under the new rules and, whilst then taxable at the prevailing capital gains tax rates (now 24% for most assets), may benefit from the rebasing. Each scenario should be assessed separately as each asset may fall into a different category.

Whilst new income and gains will be taxable on a worldwide basis from 6 April 2025, she should consider any foreign taxes she also suffers (and as a remittance basis user has perhaps not considered previously) to ensure she is able to claim any foreign tax credits.  Please note that credit for foreign taxes paid is not possible under the Transitional Provisions.

The UK has an extensive Double Tax Treaty network, and she should consider whether she can avail any benefits under these.

Inheritance tax

Alongside the UK’s extensive Double Tax Treaty network, it has 10 Estate Tax Treaties, and she should consider whether she can avail any benefits under these, for Inheritance tax purposes.

The more traditional inheritance tax planning opportunities of lifetime gifts and gifts out of excess income should not be ignored.

Under the new rules, now she has been UK tax resident for more than 10 years, if she were to leave after 6 April 2025, she would be subject to UK inheritance tax for a further 3 years.  This would be the case if she left after 13 years too but after that, this “tail” will follow her for an extra year, per year of residence. So, for example, if she leaves after 16 years, the tail will be 6 years and will continue increasing by a year up to a maximum of 10 years.

Leaving the UK

The new rules will result in Mrs Non-Dom being exposed to higher UK taxes than she has been previously. She may therefore decide to relocate to a more tax-friendly jurisdiction. As with any relocation, the tax consequences in both jurisdictions must be considered. 

The UK Statutory Residence Test will dictate how many days she can continue to remain in the UK. She should take advice and develop a plan for her days in the UK for the coming years, to be sure she does become non-UK tax resident.  There is more detail information in our note here.

She may discover that where she has chosen to move to is no more efficient from a tax perspective.  Dixcart is able to offer the immigration and tax support in a number of tax efficient jurisdictions and would be happy to assist. More information can be found here.

Conclusion

The new FIG regime is a significant shift in the tax laws and more importantly in many UK tax resident individual’s lives. Dixcart UK, and the wider Dixcart Group, can assist with providing advice on the new rules and developing a plan for the future, sadly perhaps not in the UK.

As is always the case, tax advice cannot be taken soon enough, so please do reach out to your usual Dixcart contact, or through our contact page to start these discussions: hello@dixcartuk.com.

Tax and National Insurance (NI)

• Employer’s NI will rise by 1.2%, reaching 15% from 6 April 2025.
• Employer’s NI secondary threshold the level at which business start paying National Insurance on each employee’s salary will drop from £9,100 a year to £5,000, which means employers may have more NIC costs.
• Employment allowance will be increased from £5,000 to £10,500 and be extended to all eligible employers due to the removal of the £100,000 cap, allowing more employers to benefit from this allowance.
• Income tax and NI threshold freeze won’t be extended beyond 2028/29.

National Living Wage (NLW) and National Minimum Wage Increases

• From April 2025, the NLW will rise by 6.7%, taking the hourly rate from £11.44 to £12.21 for workers over 21.
• The National Minimum Wage will also rise for younger workers, with 18 to 20-year-olds seeing a record 16.3% increase from £8.60 to £10.00 per hour.

Rates of Vehicle Tax

• Company car tax rates will be set for 2028/29 and 2029/30 to allow business to plan long term.
• Zero emission and electric vehicles will increase by two percentage points in each year rising to 9% in 2029/30.
• Cars with emissions between one and 50g of CO2 per kilometre will rise to 18% in 2028/29 and 19% in 2029/30.
• All other bands will rise by one percentage point in both 20218/29 and 2029/30.

Company cars tax rates being available this far in advance is good news for companies looking to plan their fleet strategies and budgets. The tax rates for cars with emissions between one and 50g of CO2 per Km may see substantial increase in 2028/29.

Benefits in Kind

• Confirmed plans to mandate payrolling benefits in kind via payroll software from April 2026.
• Employment related loans and accommodation will remain processed via P11D and P11D(b) forms as these can be difficult to value accurately within the tax year.

HMRC stated that they intend to make changes in the future to mandate the payrolling of these benefits, but for the time being employers will have the option to continue with the P11d and P11d(b) forms process if they require.

Other

• Reform of Overseas Workday Relief (OWR) was also announced with the relief being extended to a four-year period to align with the new FIG regime. Claims for OWR will be subject to an annual limit of the lower of £300,000 or 30% of the employee’s net employment income and requirements for the relevant income to be kept offshore will be removed.

The Employment Rights Bill was published on 10 October 2024. This introduced 28 significant reforms to a range of measures. These changes are set to reshape the landscape of employment law. The majority of reforms are anticipated to take effect from 2026, with most consultations expected to begin in 2025 and our Legal team can provide more details of these if required.

Additional Information

If you would like any further information on the changes and how they might affect you or your business, please do not hesitate to contact your usual Dixcart UK contact or enquire at hello@dixcartuk.com.