Author Archive: Muhammad Zia

Close companies face additional reporting requirements

Further administrative changes are on the cards for close companies, as the Government seeks to gain a better understanding of previously difficult-to-distinguish transactions.

Close companies – those companies controlled by five or fewer participators or by their directors if those directors are participators – may soon need to disclose details of transactions with participators in order to stay compliant.

A full definition of who qualifies as a participator can be found in CTM60107, but they will generally be shareholders or directors.

A business is controlled by a participator when the participator has voting power, share capital of the company and rights to capital on winding up.

It is worth understanding which transactions may be impacted and how this could change reporting requirements.

Which reporting requirements might change?

The proposed changes will cover a range of transactions, including:

  • Cash withdrawals
  • Loans
  • Debts
  • Dividends
  • Other distributions and transfers of assets to and from the company

It will exclude items that are already reported to HMRC, meaning that the changes will not result in a doubling up of administrative tasks.

To comply with the changes, close companies must provide details concerning the amount transacted, the date and the details of the recipient, including their name, address and national insurance number.

Why are these changes being introduced?

There is no guarantee that these changes will be introduced, as they are currently under public consultation.

However, there is a belief that transactions between close companies and their participators may be an area that is vulnerable to tax loss due to high levels of error and fraud.

Small businesses are seen as being particularly vulnerable to the tax gap, i.e. the difference between the amount of tax owed and the amount collected. They continue to be the focus of scrutiny and tax reform.

As these proposals are still under consultation, there is no clear indication of how and when the reports will need to be made.

The anticipated implementation will see the establishment of an annual reporting cycle that will be tied to the existing company tax return.

This should mean that the obligations will be easier to track, as they will not be an additional requirement.

Our team can help you understand your obligations and keep you updated on the outcome of the consultation.

Speak to our team to take the stress out of company tax compliance.

Have you got the right software in place for Making Tax Digital for Income Tax?

Making Tax Digital (MTD) for Income Tax has finally arrived and many sole traders, landlords and self-employed individuals will need to comply with the new reporting rules.

Since 6 April 2026, those with gross income over £50,000 will need to use MTD-compatible software that submits their new digital reports to HMRC.

It can be hard to know which system you need to have in place and which is the right one for you.

However, you must understand the available options now so that you can remain compliant and avoid any unwanted errors or penalties.

What is Making Tax Digital for Income Tax?

MTD is the Government’s initiative to move the UK tax system fully online.

Under MTD for Income Tax, the annual Self-Assessment return will be replaced with a more frequent digital reporting process.

Instead of submitting one annual return, you will be required to keep digital records of income and expenses, submit quarterly updates and complete a final end-of-year declaration.

These submissions must be made using HMRC-recognised software and you must have the right system in place to remain compliant.

If you haven’t already put the steps in place to become compliant, it is important that you do so now. The first reporting deadline is 7 August 2026.

What software is needed to stay compliant?

HMRC does not provide its own software for MTD and you must use compatible software that can:

  • Maintain digital records of income and expenses
  • Submit quarterly updates directly to HMRC
  • Complete the final declaration at the end of the tax year
  • Ensure digital links between records

Full accounting software

One type of MTD software available is full accounting software. This solution manages your bookkeeping, bank feeds, invoicing, expense tracking and MTD submissions all-in-one system.

Some popular systems include Xero, QuickBooks, Sage and FreeAgent.

These platforms are ideal if you want automation and real-time reporting. They can also provide useful insights about your business, which supports decision-making.

Bridging software

If you prefer to continue using spreadsheets, bridging software connects your existing records to HMRC’s system so you can submit quarterly updates digitally.

This can be a practical short-term solution, particularly for landlords or smaller businesses with simple affairs.

You will need to assess software is right for you by looking at how you currently manage your records and how much automation you want.

What should you look for when choosing MTD software?

Choosing MTD software is about more than basic compliance. The right system should support how you run your business and reduce the administrative pressure on you.

You should consider:

  • Income reporting – The software must support all relevant income streams, including self-employment, UK property and foreign property income where applicable.
  • Direct HMRC integration – It should be fully MTD-compatible and allow for quarterly updates and a final declaration to be submitted directly to HMRC.
  • Clear digital record-keeping – The system must maintain compliant digital records and ensure proper digital links between transactions and submissions.
  • Ease of use – A straightforward dashboard and clear reporting system will make your day-to-day bookkeeping more manageable.
  • Automation – Bank feeds, automatic transaction categorisation, VAT calculations and error alerts can all reduce manual input and improve accuracy.
  • Scalability – The software should be capable of supporting business growth, additional income streams and future VAT registration.

How can we support your MTD for Income Tax requirements?

Landlords and self-employed individuals who fall into the first phase of MTD for Income Tax must act now to find the right software for them to ensure their compliance.

Our professional team can support you by reviewing your current bookkeeping setup and advising on the software best suited to you and your business.

Having the right software and professional support in place can help make MTD for Income Tax more manageable.

For further advice or support on your MTD for Income Tax requirements, contact our team today.

Passing property to your children: What are the Capital Gains Tax risks?

Passing your property on to your child may feel like an easy way to secure their future, but it is far from a simple tax-free transfer.

Many property owners mistakenly believe that gifting property eliminates Capital Gains Tax (CGT) liabilities, but the reality is more complicated and getting it wrong can result in unexpected tax bills.

Whether you are considering passing on your family home or an investment property, you must understand the tax implications so you can protect your property and your family’s future.

How does CGT apply to properties?

CGT is levied on the profit made when you dispose of an asset that has increased in value.

CGT on properties is calculated as the difference between the property’s original purchase price and its market value at the point of disposal.

Residential properties that are not your main home, such as second homes or buy-to-lets, are subject to CGT at 18 per cent for basic rate taxpayers and 24 per cent for higher and additional rate taxpayers.

Everyone is entitled to an annual CGT allowance, which for the 2025/26 and 2026/27 tax year is £3,000. This means you can receive £3,000 of capital gain before paying any tax.

Your main residence may be exempt under Private Residence Relief, which provides 100 per cent CGT relief, but properties such as rentals or holiday homes do not qualify.

If the beneficiary already owns a home and decides to sell the inherited property, they will usually face immediate CGT on any increase in value since the date of death.

You must understand these rules and how they affect your property before considering any transfer.

Does gifting property to children avoid CGT?

Gifting property to your children does not mean you avoid CGT liabilities. HMRC treats gifting property to children as a disposal at the current market value, even if no money changes hands.

The transaction is essentially treated as though you have sold the property and CGT applies on any increase in value since purchase.

Despite the CGT implications, gifting can still be advantageous in certain situations.

For properties with modest gains, the CGT bill may be more manageable, particularly with the annual exemption.

Gifting may also help children get on the property ladder sooner or lock in current property values before they rise further.

What are the alternatives to direct gifting?

Rather than gifting the property outright, you may consider:

  • Selling the property, if it is not your main home, at market value and making gradual cash gifts.
  • This allows you to use Inheritance Tax (IHT) exemptions like the £3,000 annual gift allowance.
  • Retaining the property and passing it in your will, to take advantage of IHT reliefs, such as the nil rate band and residence nil rate band.
  • Using trusts to retain some control while potentially reducing the taxable value of your estate.

Trusts and estate planning can be complex and you should seek professional advice to make the most tax-efficient decision when transferring ownership of your property.

What to consider before gifting property?

Before you transfer ownership of your property to your children, you must consider your own financial security.

You may need to keep your property to cover any future living expenses, emergencies or care costs.

Once the property is gifted, the control and the benefits of the property are lost.

Family dynamics also need to be considered, especially if you have multiple children or children who are not ready for home ownership.

Those you pass on ownership of a rented property should be able to manage the responsibilities of maintenance, insurance and landlord duties.

How can we support your property tax liabilities?

If gifting your property to your children still feels like the right choice for you, you should seek early financial advice so that you can manage the tax liabilities and make the most out of available allowances.

Our expert tax advisers can calculate the CGT on your property and assess the gift’s impact on your financial and estate planning.

We want to help ensure your property transfer benefits your family and does not leave your children with any surprise tax liabilities in the future.

If you want further advice on the tax implications of transferring property, contact our team today.

Time has almost run out for landlords: Are you ready for Making Tax Digital for Income Tax?

Making Tax Digital (MTD) for Income Tax is here and landlords with a rental income above the £50,000 threshold will need to comply.

HMRC has been sending out letters to landlords warning them that digital reporting will soon become mandatory.

If you received one of these letters, you must take it seriously, as your tax reporting obligations have now changed.

What is MTD for Income Tax?

MTD for Income Tax is HMRC’s move towards a fully digital tax system.

Since 6 April 2026, landlords with a gross annual income of over £50,000 have fallen into the first phase and will need to:

  • Keep digital records of all rental income and expenses
  • Use HMRC-compatible software to submit data
  • Provide quarterly updates to HMRC
  • Complete an annual end-of-year declaration

Quarterly reporting will not replace your annual Self-Assessment. It does mean you will interact with HMRC more regularly and you will need accurate records from the start of the tax year.

Will you be affected by MTD for Income Tax?

MTD for Income Tax will be introduced in stages, based on your rental income:

  • April 2026 – rental income over £50,000 in the 2024/25 tax year
  • April 2027 – rental income over £30,000 in the 2025/26 tax year
  • April 2028 – rental income over £20,000 in the 2026/27 tax year

Landlords in the first phase will need to submit their first quarterly update by 7 August 2026 and digital records must cover the full tax year from 6 April.

You will also still need to file your 2025/26 Self-Assessment return by 31 January 2027.

What are the MTD for Income Tax letters from HMRC?

HMRC had sent out letters to landlords and sole traders who must comply with MTD for Income Tax this April.

These letters explained:

  • What MTD for Income Tax is
  • When you will need to start reporting digitally
  • How quarterly reporting will work
  • Differences from the current Self-Assessment process
  • The steps you need to take now to stay compliant

The letters were issued in batches between February and March, based on previous Self-Assessment filings.

What to do if you received an MTD for Income Tax letter?

Receiving a letter should not be a cause for panic if you understand your new obligations and how to stay compliant.

If you received a letter, you should have confirmed that you are affected and eligible for MTD for Income Tax this April.

While HMRC’s data is usually accurate, the responsibility sits with you to know when you are affected and to stay compliant.

You then should have:

  • Chosen MTD-compatible software to manage your digital records and submit quarterly updates
  • Signed up for MTD yourself as HMRC will not register you automatically
  • Started digital record-keeping
  • Shared the letter with your accountant or bookkeeper, as they will not have received a copy

If you did not receive a letter, it does not mean you are exempt. If your rental income exceeds the thresholds, you will still need to comply.

How can we help you stay compliant with MTD for Income Tax?

The countdown is now over and you should have the right digital record-keeping processes and MTD software in place by now.

It is time to let go of the spreadsheets and paper records and make sure you understand your requirements.

We are here to help you stay compliant and meet your deadlines so you can reduce the risk of errors or penalties.

We can take some of the pressure off you and handle quarterly submissions on your behalf and give you peace of mind that your tax returns are accurate.

If you need further advice on staying compliant with MTD for Income Tax, contact us today.

Can you get Stamp Duty Land Tax relief on probate properties?

When you are buying a property, you might not be aware of the additional cost that Stamp Duty Land Tax (SDLT) can bring.

These rules are a little different if you are dealing with a probate property and you are managing the estate of someone who has passed.

Some probate properties are eligible for SDLT relief and you may be able to save yourself some money or reclaim the tax you have overpaid.

What is Stamp Duty Land Tax (SDLT)?

SDLT is a tax levied by the UK Government on property transactions in England and Northern Ireland.

The tax is calculated on the property purchase price and depends on whether the property is residential, non-residential or mixed-use.

Buyers must submit an SDLT return to HMRC and pay any tax due within 14 days of completion.

Reliefs and exemptions exist in certain circumstances, including some probate property transactions.

What is probate property?

Probate is the legal process of administering a deceased’s estate according to their Will, or if there is no Will, following the rules of intestacy.

A probate property is any property included in that estate, which could be the deceased person’s home or additional land and buildings.

Executors or personal representatives who manage the estate must ensure these assets are distributed according to the law.

However, it is up to the buyers purchasing the probate property from them to follow the specific SDLT rules.

Can you get SDLT relief on probate properties?

If you inherit a property, SDLT is generally not payable and inheritance alone does not create tax liabilities.

If you purchase a probate property from the personal representatives of the deceased, SDLT normally applies.

However, certain buyers, such as property traders, may qualify for full or partial relief.

Who can claim SDLT relief?

SDLT relief is primarily for property traders, such as companies, LLPs or partnerships, that buy and sell residential properties as part of their trade.

Private individuals purchasing a probate property for personal use or as an investment are generally not eligible for this relief.

To qualify for full SDLT relief on a probate property, you must usually meet these conditions:

  • The property is purchased from the personal representatives of the deceased
  • The deceased occupied the property as their main or only residence within two years of passing
  • The total land area does not exceed 10,000 square metres
  • The buyer does not grant leases or licences
  • The buyer does not allow occupancy to themselves, their employees or connected individuals
  • Refurbishment expenditure does not exceed £10,000 or five per cent of the purchase price, which is capped at £20,000

Can you receive partial SDLT relief?

If the property exceeds the permitted land area or refurbishment limit, partial relief may be available.

SDLT could be payable on the portion of the property or land that falls outside the relief limits and this will be calculated based on market value differences.

How do you claim SDLT relief?

To claim relief, you must complete an SDLT return and note that the property qualifies as a probate acquisition.

You must also provide supporting documents, such as the grant of probate or letters of administration, as this can ensure your claim is processed efficiently.

Sometimes buyers may overpay SDLT due to miscalculation or reassessment and if this happens, you could be able to claim a refund from HMRC.

If you are eligible for SDLT relief, you should seek professional advice to ensure your claims are submitted correctly and avoid any errors.

How can we help you get SDLT relief on your probate property?

SDLT on probate properties can be confusing, but relief does exist for qualifying purchases and the right financial support can help you access this.

Our financial team can verify your eligibility for full or partial relief, calculate the correct SDLT liability and help you submit an SDLT return.

We want to help you get the best value for your probate property and make sure you pay the correct tax and avoid any unexpected liabilities.

If you need further support or advice on Stamp Duty Land Tax relief, contact our team today.

Capital allowances on office refurbishments: Are you missing valuable tax reliefs?

Renovating your office or upgrading a commercial property is an exciting time and that final result can feel even better when you are saving some tax on it.

Whether you are undertaking a full office fit-out or modernising your workspace, the tax relief available through capital allowances can reduce your overall costs if claimed correctly.

What are capital allowances for office renovations?

When businesses incur renovation costs, it is important to distinguish between repairs and capital expenditure.

Repairs are usually treated as revenue expenses and deducted through the profit and loss account.

However, many office fit-out or refurbishment costs are capital in nature.

Capital expenditure is recorded as a fixed asset in your accounts.

Although it does not reduce profit immediately, it may qualify for capital allowances and allow you to offset qualifying costs against taxable profits.

Qualifying items can include:

  • Fixtures and fittings
  • Lighting and electrical systems
  • Heating, ventilation and air conditioning
  • Plumbing
  • Integral features within the building
  • Bespoke trade installations

Even where costs are included within a larger construction contract, parts of the substructure works may still qualify.

This is why a detailed cost breakdown from contractors is essential to be able to spot these opportunities.

Why is managing capital allowances important?

Capital allowances can directly reduce your tax liabilities and failing to claim them means you are paying more Corporation Tax or Income Tax than necessary.

The Annual Investment Allowance (AIA) currently allows businesses to deduct up to £1 million of qualifying plant and machinery expenditure in the year of purchase.

If your qualifying spend falls within this threshold, you will be able to claim 100 per cent tax relief immediately.

Also, certain assets may qualify for First Year Allowances (FYAs) and provide relief in the year the expenditure is incurred.

However, FYAs must be claimed in the correct accounting period. If this is missed, relief may still be available through Written Down Allowances (WDAs), but this does spread the deduction over time.

Careful planning and the right financial support can help you maximise available reliefs and improve your cash flow during or after your renovation project.

What are commonly missed capital allowance opportunities?

Many businesses overlook capital allowance opportunities due to incomplete documentation or a misunderstanding of the rules.

Frequently missed items include:

  • Demolition and strip-out costs
  • Professional fees such as architects, surveyors, engineers and legal fees
  • Electrical and data cabling
  • Security systems
  • Specialist industry-specific installations

A common misconception is that refurbishment costs are always non-claimable because they are capitalised. However, many integral features and functional improvements qualify.

Even retrospective reviews of complete projects can uncover missed reliefs and lead to tax savings or repayments.

What are the types of capital allowance pools?

Capital allowance claims generally fall into three main categories:

  • Main pool – Standard plant and machinery
  • Special rate pool – Long-life assets and integral features
  • Structures and Buildings Allowance (SBA) – Structural construction or renovation costs

Correctly allocating expenditure between these pools is crucial for your claim to be compliant.

How can we support your capital allowance claim?

Office fit-outs and commercial renovation can be expensive enough and don’t let poor capital allowance planning leave you with unclaimed tax relief.

Our professional advisers can spot any hidden qualifying assets, prepare detailed capital allowance reports, submit compliant claims and support you with any HMRC enquiries.

Capital allowance legislation is scrutinised by HMRC and errors in classifications or insufficient evidence can lead to denied claims or penalties.

When capital allowances are claimed correctly, you can turn your commercial investment into meaningful tax savings.

If you want further support or advice on capital allowances during refurbishment and development, get in touch today.