Author Archive: Muhammad Zia

Personal tax planning for the new tax year

Whether you’re in need of some extra cash to feed a growing family or wish to retire early and securely, effective tax planning can help you to achieve your personal finance goals.

Here are some ways you can manage your personal taxes in 2025.

Work-related expenses

If you incur work-related expenses in the course of your job, you may be able to claim tax relief. You can claim tax relief on flat rate expenses if you’re employed by someone and you clean your work uniform and/or you spend your own money on repairing or replacing equipment you need to do your job.

The amount you can claim depends on your job and the industry you work in.

If you are travelling in your own car for business purposes, and your employer is not reimbursing you, you may be able to claim a deduction from your income. However, you cannot claim tax relief for travel between your home and your permanent place of work.

You can claim additional tax relief for subsistence if the expenditure is incurred through business travel or an overnight business trip.

Additionally, you can claim tax relief on personally paid professional membership fees or annual subscriptions to approved professional bodies or learned societies if being a member of that body or society is relevant to your job.

Make full use of your pension benefits

There are a range of pension tax reliefs available.

For example, through your Annual Allowance, you can invest up to £60,000 into your pension pot tax-free.

Additionally, you can draw up to 25 per cent from a personal pension tax-free once you are 55.

You can also claim tax relief on workplace pension contributions, and exchange some of your salary in return for a larger pension contribution made by your employer. Make sure HM Revenue & Customs (HMRC) is aware of any additional workplace pension contributions you make each year.

From 6 April 2028, the minimum pension age will increase to 57.

Careful tax planning is advised to help mitigate any impacts on your retirement plans.

Gifts to charity

If you’re claiming tax back through your Self Assessment tax return or by asking HMRC to amend your tax code, keep records showing the date, the amount, and which charities you’ve donated to.

Marriage benefits

The Marriage Allowance allows you to transfer £1,260 of your Personal Allowance to your basic rate taxpaying spouse or civil partner, reducing their tax bill by up to £252 in the tax year.

Inter-spouse transfers are another effective way of reducing your tax liabilities. Individuals with an annual income between £100,001 and £125,140 can maximise capital gains and income tax rates and allowances through these exempt transfers.

Children

Child benefits provide a range of benefits beyond a regular allowance for each child.

By claiming child benefits, you’ll receive National Insurance credits which count towards your State Pension, as well as ensure that your children receive a National Insurance numbers without them having to apply.

For your eldest or only child, the weekly rate is £25.60. For any additional children, the rate is £16.95 per child.

However, if you or your partner has an income exceeding £60,000, child benefit payments are reduced – and they are withdrawn entirely if your income is more than £80,000.

There are also a range of reliefs to support the cost of childcare. Families with an adjusted net income of less than £100,000 can claim free hours of childcare – 30 hours per week for children aged three to four years old, and 15 hours per week for children aged 9 months to two years old.

Personal tax planning with Rotherham Taylor

At Rotherham Taylor, we provide a comprehensive personal tax planning service that is specifically tailored to the needs of individual clients.

We’ll minimise your tax liabilities whilst ensuring you remain compliant.

For expert advice on personal tax planning, get in touch with our tax team today.

What are the Inheritance Tax benefits of writing a life insurance policy in trust?

Inheritance Tax (IHT) remains a concern for many individuals seeking to preserve family wealth across generations.

These concerns have been amplified by the announcements in the Autumn Budget, which introduced major changes to key IHT reliefs and regimes.

From April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) will be subject to a combined cap of £1 million, with a new reduced rate of 20 per cent applied to qualifying assets above this threshold.

Additionally, reforms to the IHT treatment of non-domiciled individuals (non-doms) will take effect from April 2025, moving to a residence-based system.

These changes are expected to affect farmers, family businesses and internationally mobile individuals, increasing the risk of substantial IHT liabilities.

One often overlooked yet highly effective strategy to mitigate IHT liabilities is writing a life insurance policy in trust.

What is a trust?

A trust is a legal arrangement whereby one party (the trustee) holds assets for the benefit of others (the beneficiaries).

In the context of life insurance, the policyholder arranges for the proceeds of the policy to be paid into the trust upon death, ensuring the payout is outside their taxable estate.

Types of trusts commonly used include:

  • Bare trusts – Fixed beneficiaries and straightforward structure, often used when certainty is preferred.
  • Discretionary trusts – Trustees have discretion over how and when to distribute funds, offering flexibility but with additional administrative requirements.
  • Flexible trusts – Combine elements of both, allowing a default beneficiary while enabling trustees to alter distributions if circumstances change.

How does writing a life insurance policy in trust reduce IHT?

Normally, any life insurance policy not written in trust will form part of the deceased’s estate.

Consequently, the payout could increase the value of the estate and potentially result in a higher IHT liability.

By writing the policy in trust:

  • The proceeds are excluded from the estate and are therefore not subject to IHT.
  • The payout is made directly to the trust, ensuring beneficiaries receive funds swiftly without waiting for probate.
  • It can provide liquidity to cover any IHT due, preventing the need for heirs to sell assets such as property or investments.

Key benefits of using a trust

One of the primary advantages is that the value of the life insurance policy is not included when calculating IHT.

Because the payout bypasses the estate and probate process, beneficiaries typically receive the proceeds more quickly, which is especially useful when there are pressing financial obligations, including the settlement of any IHT liability.

The trust arrangement allows the policyholder to specify exactly who should benefit and under what circumstances.

Discretionary trusts offer even greater flexibility, enabling trustees to decide how to distribute the funds based on beneficiaries’ needs.

Addressing gifts and taper relief

Life insurance in trust is also useful for covering potential IHT on gifts made within seven years of death.

A term policy can provide funds to meet any liability, especially where taper relief applies.

This ensures beneficiaries are not left with an unexpected tax bill if the donor dies within that period.

Important considerations

While writing a life insurance policy in trust offers several advantages, there are factors to bear in mind:

  • Loss of control: Once the policy is placed in trust, it is legally owned by the trustees. Any changes require their consent.
  • Potential periodic and exit charges: Discretionary trusts may be subject to the relevant property regime, although life insurance policies typically have no value during the policyholder’s lifetime, making such charges negligible.
  • Professional advice essential: Ensuring the correct trust structure is chosen and drafted correctly is a must. Missteps may lead to IHT exposure or unintended consequences.

If you are concerned about IHT and keen to preserve wealth for future generations, writing a life insurance policy in trust can be a simple yet powerful planning tool.

If you would like to explore how this strategy could fit into your estate planning, Rotherham Taylor’s expert tax advisers are on hand to guide you.

Contact us today to discuss solutions for you and your family.

Capital Gains Tax clampdown – What HMRC’s surge in investigations means for you

HM Revenue & Customs (HMRC) has intensified its efforts to track down unpaid Capital Gains Tax (CGT), with recent figures showing an increase in compliance activity.

The number of completed CGT investigations more than trebled in the last tax year, rising from 4,564 cases in 2022/23 to 14,223 cases in 2023/24.

For individuals and businesses, this sharp increase is a clear signal that HMRC is taking CGT compliance more seriously than ever, and the risk of being selected for investigation has grown.

Why is HMRC focusing on Capital Gains Tax?

There are several factors behind HMRC’s clampdown:

  • Government pressure to boost tax revenue – HMRC has been tasked with improving tax compliance and raising revenue. Wealthy individuals, property owners, and investors are key target groups, as CGT represents a significant source of potential revenue.
  • Reduction in CGT allowances – From April 2024, the CGT annual exemption halved to £3,000 for individuals and £1,500 for trusts, down from £6,000. With lower thresholds, more taxpayers will now face CGT liabilities.
  • Expanded data access – HMRC has increased its information-gathering powers, including access to data from crypto exchanges. This allows them to cross-check asset sales and identify undeclared gains more effectively.

What do the latest figures show?

While the number of completed CGT investigations skyrocketed, the amount of tax recovered increased only modestly, rising from £180.8 million in 2022/23 to £202.4 million in 2023/24.

This suggests HMRC is casting a wider net, reviewing more cases, but still aiming to catch larger instances of non-compliance.

MPs have also criticised HMRC for underestimating tax evasion and lacking a clear strategy to address deliberate avoidance.

The agency appears to be responding by stepping up its compliance activity, particularly around CGT.

Who is most at risk from a Capital Gains Tax clampdown?

Certain groups are under increased scrutiny:

  • Buy-to-let landlords and second home owners – With property sales often generating sizeable gains, this group is firmly in HMRC’s sights.
  • Investors disposing of shares or business assets – After the October Budget, higher and additional rate taxpayers now face 24 per cent CGT on these disposals.
  • Crypto asset holders – HMRC’s access to crypto exchange data makes undeclared gains far more visible.
  • High-net-worth individuals – Wealthier taxpayers, often holding diverse assets, could be at a greater risk of investigation due to the amount of tax HMRC could recover.

How can you stay compliant?

With HMRC ramping up investigations and rates rising, it is important to make sure your CGT affairs are in order:

  • Keep accurate documentation – Maintain clear records of asset purchases, associated costs, improvements, and sales.
  • Use available reliefs and allowances – While the CGT annual exemption has been reduced, reliefs such as Business Asset Disposal Relief are still available. However, note that the BADR rate is set to rise from 10 per cent to 14 per cent from April 2025, increasing the tax cost of qualifying disposals.
  • Report crypto disposals – Even if profits are small, HMRC may easily identify undeclared crypto gains due to its expanded access to crypto exchange data.
  • Plan disposals carefully – Consider the timing of asset sales in light of the recent rate increases and the upcoming rise in BADR rates, to minimise your tax liability.

If you have concerns about past disposals or want to ensure you are compliant, our expert team is here to help. Speak to us today for trusted, proactive advice.

Important updates to Making Tax Digital and late payment rates you might have missed in the Spring Statement

This week’s Spring Statement brought two announcements that will matter to anyone running their own business or earning income from property.

Firstly, there will be tougher penalties for late tax payments under Making Tax Digital (MTD).

Secondly, the MTD scheme itself is being extended to bring in those earning over £20,000 from 2028.

Both changes mean more admin, stricter deadlines and bigger costs for getting things wrong, just as many business owners are already feeling stretched.

Harsher penalties for late payment from April 2025

At the moment, there is a small window after the tax deadline where no penalty applies.

If you pay your outstanding tax within the first 15 days, you are in the clear.

After that, the current charge is two per cent at day 15, and then another two per cent at day 30, totalling four per cent.

From April 2025, the penalties will get steeper, but only for those in the Making Tax Digital (MTD) system.

Under the new rules, if your tax bill is still unpaid after 15 days, the charge will be three per cent.

If it is still unpaid after 30 days, that rises to six per cent in total.

It does not stop there. The annual interest rate on late payments is also going up from four per cent to 10 per cent.

The Government says the aim is to encourage people to pay on time.

Whether you agree with the reasoning or not, the outcome is the same: the cost of paying late is going up sharply.

These charges could be painful for anyone dealing with cashflow issues or who simply forgets to sort their tax on time.

What can you do ahead of these changes?

If you are in the MTD system (or will be soon), make sure your bookkeeping is up to date and that you have money set aside for tax bills in advance.

Leaving things until the last minute is likely to cost more than ever. If you struggle with the admin side, it might be time to consider using cloud accounting software or working with our accountants, who can help keep you on track.

MTD net widens in 2028

We already knew that the next phase of Making Tax Digital for Income Tax (MTD ITSA) is coming – starting in April 2026 for sole traders and landlords earning over £50,000, and then extending to those earning over £30,000 in 2027.

The subtle announcement in the Spring Statement revealed that by 2028, all self-employed individuals and landlords earning over £20,000 will also be brought into the system.

This means more people will need to send quarterly updates to HM Revenue & Customs (HMRC), not just one tax return per year.

If you are not already using digital tools for your record-keeping, consider doing so in the near future.

Quarterly reporting does not need to be difficult, but it does require a change in how you handle your accounts.

Getting used to a system now before it becomes mandatory will save you stress later.

You will also want to keep an eye on your income.

If you are hovering around that £30,000 mark, for example, you might not be caught by MTD in 2026 but could be by 2027.

It is worth speaking with us about what this means for you and how to plan ahead.

MTD made easy with Rotherham Taylor

The message from the Government is clear: keep your records digital, file regularly, and do not be late paying your tax.

These changes are unlikely to be reversed, and the costs of getting things wrong are going up.

Our expert tax specialists can help you understand what the MTD changes mean for you and how you can prepare.

For tailored advice and guidance on Making Tax Digital, speak to our team today.

Too many businesses falling into VAT traps

VAT is complex, and too many businesses are making costly, avoidable mistakes.

Even a simple oversight or misunderstanding can lead to penalties, cash flow problems, and disputes with HM Revenue & Customs (HMRC).

Here are some of the most common VAT mistakes to avoid:

  • Charging the wrong VAT rate – Some goods and services have reduced or zero-rated VAT and applying the wrong rate can mean underpaying or overpaying tax.
  • Incorrect VAT reclaims – Not all expenses qualify for VAT recovery. Claiming back VAT incorrectly can trigger an HMRC investigation.
  • Late VAT returns and payments – HMRC penalises businesses that miss deadlines. In the Spring Statement the Government announced that late payment penalties for VAT taxpayers will increase from April 2025 onwards. Filing and paying on time is essential to avoid these fines and unnecessary scrutiny.
  • Missing the VAT registration threshold – If your annual turnover exceeds £90,000, you must register for VAT. Failing to monitor this can result in penalties for late registration.

Additionally, you may need to consider the Kittle principle which allows HMRC to deny VAT reclaims if a business knew or should have known it was involved in a fraudulent supply chain.

Even if a company is not directly involved in fraud, failing to carry out proper due diligence on suppliers can lead to serious financial consequences.

How to stay compliant

VAT mistakes are avoidable with the right approach, so we suggest you do the following:

  • Check VAT rates carefully to avoid costly errors.
  • Keep track of turnover to ensure VAT registration happens on time.
  • Maintain proper records to support VAT claims and submissions.
  • Submit returns and pay on time to avoid HMRC scrutiny.
  • Verify suppliers to steer clear of fraudulent transactions.

For extra peace of mind, seeking expert advice can help ensure your VAT processes are always compliant.

Protect your business from VAT traps – speak with our team today.

900,000 sole traders pulled into MTD for ITSA

The Government has confirmed that Making Tax Digital (MTD) for Income Tax will apply to sole traders and landlords earning over £20,000 a year.

This latest extension means that an additional 900,000 sole traders must adopt digital record-keeping and quarterly tax submissions by this deadline.

Who is affected and when?

Mandating digital record-keeping allows HMRC to enhance compliance and streamline reporting for taxpayers and the tax authority, reducing errors and improving efficiency.

Over the next few years, more sole traders will be brought into the MTD system.

Here is when different income thresholds will come into effect:

  • From April 2026 – Sole traders and landlords with income over £50,000 must comply.
  • From April 2027 – The threshold reduces to £30,000.
  • From April 2028 – Those earning over £20,000 will also be required to join.

You will need to plan ahead to ensure your business is ready for these changes before they are enforced.

How should you prepare?

Sole traders should take the following steps to ensure compliance before the deadline:

  1. Adopt digital record-keeping – Research and select HMRC-approved accounting software that best fits your needs.
  2. Understand quarterly reporting – Rather than submitting a single annual return, you must provide tax updates every three months, followed by a final declaration. Keeping up-to-date financial records will help to avoid errors and late submissions.
  3. Seek professional guidance – An accountant can clarify compliance and help optimise tax efficiency. Their expertise can make the transition less stressful.
  4. Stay informed – HMRC may refine its requirements, so signing up for relevant updates and attending webinars will ensure you remain prepared.

Taking proactive steps now to prepare for mandatory digital record-keeping will make your transition to MTD smoother.

Are you ready for MTD? Get in touch for tailored support.

Labour introduces harsher penalties for late taxpayers

The Chancellor’s Spring Statement introduced harsher penalties for late taxpayers under Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).

With the Government confirming an extension to sole traders and landlords earning more than £20,000 from April 2028, a lot more taxpayers – an estimated 900,000 – will need to pay tax via MTD for ITSA.

Under the current rules, you will not receive a penalty if you pay your tax within the first 15 days of the deadline.

Penalties then apply at the following rates:

  • Day 15 – two per cent
  • Day 30 – four per cent
  • Annual interest rate on late payments – four per cent

However, from April 2025, the new penalty rates will be:

  • Day 15 – three per cent
  • Day 30 – six per cent
  • Annual interest rate on late payments – 10 per cent

The 15-day grace period, however, will remain.

These increased penalties also apply to taxes paid under MTD for VAT.

How to avoid late tax penalties

Higher penalty charges will be painful for those with cashflow difficulties, businesses still getting to grips with MTD for ITSA, and those who simply forget to pay their taxes on time.

To avoid getting caught out, make sure your bookkeeping is up to date and that you have money set aside for tax bills in advance.

Give yourself plenty of time to submit your tax return and make payments. Leaving everything to the last minute will be even more costly than before.

Avoid getting caught by costly penalties. Get in touch today for urgent advice and guidance.

Should you submit your tax return at the start of this tax year?

Submitting your Self-Assessment tax return at the start of this tax year is a great way to manage your tax bill effectively.

The earlier you file a return, the sooner you will find out how much tax you owe.

This can help with financial planning and budgeting for the year ahead.

Early submission also means that any refunds you are owed can be paid to you sooner, thus boosting your cash flow.

You will also have more time to calculate any reliefs or allowable expenses available to you.

This could reduce the amount of tax you owe and free up crucial funds for your business.

Furthermore, submitting a tax return at the beginning of the year provides you with proof of income, which can otherwise be difficult to obtain for those who are self-employed.

Having this proof of income is crucial if you need to apply for a mortgage, claim benefits, or open a savings account.

Finally, leaving your tax return to the last minute can lead to panic, errors, and late submissions that result in penalties from HM Revenue & Customs (HMRC).

This was the case for the more than one million taxpayers who missed the 31 January 2025 deadline this year.

Submitting your tax return at the beginning of the tax year gets it done and out the way, giving you peace of mind and enabling you to focus on other business and financial matters.

Need help submitting your tax return? Contact our experts today.

Why capital allowances should be top of your to-do list this April

The new financial year will see many of the proposed changes announced in the Autumn Budget enacted, impacting businesses across the country.

These changes will have business owners planning their tax strategy for the 2025/26 tax year, and a key part of this should be considering capital allowances.

Capital allowances available to businesses

While the changes made in the Autumn Budget could cause you financial problems, capital allowances provide a efficient way to reduce taxable profits.

Here are just a few of the capital allowances you can take advantage of in the 2025/26 tax year:

  • Full expensing
    • Available to companies investing in new, qualifying plant and machinery.​
    • Allows 100 per cent of the cost to be deducted in the year of purchase.​
    • Applies to main rate assets only (machinery, equipment), not to long-life or special rate assets.​
  • Annual Investment Allowance (AIA)
    • Offers 100 per cent relief on qualifying capital expenditure.​
    • Available to companies, sole traders, and partnerships.​
    • The limit is £1 million per year. ​
  • First-Year Allowances (FYA)
    • Allows 100 per cent relief on certain environmentally beneficial or energy-efficient equipment.​
    • Does not reduce the available AIA.​
    • Must be claimed in the year of purchase.​
    • Qualifying assets include electric cars with zero CO₂ emissions and equipment for electric vehicle charging points. ​
  • Writing Down Allowances (WDA)
    • Used when assets do not qualify for AIA or full expensing.​
    • Main rate pool – 18 per cent per year on a reducing balance basis.​
    • Special rate pool – Six per cent per year (integral features, long-life assets).

In short, capital allowances can give your business a real financial boost, but only if the claims are done right.

It is easy to overlook what qualifies or make mistakes that invite HMRC attention, so a bit of expert help now can save a lot of hassle later.

Speak to us today and make capital allowances work for your business in 2025/26.

Change to dividend reporting to affect thousands of owner-managed businesses

From 6 April 2025, many directors will need to report dividend income in much more detail in their Self-Assessment tax return.

This change will affect an estimated 900,000 directors across the UK.

HM Revenue & Customs (HMRC) will now require directors to disclose the name and registration number of the company, the highest percentage shareholding held during the tax year, and the amount of dividend income received from that company.

These figures must be listed separately from dividends received from other sources.

At present, directors simply report total dividend income. HMRC has no visibility of how much comes from their own business versus other investments.

This change will allow HMRC to build a clearer picture of remuneration and target compliance activity more effectively.

Employee hours reporting scrapped

The Government has abandoned its proposal to require the reporting of actual hours worked by employees through payroll.

Originally delayed to April 2026, the plan has now been dropped entirely due to concerns over the implementation cost, which was estimated at nearly £60 million.

Compulsory questions are coming

The question about whether a taxpayer is a director of a close company will also become mandatory on the Self-Assessment return from 2025/26.

As a director, you will need to be prepared with accurate figures, particularly where shareholdings change during the year or where different share classes are involved.

These changes are an indication of a move towards increased transparency and more detailed individual reporting.

If you own a business and need help preparing for the 2025/26 changes then contact our team of expert accountants today.