Employment Rights Act 2025 is here – How employers can prepare their payroll

The Employment Rights Act 2025 has reached the end of its parliamentary debate and is set to bring significant changes to UK Employment Law.

Employers are now faced with a limited window to prepare their payroll systems and processes for the upcoming reforms.

What reforms will the Employment Rights Act 2025 bring?

The Employment Rights Act’s regulations will mainly come into effect on the common commencement dates of 6 April or 1 October.

From April 2026, Statutory Sick Pay (SSP) will become more accessible as the Lower Earnings Limit (LEL) and waiting period will be removed.

Paternity leave and unpaid parental leave will become day-one rights, requiring payroll and leave-tracking systems to apply statutory entitlements from the start of employment.

A new Fair Work Agency (FWA) will be established, alongside a simplified trade union recognition process, shorter employment tribunal time limits and stronger whistle-blowing and sexual harassment protections.

From October 2026, changes to tipping laws will require fair distribution of tips through payroll in sectors such as hospitality.

These reforms will have a knock-on effect on your payroll system and careful planning is required to stay compliant.

How can you prepare your payroll?

Close coordination between payroll and HR teams is essential, as payroll teams will need to change their policies to ensure accurate pay outcomes.

Employers should start by reviewing employment contracts and payroll policies so that they comply with the new reforms.

Manager training on performance management and record keeping during probation will be critical to reduce potential litigation risks.

Clear communication with employees can allow them to understand the changes to pay, benefits and statutory entitlements and reduce the risk of potential disputes.

Why do your payroll policies and systems need to change?

These reforms will bring additional payroll and compliance implications.

Our team can offer financial and payroll advice to help your business update systems and implement changes efficiently for when the various elements of the Act come into effect.

For expert payroll advice and support, contact our team today.

MTD countdown underway – Landlords and sole traders have just months left to prepare

The Making Tax Digital (MTD) for Income Tax countdown is on and landlords and sole traders who are not prepared may face costly repercussions.

From 6 April 2026, sole traders, landlords and self-employed individuals with a qualifying income over £50,000 will be required to comply with MTD.

In the following year, the qualifying income threshold drops to £30,000, followed in April 2028 with a qualifying income threshold of £20,000.

With the first phase fast approaching, landlords and sole traders must act now and update their systems to stay compliant.

How will MTD affect sole traders and landlords?

Under MTD, the traditional annual Self-Assessment tax return will be replaced with a new system of digital record-keeping, four quarterly submissions during the tax year and a final digital declaration after the year-end.

For sole traders, MTD is a move away from paper records and spreadsheets towards fully digital accounting, so income and expenses will need to be submitted quarterly to HMRC.

Landlords will face similar changes and those with UK or overseas rental income will also need to submit quarterly updates for property income.

Landlords with multiple properties may find that their financial obligations are increasing, so preparing HMRC-compliant recording and reporting systems is crucial.

How to prepare for MTD?

Preparation for MTD starts with assessing your qualifying income.

Reviewing your most recent tax return can help determine your financial position and this should be done immediately.

The next step is moving to MTD-compliant software, as submissions must be made digitally.

Many accounting platforms are designed to simplify record-keeping and quarterly reporting, making it easier to stay compliant.

Sole traders and landlords must start the transition and move away from paper records and basic spreadsheets to keep digital records before it becomes mandatory.

Why early preparation matters

MTD is a move towards real-time financial management and waiting for the first phase to be implemented could leave you facing an unexpected penalty.

Our professional team can take some of the administrative burden off you and prepare and submit quarterly updates on your behalf.

MTD is bringing significant reform to tax filing and staying informed can give you a better understanding of your requirements, reducing the risk of any last-minute errors.

To get ready for MTD for Income Tax, speak to our team today.

What are the upcoming changes to EIS and VCTs?

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) are both set to experience changes from April 2026, as was revealed in the Autumn Budget.

These schemes were viewed as outdated and the reforms aim to modernise their effectiveness.

This is part of the Government’s desire to be seen supporting entrepreneurship and scale-ups, while also recalibrating the balance of tax relief between different investment routes.

Who will be affected?

Following the Autumn Budget, a policy paper outlined the main measures of the proposed reforms.

This indicated that the measures will affect companies raising finance under EIS and VCTs, as well as individual investors using these schemes, fund managers and advisers involved in structuring and promoting qualifying investments.

It is hoped that several hundred businesses will stand to directly benefit from the changes, especially if they were staring down the existing funding or asset limits.

The news is less welcome for the 24,000 individual investors who are likely to be hit by the reduction in VCT Income Tax relief.

What are the key changes?

Upcoming legislation will seek to amend the Income Tax Act 2007 and bring about a host of reforms.

These include:

The gross assets requirement for a company will increase to £30 million before the issue of shares, up from £15 million, whilst the limit for immediately after the issue of shares will increase to £35 million, up from £16 million.
The annual investment limit will double to £10 million, up from £5 million, as will the limit for knowledge-intensive companies to £20 million, up from £10 million.
The lifetime investment limit will also double to £24 million for companies, up from £12 million, as well as for knowledge-intensive companies to £40 million, up from £20 million
The Income Tax relief that can be claimed by an individual investing in VCTs will be reduced to 20 per cent from the current rate of 30 per cent

Certain companies operating in Northern Ireland in specific sectors linked to electricity generation and supply will be unaffected by the changes and must follow the current limits.

If you would like to know more about what these changes to EIS and VCTs mean for you, please get in touch.

How will HMRC changing its system of fines affect you?

Following the Autumn Budget, it is increasingly clear that the Government is toughening its approach to tax compliance.

This is a break with tradition, as penalties have remained unchanged for years, meaning that inflation has caused the impact to soften with time.

As such, we are facing an update to penalties aimed at tackling late filing, late payment and repeated non-compliance, all of which will soon result in larger fines.

Corporation Tax penalties are increasing

From 1 April 2026, Corporation Tax late filing penalties will double, as missing a deadline will result in a £200 fine, up from £100.

This penalty increases to £400 if the return is more than three months late.

Repeat offenders will face a fine of up to £2,000 for missing three consecutive filings.

HMRC expects to raise £60 million a year through the changes, though this could be higher if the penalties improve taxpayer behaviour.

Wider tightening of penalties

While the penalties for missing Corporation Tax filings are changing for the first time in 25 years, other penalties are increasing too.

Late payment interest will also increase as tax interest rates are aligned more closely with the Bank of England base rate movements.

Higher penalties are also being proposed where undeclared income or gains involve overseas assets, while failure-to-notify penalties are being strengthened too, particularly where businesses fail to register correctly for VAT or PAYE on time.

Making Tax Digital for Income Tax

As the first deadline is swiftly approaching, all eyes are on Making Tax Digital (MTD) for Income Tax.

To allow people time to prepare, the 2026 tax year will not have penalties for missing MTD deadlines, but 2027 will see the penalty system take effect.

Each late submission earns one penalty point.

A £200 penalty will be enforced after you get two points for annual filings and four points for quarterly filings.

Any further missed annual filings will also face a £200 fine.

Points reset when outstanding submissions are filed and after 12 months of compliance with quarterly filings and 24 months for annual ones.

Stay compliant with tax obligations by speaking to our team today.

What impact will the Agricultural Property Relief (APR) and Business Property Relief (BPR) U-turn have?

Given how recently the Autumn Budget was, most people had assumed that all of the big tax measures for the year had been issued.

However, Rachel Reeves decided to wrap up 2025 with an eleventh-hour announcement of changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) that will increase the allowance available to estates.

As many will have already been thinking about estate planning, it is vital that the changes to these Inheritance Tax (IHT) reliefs are well understood.

What has changed with IHT?

One of the most contentious aspects of the Autumn Budget was the refusal to update thresholds that had been causing concern for many since they were announced in the 2024 Autumn Budget.

Chief among these were the thresholds for APR and BPR that were set to offer 100 per cent relief only up to £1 million, after which the relief would drop to 50 per cent.

In the 2025 Autumn Budget, it was confirmed that this allowance could also be passed to surviving spouses or civil partners.

However, in a surprising pre-Christmas U-turn, the Chancellor increased the threshold to £2.5 million, when the changes take effect on 6 April.

This means that a couple will be able to pass on up to £5 million of agricultural or business assets between them, on top of the existing allowances such as the nil-rate and residence nil-rate band.

What will the changes mean for estate planning?

The changes are set to be a light in the darkness for many dreading steep IHT bills.

A common criticism of existing plans was that they failed to account for fiscal drag and the asset-rich, cash-poor nature of family farms.

Where once the only option available to those staring down steep IHT bills was to gift generously and hope to survive long enough for the tax burden to pass, there is now more scope to dispose of assets through other means.

Regardless, effective estate planning remains imperative ahead of the other reforms to IHT that are still incoming, such as the inclusion of unspent pension pots.

For full help and support with managing your family’s financial future, speak to our team today.

Client Spotlight: DD Cooling Limited

In this month’s client spotlight, we share the success of DD Cooling Limited. First established in 2007 by Director, Dave Dobson, it has grown to employ 50 staff and provides air conditioning and refrigeration services across the UK.

In 2021 with Rotherham Taylor’s help the company successfully transitioned to an Employee Ownership Trust (EOT), joining the likes of Richer Sounds and John Lewis to be owned for the benefit of all employees.

One of the company’s recent projects has been the internal fit out of Fleetwood Seafood & Fish Processing Park.

This has supported the construction of a purpose-built 42,000 square foot modern commercial Seafood & Fish processing facility.

The existing six fish processing companies have all moved into the new facilities situated around the docks at Fleetwood.

The new facility included a new fish auction hall, processing factory, a smoking kiln and a recycling centre for all the polystyrene boxes.

The eight individual industrial unit fitouts comprised of more than 30 individual panelled rooms including freezers, fridges, processing areas and ice rooms.

Over 35 insulated doors were also supplied, including rapid roll, sliders and hinged doors. For the day offices in the processing area, DD Cooling Limited supplied windows suitable for temperature-controlled environment.

26 individual Refrigeration systems were also installed as part of project, including heat recovery, the heat recovery system recovers excess heat from the refrigerant and preheats hot water to approximately 50^oC to supply the hot water heaters.

Our team at Rotherham Taylor are proud to have supported DD Cooling Limited as it goes from strength to strength, providing guidance and support to help grow.

Pensions and probate: why estates may look very different after 2027

For many years, pensions have quietly played a starring role in estate planning, as a means of reducing a potential Inheritance Tax (IHT) bill.

Unlike property or savings, pension pots have often sat neatly outside the estate, protected from Inheritance Tax and allowing beneficiaries to receive value with relatively little erosion.

That landscape is now shifting following successive Budgets, which have introduced proposed changes to the treatment of unspent pensions for Inheritance Tax from 2027, followed by expected reforms to salary sacrifice arrangements from 2029.

Combined, these changes are likely to result in smaller pension pots over a person’s lifetime.

However, even though savings may be reduced, their inclusion as part of the estate may drag many more families into the IHT regime.

How pensions have traditionally been treated

At present, most defined contribution pensions do not usually form part of an individual’s estate for Inheritance Tax purposes.

Instead, they sit outside the estate and are paid at the discretion of pension scheme trustees.

This has made pensions particularly attractive. Funds could often be passed IHT-free, accessed flexibly by beneficiaries and in some cases withdrawn free of Income Tax where death occurred before the age of 75.

For this reason, many people have deliberately preserved their pension pots during retirement, choosing to draw on other assets first.

The impact of unspent pension changes from 2027

From 2027, unused pension pots may be brought within the scope of IHT on death.

This represents a fundamental shift in thinking. Instead of sitting cleanly outside the estate, pension funds could face tax of up to 40 per cent.

However, more importantly, when combined with other assets, the value of pension pots is likely to draw more of the whole estate into the scope of IHT.

From a probate perspective, the change also introduces added complexity, with pension values needing to be carefully reported and factored into the overall estate position.

Salary sacrifice reforms from 2029

At the same time, further changes are expected from 2029 in relation to salary sacrifice arrangements.

Salary sacrifice has long been a tax efficient way for employers and employees to boost pension contributions.

Reforms in this area may reduce its appeal, potentially slowing the growth of pension pots in the years leading up to retirement.

When combined with the proposed IHT changes, this creates a double impact. Not only could pension pots be smaller, but more of their value could be lost to tax on death.

What this means for probate planning

Together, these developments mark a clear shift in how pensions should be viewed within estate planning.

From a probate standpoint, executors and administrators may find themselves dealing with pension assets in ways they have not previously encountered, often requiring closer coordination with pension providers and other professional advisers.

For those planning ahead, the changes raise important questions. It may no longer be sensible to preserve pension wealth at all costs and in some cases accessing pensions earlier could reduce future Inheritance Tax exposure.

It also becomes increasingly important to view pensions alongside other assets, such as property, investments and business interests, rather than treating them as a separate and protected category.

Planning for pension reform

Pensions will remain a valuable part of retirement planning, but their role as an estate planning tool is clearly evolving.

Probate planning is no longer just about property and cash. Understanding how pensions fit into the estate and how future changes may affect their value, is now key to avoiding unwelcome surprises and protecting as much wealth as possible for the next generation.

If you would like guidance on this or any other probate or estate planning matters, please get in touch.

App of the month: Dext and Xero

We think it is time to shine a light on Dext and, in particular, how it works seamlessly with Xero to simplify day-to-day bookkeeping.

Dext is a powerful automation tool designed to remove the manual admin from receipts, invoices and expenses.

When combined with Xero, it creates a smooth, end-to-end bookkeeping process that saves time, reduces errors and keeps your financial records up to date.

How Dext works with Xero

Dext captures receipts, invoices and bills, then automatically extracts the key data before sending it directly into Xero. This means no manual data entry and no chasing paperwork.

You can simply take a photo of a receipt or upload an invoice, whether you are in the office or on the go.

Dext pulls in documents directly from suppliers, email inboxes and bank feeds, helping prevent delays and bottlenecks in your bookkeeping.

Once the data is extracted, it flows straight into Xero, ready for reconciliation and reporting.

Built for growing businesses

For businesses selling online, Dext can also connect with platforms such as Shopify, Stripe and PayPal, ensuring sales data flows neatly into Xero and many other platforms without adding complexity.

All documents are stored securely in the cloud, organised intelligently and available whenever you need them.

Try it for yourself

Dext offers a 14-day free trial, giving you full access to its core features and enough time to see how it fits with your business and your Xero setup.

With tens of thousands of firms and hundreds of thousands of businesses already using Dext to streamline their bookkeeping, it is a powerful addition to any Xero-based accounting process.

If you would like help implementing Dext within your business and connecting its powerful features to your Xero account, please get in touch.

Meet Max – Our latest trainee

We are pleased to welcome Max Hopkinson to Rotherham Taylor as our newest trainee accountant.

Max is currently working towards his ACCA qualification and is building his experience across the team.

He particularly enjoys the problem-solving side of accountancy, finding there is a real sense of achievement in working through challenges and arriving at the best solution.

While managing multiple deadlines can be demanding, Max says it has helped him develop strong organisational skills and stay focused, especially during busy periods.

He credits his colleagues as a key source of inspiration, valuing the support and teamwork around him as he continues to learn and progress.

Outside of work, Max keeps active by playing table tennis, football and training in the gym, helping him unwind after a busy week.

Employee Ownership Trusts: Are they still the right step for your business?

Employee Ownership Trusts (EOTs) have become one of the UK’s fastest-growing business succession models, and for good reason.

Since their introduction in 2014, the Employee Ownership Association and WREOC have reported a 1,640 per cent increase in EOT-owned businesses in the past decade and 560 transitions in 2024 alone.

However, with the recent Autumn Budget announcing that Capital Gains Tax (CGT) now applies to EOTs, companies may question whether this once tax-efficient strategy is still worth it.

What is an Employee Ownership Trust?

An EOT is when a trust acquires a controlling interest (more than fifty per cent) of a company on behalf of its employees.

EOTs can allow employees to collectively benefit from the success of the business while owners reduce their involvement over time.

To qualify for EOT reliefs, the company must be a trading business or a holding company of a trading group.
Business owners may retain a minority shareholding or continue as directors, provided they do not control the trust.

Are EOTs still beneficial post-Budget?

In this year’s Autumn Budget, Rachel Reeves announced that CGT relief on disposals to EOTs will now stand at 50 per cent – half of the previous 100 per cent relief.

HMRC reported that the cost of CGT relief has increased significantly over the years, reaching £600 million in 2021/22.

With forecasts suggesting it could rise to more than 20 times the original cost, to £2 billion by 2028–29, the Chancellor decided to act.

Despite these changes, EOTs can still offer significant tax advantages, including tax-free bonuses of up to £3,600 per employee each year and no Inheritance Tax (IHT) implications for selling shareholders.

Employee ownership can also improve incentivisation and retention due to increased involvement in the company.

Selling to an EOT can also avoid the uncertainty of third-party buyers and allow founders to protect the business’s identity and company culture.

What are the current policies of an EOT?

As with any exit strategy plan, challenges can arise, and choosing the right model for your business is important.

EOTs have faced several changes from this year’s Budget and 2024’s Autumn Budget to encourage employee ownership.

These include rules around UK residency for trustees and companies having to meet qualifying conditions for CGT relief, which were extended to four years.

For business owners considering an exit in the coming years, seeking financial advice can help you make the most of your finances and understand how the current policies will affect you.

For expert financial advice and support in relation to EOTs, contact our team today.