WELCOME TO HARBOUR KEY'S MAY 2026 E-NEWSLETTER
We’re starting with a couple of team updates — celebrating new opportunities as we say goodbye to two colleagues, and giving a warm welcome to a new addition joining the team.
After five years with Harbour Key, Simon is moving to pastures new (one of the friendly accountancy firms we work with), due to family reasons but we will remain in regular contact. Leon who completed his professional training with us, has also left to join another tax focused practice to continue his professional development. We thank them both for their contributions and wish them every success in their new roles.
We are pleased to welcome Matt to Harbour Key. Matt joins from Evelyn Partners and is a qualified accountant with five years experience. Over the coming months many of you will get to know Matt, as he supports with annual accounting compliance work, together with supporting advisory projects.
UK TAX TAKE INCREASES
HMRC recently announced that it had collected £938.8bn in taxes in 2025-26, an increase of 9.3% from £858.6bn the previous tax year, heading towards the ominous one trillion-pound figure. To put this in context, annual tax take over the last 20 years has grown from £428.6bn in 2006-07 at the start of austerity to today’s £938.8bn, and it is 30.7%, up a full two percentage points as a proportion of GDP over that time.
VAT has had a significant increase in the level collected at £180.7bn, while Corporation Tax and related niche business taxes totalled a record £101.4bn, which HMRC said was up year on year due to “growth in onshore Corporation Tax receipts.” Recent Budget announcements have had an impact with the class 1 Employer NICs hitting £143.9bn in 2025-26, up from a total of £108.5bn in 2023-24 due to the huge rises implemented in April 2025 after the announcement. (This is better than original Treasury predictions!) Annual Capital Gains Tax (“CGT”) receipts for financial year 2025-26 are 62% higher than in 2024-25, rising from £13.68bn to £22.18bn. The CGT figure has increased significantly compared with earlier years, but whether there will be a continued growth in CGT revenue, or it remains at that level, is questionable as disposals were linked to pre-Budget rumours of huge rises in CGT rates which did not transpire, although they did increase.
Inheritance Tax receipts have continued to increase, surpassing last year’s total and marks the fifth consecutive annual record. This is before the changes to Business Property Relief and Agriculture Relief Tax took effect (from 6 April 2026) and then pensions (April 2027). Inheritance Tax receipts are only going to increase! A list of the tax changes/increase for this current tax year can be found in last month’s newsletter.
At Harbour Key, the work we are undertaking supports the increases in the various taxes, as we have had a significant increase in transactional work over the last two years advising on CGT, and clients asking about Inheritance Tax.
As the UK becomes a higher taxation country, those who can, are leaving to more tax efficient countries. The middle east conflict has meant we have not seen the numbers asking about Dubai, but we are still being asked about moving there and have other clients who have planned to move there continue with their plans. However, other countries are now being discussed, for example Cyprus, Malta, and Montenegro.
Historically, the top 1% of UK earners have contributed around 30% of Income Tax revenues, and any reduction in this group’s contribution as they leave the UK, will see a shift in the tax burden towards middle-income earners. However, we do not deal with the uber wealthy, but our client base, the middle income and business owners are looking to leave the UK.
EMPLOYER HMRC REPORTING 6 JULY FILING DEADLINE
May and June are the months when several employer returns will need to be submitted, in the run up to the 6 July deadlinefor Employee Benefits, and Eemployment Eelated Securities/Option Scheme reporting. All the annual employer payroll reporting needs to be completed and all employees who were on the payroll at 5 April are required to receive a P60 by 31 May.
Employment benefits (company car, medical insurance, cheap overdrawn loan accounts, etc.) which have not been payrolled, must be reported via the form P11D and filed by 6 July. (Please note that mandatory payrolling of Benefits in Kind for all employers will take effect from 6 April 2027).
Employers are also required to report to HMRC details of directors or employees acquiring shares or being granted share options in the tax year (to 5 April), by the following 6 July, using HMRC’s online system. In addition, annual returns for approved Share Option Schemes, such as EMI, need to be filed by 6 July. These returns can only be filed electronically, which means the employer will need to have set up online access, which takes a few weeks. The Employment Related Securities service is part of the PAYE Online for employers’ service. More detail can be HERE!
From our experience, Employment Related Securities (“ERS”) is becoming a major issue in respect of transaction due diligence, the implications of which can be catastrophic, when an employee who has been incentivised with "Shares" believing on a sale that they will be subject to lower rate Capital Gains Tax (18% or 24%), only to be told that Income Tax and National Insurance applies at 47%! We would highly recommend that you look at our articleregarding ERS which includes a case study, so you can avoid getting into difficulties.
HMRC INCREASE THE PRESSURE CHASING TAX PAYMENTS
- We have reported on several occasions on how HMRC is becoming active in its intervention activities opening more enquiries and compliance checks, and we are now seeing a more aggressive approach to chasing outstanding tax payments.
HMRC’s post-Covid-19 pandemic leniency regarding tax collection has officially ended. As the Treasury puts more resource into tax collection and issued a record-breaking £302m in late payment fines. We are working with one of our clients, who was unable to pay their self-assessment bill at the end of January, a significant element being Capital Gains Tax, and their consideration payment being delayed resulting in agreeing a payment plan with HMRC. The client missed one payment, and HMRC started enforcement action within weeks, which after some dialogue, they agreed to give some extra time for our client to try and resolve their position.
There is a slight increase in winding up petitions although not at the peak of 2023, yet one trend emerging is the increasing number of winding up petitions being issued by HMRC. Between 2021 and 2025, HMRC winding up petitions have increased by over 600% (In 2025, according to Insolvency Service statistics, HMRC submitted 60% of all winding up petitions). The change in approach is likely to be as a result of HMRC being the most exposed in a business entering trading difficulties with generally VAT & PAYE being the first payments which are defaulted on as the funds are used to pay more pressing liabilities to enable the business to continue to trade, and as a secondary preferential creditor, HMRC has a better chance of recovering from the winding up, if gets in earlier.
Before Covid, during and initially after, HMRC was more amenable to agreeing alternative payment arrangements under Time to Pay (TTP) or entering discussions with businesses to try and find a mutually acceptable solution to outstanding tax liabilities. (Similar arrangements are available for individuals’ self-assessment tax liabilities). TTP allow business time to reorganise and pay their debts off, usually over a 12-month period but can be longer, with HMRC normally a willing participant that was sympathetic to the struggles businesses faced and not wishing to wind up viable businesses, experiencing short-term cash flow or other issues.
Outside of winding up petitions, we are also seeing HMRC use lesser-known powers, such as notices of registration to demand security for taxes, especially VAT, upfront. HMRC is also taking a more active role in court-led restructuring.
The key message and most important is to have proactive engagement with HMRC at an early stage, opening a dialogue before HMRC initiates enforcement, and complying promptly with requests for information, significantly reduces the risk of a winding-up petition. TTP remains available and is the single most effective mechanism for avoiding formal proceedings, but do not over promise, make sure you have forecasted so that the payment plan you offer is affordable. Should you enter difficulties with the payment plan, speak to HMRC at the earliest opportunity. Don’t stick you head in the sand. TTP is also not just about payment, it is also about making sure your tax reporting is up to date and maintained, so HMRC can see that you are keeping your affairs in order. HMRC are likely to closely monitor tax reporting, and any lapse risks prompting HMRC to escalate to more aggressive enforcement measures.
If you believe you are going to have difficulties with your tax payments, please speak to us.
REMINDERS!
- If you have not (and there are some despite our chasing since November), completed your Companies House ID verification, can you please deal with at the earliest opportunity. More details can be found HERE!
- For those who are self-employed and/or a landlord with total income of more than £50k, you will need to register with HMRC for Making Tax Digital, and the first quarterly return filed by 7 August 2026. More details can be found HERE!
- 2026 Self-Assessment Return – It is never too early to get your tax return information for your 2026 to us, the earlier the better.
DATES
Key Tax dates for the 2026 calender year.
Should you wish to speak with us about a specific matter, or just to be a sounding board or for a chat, please do not hesitate to give us a call on 01452 713277
