BUDGET ANTICIPATION STALLS BUSINESS DECISIONS

Team HK can’t wait for the Budget!  Just to get it out the way!  This is the longest run into a Budget anyone can recall, and the distraction, and stagnation it is causing with spending plans (both business and consumer), decision making, and investment is noticeable – everyone just waiting!

Since our October newsletter the following have been areas that have been raised over the last month:

• Profit shares for LLP members could be subject to employers’ national insurance.  (Currently treated as self-employed income, and the individual pays self-employed income tax and national insurance, with the LLP paying no employment taxes);
• Exit tax – A charge raised on those individuals who become non-UK tax resident;
• Income Tax increases with a statement given which all thought was laying the ground for breaking the manifesto promise, but this looks unlikely now.

We continue with our position don’t try and second guess what is going to happen by implementing any “knee jerk” planning actions.  If you are going to undertake an action regardless of the Budget, then continue with these, but look to complete this where possible before the Budget.  For the example, if selling a property, even if your main home (with the rumours that principal private residence relief could be restricted on higher value properties), exchange contracts before the Budget.  That said, we have a few tips/measures we would consider you may wish to consider before the Budget some mentioned in the October newsletter:

• It looks like Income Tax Rates across the board will increase, therefore dividend income tax rates will increase (last month we thought could).  To beat the increase (subject to any anti forestalling measures), if you are an owner manager who declares dividends towards the end of the calendar year or first quarter next year, then you may wish to consider, if the Company has sufficient reserves, to declare and pay a dividend in advance of the Budget.  It is important that the dividend is legal meeting Company Law requirements, recorded and paid correctly, which basically means having up to date financial management information; 
• Pension Salary Sacrifice looks to be in the sights, the Chancellor raised the point back in May, and a lot of “noise” in the last few weeks.  No idea if total abolishment or only look at a set level that can be sacrificed, however if you sacrifice a significant amount, say an annual bonus, where possible, complete this before the Budge;
• If you are considering making a gift for Inheritance Tax Planning reasons, again with rumours circulating there may be changes to the potential exemption transfer (“PET”) rules, you may wish to complete the gift in advance of the Budget. 
• With Inheritance Tax being charged on pensions from April 2027 (see our article HERE.  For those with healthy pension pots with other sources of income to rely on, consideration (together with financial advice) should be given to extracting the tax-free lump sum to enabling gifts to be made.  (Although we understand that the volume of individuals taking their tax free cash, a lot of providers have had to stop accepting applications).

We have no crystal ball as to what is going to happen, and the above suggestions are put forward as high possibilities of being announced, and which may fit certain individual’s circumstances which could be considered.

TAX VALUATIONS

Valuations is the new hot top at HK offices, as we see more interest by HMRC in this area in respect of our enquiry work, and changes in approach to valuation methodologies.  The reason this is becoming a hot topic, is the requirement for a Tax Valuation is increasing. A point made at a recent House of Lords Finance Bill Sub-Committee reviewing the changes to Business Property Relief, and Agriculture Property Relief, where Valuations were discussed.  The reduction in these reliefs to a £1m lifetime allowance in April 2026, which result in the requirement for Valuations, which were previously not required.  We highly recommend that you read our short article on Tax Valuations, and their importance. 

WHY IS TAX VALUATION SO IMPORTANT?

DIRECTORS PAYE

HMRC is advising directors and employers to check their National Insurance contributions (NICs) are correctly calculated to reflect any changes to previous tax years as two rate cuts have occurred.  (There are rumours there could be one in the Budget to compensate for the income tax increase).  There is a concern that NIC due at the end of the tax year for PAYE directors using the annual earnings period method may have shortfalls.  Although this applies to all tax years, HMRC said it has ‘particular concerns where there are changes in year to the NIC rates, for example, the 2022 to 2023 tax year’.  Employers (or their payroll provider) need to review their submissions for 2022-23 tax years and onwards to make sure that no further NICs are due. If any underpayments are identified, HMRC recommends the issue is self-corrected through PAYE where possible.  In instances where it is not possible to self-correct, HMRC stressed that a disclosure will need to be made.

HMRC WHISTLEBLOWERS

The press is reporting that HMRC is set to launch a Whistleblower Reward Scheme, allowing informants to earn up to 30% of recovered taxes.  The initiative takes inspiration from the US, where the Internal Revenue Service offers incentives for those providing information on fraud. Since 2007, the USA has paid $1.3bn to whistleblowers from $7.4bn recovered, offering 15%–30% of taxes recouped on cases with at least $2m recovered. The UK initiative aims to incentivise insiders with credible, actionable knowledge to come forward and help close the UK's tax gap.

STOP! THINK FRAUD CAMPAIGN

As Christmas season rapidly approaches, as well as the tax payment season for a lot of corporates, and the self-assessment January payments, be mindful of fraud. 

The Stop! Think Fraud campaign helps individuals and small businesses to protect themselves from fraud. By taking a moment to stop, think and check when you receive or see suspicious communications, or adding an extra layer of security to your online accounts with two-step verification, you can help to protect yourself. The campaign includes a dedicated section to help people protect their business from fraud, including:

• Cyber security advice for small and medium sized organisations;
• Personalised cyber action plans;
• Free online training for staff.

More details can be found HERE.

DATES

• Key Tax dates for the period 1 November 2025 to 31 December 2025;

• Autumn Statement - 26 November 2025.

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