Summer is coming to an end, children are back at school, and we have had lots of noise over the summer about the forthcoming Budget! We have prepared a summary of the Budget chat over the summer holidays, which can be found below on our blog.
As we have continually advised, our position as always is 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 this, but, if possible, look to complete this before the Budget, but time is now very short.
August for team HQ is usually a quieter month compared to the rest of the year, as most clients and members of the team are taking holiday and there are no real deadlines (30 September being the next big deadline for us, with 31 December year accounts to be filed by) - usually a bit of catch-up. Not this year! We found this August the total opposite of previous years. We completed several transactions, including a listed company investing in one of our clients, as well as advising on pre-Budget planning as the date gets closer.
One news item that may have slipped under the radar in August:
The Fair Work Agency (FWA) has released its first ‘naming and shaming’ list since taking over enforcement of the National Minimum wage. The FWA brings several older regulatory bodies and enforcement functions together into a single organisation, including taking over minimum wage. The list provides the names of businesses who are found to have failed to pay at least the minimum wage to its workers, along with details of how many workers were underpaid and the amount of underpayment. 658 employers were named for underpaying more than 27,000 workers in total, including some household names, and some accountants! The report also showed that a total of around £7 million in penalties has been issued. Without having completed a detailed review of the report, in summary it appears that a lot of the problems were innocent errors, for example IT errors, rates updated late on systems, but when the problem was noticed, it was rectified by the employer before FWA involvement but still resulted in hefty penalties. This is another example of this Government's aggressive approach with penalties a source of revenue, which we are finding with direct taxes, and is an important lesson to keep an eye on your IT updates.
Keeping on the theme of employee pay and IT, for those who have not voluntarily registered, payrolling benefits is mandatory for most benefits from April 2027, with most others following in April 2028. This is only six months away. As a new process involving employee benefits (not wanting to upset your staff) and IT, best practice is to start preparing now, to avoid any issues in April 2027.
CAPITAL GAINS TAX
The collection of Capital Gains Tax soared by nearly double in 2024-25 to a record £24.2bn, with an annual increase of £11.4bn, exceeding the total amount collected at any time between 1987 and 2020. This is an increase of 89% from £12.8bn from the previous tax year. Per our Budget summary, Capital Gains Tax is, we believe, a tax under review, but the Government should not take the record take for 2025 as a sign that more can be collected, as there are several reasons why the take was so high for 2025:
- Business owners and asset owners raced to sell businesses and properties due to fears the former chancellor Rachel Reeves would hike rates in the 2024 Budget.
- There was an increase in the Business Asset Disposal Relief rate from 14% to 18% on 6 April 2025, so business owners who wanted to exit would wish to do so before the change. Data shows that Business Asset Disposal Relief was claimed by 61,000 taxpayers on £18.5bn of gains in 2024-25, resulting in £1.8bn of CGT due, representing a 69% increase on the previous year.
- The annual exempt amount (the amount of gain that is tax-free) was cut from £12,300 to £6,000 in April 2023, before being halved again to £3,000 in April 2024. Not only does this increase collection, but the number of taxpayers who pay the tax.
- There was a major change to how carried interest payouts received by private equity and hedge fund managers are taxed, from April 2025, so it was expected they scrambled to avoid the tax increase.
- This was also the first year Crypto Tax Gains were recorded with reported gains of £1.38bn. (See below)
HMRC has launched a targeted Education & Voluntary nudge letters to Crypto Asset holders they are aware of. HMRC has also published its official statistics on taxable Crypto Asset Capital Gains, and for the first time Digital Assets have their own place in the Self-Assessment return. The statistics estimate that its compliance, education, and social media outreach in late 2023 generated £168 million in additional CGT revenue during the 2024/25 period alone. It should also be noted that starting in 2027, HMRC will receive automatic direct reporting from crypto exchange platforms and custodians regarding transactions made by UK tax residents. Platforms failing to comply face fines of up to £300 per user.
Crypto is on HMRC’s radar; it will have more information to use to trace taxpayers, so make sure your affairs are in order, and make a voluntary disclosure if required.
The VAT discounts that the Government gave to a few sectors over the summer ended on 31 August. Therefore, make sure all till systems, point-of-sale systems, accounting software and VAT records have reverted to 20% at midnight on Tuesday 1 September, to avoid problems with VAT returns.
HMRC warned: “Businesses that used the reduced rate for children’s meals, tickets and family attractions must make sure they have switched back to charging the standard VAT rate of 20% on all relevant sales and supplies from 2 September 2026”.DATES
- Key Tax dates for the 2026 calendar year.
- 31 January 2027 - Self Assessment deadline!
