Category: Business Advisory

From 6 April 2026, important changes to the Construction Industry Scheme came into effect. These changes mainly affect contractors who either use subcontractors or have periods where no subcontractors are paid.

Contractors must now either file a CIS return every month, including nil returns, or tell HMRC in advance that they will not be paying subcontractors for that month by submitting an inactivity request. HMRC confirms that penalties may apply where neither action is taken without reasonable excuse.

The full late filing penalty regime has also returned. A late CIS return can trigger a £100 fixed penalty, followed by a £200 penalty after two months. Further penalties may apply at six and twelve months, including tax-geared penalties based on the liability that should have been reported.

There are also tougher rules around fraud and Gross Payment Status. From 6 April 2026, HMRC can remove Gross Payment Status immediately, recover lost tax and charge penalties of up to 30% where a business knew, or should have known, that a payment was connected to fraud.

For construction businesses, the message is simple: every CIS month now needs to be accounted for. Filing nothing is no longer a safe option.

At A&C Chartered Accountants, we help construction businesses stay compliant, avoid unnecessary penalties and keep their CIS records in order. If you are unsure whether you need to file a return or submit an inactivity request, speak to us before the deadline.

A final reminder for any businesses that source workers through third parties, such as agencies or umbrella companies. New rules will come into effect from 6 April 2026 that could have significant tax implications.

Under the new legislation, businesses may become jointly and severally liable for PAYE and National Insurance contributions relating to workers supplied through these arrangements if the third party fails to meet its tax obligations to HMRC.

This means that if an agency or umbrella company in the labour supply chain does not correctly account for PAYE or NIC, HMRC may seek to recover the unpaid amounts from other parties involved in the arrangement, including the end client.

Given the potential financial exposure, it is important for businesses that rely on outsourced labour to review their current arrangements and understand how the new rules may apply.

Carrying out appropriate due diligence on labour providers and understanding how workers are engaged within the supply chain will be essential to reduce the risk of unexpected tax liabilities.

If your business regularly engages workers through agencies or umbrella companies, it would be sensible to review these arrangements before the new rules take effect in April 2026. We would be happy to help you assess your current position and ensure your processes are compliant.

If you have paid too much tax, perhaps because of an error on a tax return or because you believe an amount assessed by HMRC was incorrect, there are ways to reclaim the overpaid tax.

As a general rule, claims for refunds cannot be made more than four years after the end of the relevant tax year. For example, a claim relating to the 2021/22 tax year would need to be made by 5 April 2026.

However, in certain circumstances it may be possible to reclaim overpaid tax through a process known as overpayment relief. This involves making a formal claim to HMRC and acts as an important safeguard for taxpayers.

HMRC has recently updated its guidance to help individuals submit successful claims. Any claim for overpayment relief must be made in writing and must clearly state:

• that the claim is for overpayment relief

• the tax year in which too much tax was paid or assessed

• the reason why too much tax was paid or assessed

• the amount believed to have been overpaid or over-assessed

• whether an appeal has previously been made in relation to the same payment or assessment (the term “appeal” must be used)

The claim must also include a declaration confirming that the information provided is correct and complete to the best of the claimant’s knowledge and belief, and it must be signed personally.

It is important to follow the correct process when making a claim. If you believe you may have paid too much tax in previous years, we would be pleased to assist you in reviewing the position and preparing a claim where appropriate.

We are continuing to work with a number of our clients as they prepare for Making Tax Digital (MTD) for Income Tax. This new regime will apply from April 2026 to self-employed individuals and landlords whose business and/or property income (that is, total takings rather than profit) exceeds £50,000 per year.

Under the new system, individuals will be required to keep digital records and submit quarterly updates to HMRC. The first quarterly update will be due by 7 August 2026.

HMRC recently confirmed that around 860,000 individuals will be brought into the regime from April 2026. They are encouraging taxpayers to begin preparing now and are emphasising the benefits of spreading tax administration across the year, rather than leaving everything until the annual tax return deadline.

If you fall within the group affected from April 2026, it is important to remember that the normal Self Assessment process will still apply for the current tax year. Your tax return for the year ended 5 April 2026 must still be submitted by 31 January 2027.

This means that during the 2026/27 tax year you will be providing HMRC with quarterly updates under MTD, while also completing your final traditional tax return for 2025/26.

If we are not already working with you to plan your transition into this new digital regime, please do get in touch and we will be happy to support you.

During a week dominated by news from the Middle East, the Chancellor, Rachel Reeves, presented the government’s Spring Forecast to Parliament on 3 March 2026.

The Chancellor told MPs that economic stability had been restored, pointing to the latest projections from the Office for Budget Responsibility.

While the government focused on signs of economic growth, particularly when measured by GDP per person, the OBR’s report paints a more complex picture. It suggests that the fiscal environment remains tight and that the next Budget will take place against a challenging backdrop.

As part of the government’s policy to hold only one major fiscal event each year, the Spring Forecast included no new tax or spending announcements. However, the updated forecasts provide useful signals about where future tax pressures may emerge.

A steadily rising tax burden

One of the clearest messages from the OBR’s projections is that the overall tax burden is expected to continue rising.

Taxes are forecast to reach 38.5% of GDP by 2030/31, which would represent the highest level since the Second World War.

A major driver of this increase is the continued freeze on income tax thresholds, which is currently scheduled to remain in place until April 2031. As wages rise over time, more people will be pushed into higher tax brackets even if their real financial position has not changed.

This phenomenon, often described as fiscal drag, means that many individuals and business owners may find themselves paying higher levels of tax without any formal rate increases being introduced.

The state pension and income tax

Another interesting point raised in the forecast relates to the state pension.

From 2027/28, the full state pension is expected to exceed the personal allowance. This could potentially bring around 600,000 more people into the income tax system by 2026/27, rising to approximately one million by 2030/31.

The government has stated that it does not intend for pensioners whose only income is the basic or new state pension to pay income tax during this Parliament. However, the detailed policy explaining how this will work in practice has not yet been confirmed.

National insurance and hiring pressures

The OBR also notes that the increase in employer national insurance contributions, introduced last April, is contributing to the higher tax take.

For businesses, this increase in employment costs may influence hiring decisions. At the same time, the OBR forecasts that unemployment could rise to around 5.3% in 2026 before gradually falling back to 4.1% by 2030.

For many employers, the combination of higher payroll costs and economic uncertainty may encourage a more cautious approach to recruitment.

Self assessment and international tax changes

Self assessment payments are expected to increase significantly during the 2026/27 tax year.

Part of this rise is linked to the abolition of the UK’s non-domiciled tax regime in 2025/26, alongside a temporary facility that allows certain overseas income to be brought back to the UK.

Anyone with overseas income, assets or international financial arrangements should review their position carefully, as these changes may have a meaningful impact on future tax liabilities.

Capital taxes and investment planning

The OBR also expects receipts from capital taxes to rise.

Strong performance in UK equity markets has increased the value of many portfolios, which means more investors could be facing capital gains tax when they sell assets.

If you hold UK shares or other investments, this may be an appropriate time to review your portfolio and consider whether crystallising gains, rebalancing holdings or making use of available allowances could improve your tax position.

Any such planning needs to take account of anti-avoidance rules such as the ‘bed and breakfasting’ rules, which restrict the immediate repurchase of assets after they have been sold.

Why proactive tax planning matters more than ever

Taken together, the OBR’s report suggests that tax planning will become increasingly important over the coming years.

For individuals and business owners alike, this means:

• monitoring available allowances carefully

• thinking about the timing of income, gains and dividends

• making sure reliefs are fully utilised

• reviewing pension contributions and investment structures

• considering how assets are held within a family

Small adjustments made early can often make a meaningful difference to future tax liabilities.

As the tax landscape continues to evolve, taking a proactive approach to financial planning will be key to keeping tax bills under control while maintaining long-term financial stability.

Effective tax planning is about timing, structure and using allowances before they’re lost. The following areas should be reviewed well ahead of the 5 April 2026 tax year end.

Income tax & allowances

• Maximise use of the personal allowance (£12,570) and basic rate band across family members where income splitting is commercially justified

• Use the dividend allowance (£500) and personal savings allowance (£1,000 for basic rate taxpayers, £500 for higher rate taxpayers) before year end

• Consider the timing of bonuses and discretionary income, particularly where income is approaching £100,000 (personal allowance withdrawal) or £125,140

• Accelerate or defer income receipts based on expected tax rates and personal circumstances in 2026/27

Capital gains tax planning

• Use the annual exempt amount (£3,000 per individual) before 5 April 2026 — losses cannot be carried back

• Consider bed-and-breakfasting alternatives, such as ISA reinvestment or spouse transfers, to refresh CGT base costs

• Review disposals where Business Asset Disposal Relief may apply (lifetime limit £1 million, taxed at 14%, subject to qualifying conditions)

• Crystallise capital losses before year end to offset current or future gains (losses carry forward indefinitely but current year losses must be used first)

• For residential property disposals, note CGT rates of 18% or 24% and the 60-day reporting and payment requirement

Pension contributions

• Maximise pension contributions up to the £60,000 annual allowance and use carry-forward relief from the previous three tax years

• High earners with adjusted income over £260,000 should review the tapered annual allowance, which can reduce to £10,000

• Employer pension contributions avoid employer NICs (now 15%) and remain deductible for corporation tax

• Review exposure to the money purchase annual allowance (£10,000) if pension benefits have already been accessed

Tax-efficient investments

• Use ISA allowances (£20,000 per individual) and Junior ISA allowances (£9,000 per child) — unused allowances cannot be carried forward

• Consider venture capital schemes where appropriate:

  • SEIS: up to £200,000 at 50% income tax relief

  • EIS: up to £1m (£2m for knowledge-intensive companies) at 30% relief

  • VCTs: up to £200,000 at 30% relief

• Review availability of loss relief on EIS and SEIS investments, which can be set against income as well as gains

Corporate planning for directors and companies

• Review the optimal mix of salary and dividends, particularly following the increase in employer NICs to 15% from April 2025

• Consider timing of capital expenditure to maximise relief under the £1m Annual Investment Allowance or full expensing rules

• Review group relief opportunities where companies have differing year ends

• Monitor director loan accounts — balances over £10,000 can trigger benefit-in-kind charges, and outstanding loans may attract a 33.75% s455 charge

Inheritance tax planning

• Use the annual gifting exemption (£3,000, plus prior year if unused) and small gifts exemption (£250 per recipient)

• Structure regular gifts from surplus income to qualify for immediate exemption, ensuring appropriate records are kept

• Consider potentially exempt transfers now to start the seven-year clock

• Review Business Property Relief and Agricultural Property Relief eligibility and ownership periods

• Check life assurance policies are written in trust where appropriate

Property & SDLT considerations

• Review property portfolios for potential disposals ahead of future tax changes

• Consider incorporation of property businesses, balancing SDLT costs (including the 3% surcharge) against long-term corporation tax savings

Cross-tax and administrative planning

• Review salary sacrifice arrangements for pensions, childcare and cycle-to-work schemes

• Time charitable donations to maximise Gift Aid relief

• Review VAT schemes (flat rate, cash accounting or annual accounting) where relevant

• Check HMRC coding notices and payments on account

• Ensure self-assessment obligations are planned for ahead of the 31 January 2027 deadline