In June 2025, HMRC will be sending out simple assessment letters to taxpayers who aren’t obligated to file full self-assessment tax returns – which might come as a surprise to some.
Here’s a summary of what taxpayers should know about simple assessments in 2025.
Who will get a simple assessment letter?
You are likely to receive a simple assessment letter from HMRC if you owe:
- Income Tax that isn’t automatically taken out of your income
- £3,000 or more to HMRC
- Tax on your State Pension
If you don’t have a PAYE code or the tax you owe can’t be collected by adjusting your tax code, then HMRC is also likely to send you a letter about this.
What is a simple assessment letter?
If you haven’t completed a full self-assessment tax return, but still owe tax, then HMRC will send you a letter regarding the tax you owe for the 2024–2025 tax year.
The simple assessment letter will cover all the key information, such as:
- Detailed calculations showing the amount of tax due
- The latest date you need to pay the tax by
- How you can pay the tax to HMRC
- What you should do if you disagree with HMRC’s calculations
For the 2024–2025 tax year, the deadline for paying any tax due will be 31st January 2026.
Why are more taxpayers receiving simple assessment letters?
While some people receive these letters every year, for many first-time recipients, they’ll seem to come out of the blue. This is because HMRC is sending letters to more and more people due to frozen Personal Allowances affecting their tax brackets.
The annual tax-free Personal Allowance has been stuck at £12,570 since 2021 and will remain the same until 2028. The basic old and new State Pensions may be below this level in 2025, but if you have the additional State Pension (which increased by 6.7% last year) or deferred your State Pension for an increased payment, this could be enough to exceed the allowance.
Additionally, if you owe tax on interest earned through a bank or building society account, HMRC could send you two simple assessment letters for the same year. If this happens, the second assessment will be based on the latest information and independent from the first.
Will you receive a simple assessment letter next year?
If the State Pension increases by 5% or more from the current level by April 2028, the basic new pension will exceed the Personal Allowance alone, pushing even more people into paying tax.
With inflation currently above 3% and earnings growth at around 5.5%, this pension increase could be reached during the 2026–2027 tax year, causing even more complications for HMRC.
You can learn more about simple assessments on the HMRC website. Should you need help with managing tax bills and communicating with HMRC, our accountants in Barnsley would be happy to offer assistance from the range of financial services we offer at gbac.
Call 01226 298 298 or email info@gbac.co.uk to benefit from our tax planning services!
Previously, HMRC told UK taxpayers that the agency would use personal interest information from banks and building societies to calculate taxable personal interest for the 2023–2024 tax year, then adjust individual tax codes or issue Simple Assessments.
While the aim was to avoid an influx of tax returns due to increased interest rates that year, HMRC has struggled to collect all of the income tax on personal interest for 2023–2024.
As a result, HMRC is issuing a warning to anyone who’s still relying on the tax agency to sort out their personal interest tax for them – reminding taxpayers that, ultimately, the responsibility for reporting interest income and paying any tax owed lies with the taxpayer.
The effects of frozen thresholds and inflation on personal interest tax
A common strategy used by the UK government to increase tax revenue is to freeze tax bands and allowances. As income increases with inflation, more people are brought into the tax system and existing taxpayers end up paying more tax, which is known as fiscal drag.
The Personal Savings Allowance (PSA) has stayed the same since it was introduced back in 2016, which allows people to earn the following amounts of interest income tax-free:
- £1,000 a year for basic rate taxpayers
- £500 a year for higher rate taxpayers
- £0 a year for additional rate taxpayers
Until 2022, if the Bank of England interest rate was below 1%, the PSA could cover interest on a five-figure deposit – meaning most savers wouldn’t owe any tax on their interest earnings.
However, rising inflation resulted in an average Bank of England rate of around 5% in the 2023–2024 tax year, meaning savers earned more interest while their PSA remained frozen.
Unfortunately for HMRC, the consequences of these conditions included such a significant volume of calculations that the agency didn’t finish issuing Simple Assessments until March 2025 – more than a month after the regular deadline for filing 2023–2024 tax returns online.
On top of this, HMRC has also been unable to match around 20% of the 130 million reports it received to the relevant taxpayer records. As a result, the tax agency is now instructing savers to check their interest income tax situation if they haven’t heard from HMRC.
Will the same problems apply to 2024–2025 interest tax collection?
The 2024–2025 tax year that ended recently also saw Bank of England rates reach as high as 5%, which means the same issues are likely to pop up again for savers and HMRC.
However, as the government is focusing on restricting cash ISAs after freezing the ISA allowance for another five years, it’s unlikely that PSA thresholds will be adjusted.
This could potentially make things even worse, so if you’re likely to be affected by a higher personal interest tax bill or already have been, then you should check in with HMRC urgently and take steps to ensure you’re reporting your income accurately and on time.
Here at gbac, we know that managing taxes can be a hassle, which is why our accountants in Barnsley offer tax consultancy services to support individuals and businesses.
So, if you need help with current or future tax planning or liaising with HMRC regarding previous tax years, you can call our team on 01226 298 298. If you prefer, you can send a query by email to info@gbac.co.uk and we’ll get back to you soon with more details.
Company directors, people with significant control (PSCs), and anyone who files at Companies House will be expected to verify their identities from autumn 2025.
While identity verification at Companies House is currently voluntary, it will become mandatory later this year. There could be financial penalties for failing to verify your identity when filing your company’s confirmation statement or becoming a director or PSC.
Ahead of mandatory verification, it’s possible for directors and PSCs to verify their identity on a voluntary basis right now – with the online verification process only taking 10-15 minutes.
How to verify your identity for Companies House
To get ahead of any problems that might come up, it’s a good idea to verify your identity in advance of the deadline. There are three ways to do this, which are:
- Online – Using a GOV.UK One Login to verify who you are with a photo ID through your web browser or the mobile phone app (free of charge).
- At a Post Office – Showing photo ID in person through the Post Office in-branch verification service, which requires providing details online first.
- Through an ACSP – An accountant or lawyer may be an Authorised Corporate Service Provider who can verify your identity for a fee.
After successfully verifying your identity, you will receive a Companies House personal code. This unique identifier will be required whenever you file company statements.
To voluntarily verify your identity at Companies House through the government website, you’ll need a valid photo ID, your address details, and a GOV.UK One Login.
Need help with Companies House?
Whether you own or work for an existing or new company, it’s crucial for all companies to follow the latest regulations for registering and filing at Companies House.
If you need assistance with managing accounts and fulfilling filing obligations, you may want to get in touch with our accountants in Barnsley, who can offer various financial services.
For help with company accounts, call the gbac team on 01226 298 298, or send us an email at info@gbac.co.uk and we’ll get back to you with more information.
While employers were previously required to start using payroll software to report taxable benefits by April 2026, the deadline has been delayed to 6th April 2027.
This means employers can continue using P11D forms to report benefits in kind until next year.
When compulsory reporting is introduced next April, most employee benefits – except for cheap or interest-free loans and employer-provided accommodation – must be payrolled.
These exceptions can still be reported through a P11D form for the foreseeable future, but it’s likely they will eventually be subject to mandatory payrolling, too.
For the 2026–2027 tax year, payrolling benefits remains voluntary, but if employers do want to payroll employee benefits for this year, they must register before 6th April 2026.
Here’s how things will change when payrolling benefits becomes mandatory.
Reporting employee benefits from 2027–2028 onwards
Once payrolling is mandatory, it won’t be necessary to register, as HMRC will automatically enforce this and remove benefits from employee tax codes in time for the deadline.
If an employer wants to payroll a cheap or interest-free loan or accommodation before this, they can register voluntarily. For the time being, though, the P11D process will still be available for employers who don’t want to payroll these benefits after March 2027.
If employers cannot accurately determine taxable benefit values during the tax year and can only provide reasonable estimates, there will be an end-of-year process to account for this.
To support employers transitioning to payrolled benefits, HMRC also won’t be charging penalties for errors during the first year (unless there is evidence of deliberate non-compliance). However, penalties and interest will still be charged for late filing and late payment.
How will this impact cashflow for businesses?
Tax is deducted in real time through payrolling, but employees may be taxed simultaneously on benefits received in previous years through their tax code. This means the mandatory payrolling move could see employees facing tax deductions for multiple tax years all at once.
If multiple deductions would cause financial difficulties for an employee, HMRC may accept a request to spread previous underpayments across more than one tax year. The tax agency will soon provide further guidance to help employers support their employees with this.
A technical note from HMRC is available on the government website, which explains mandating the reporting of benefits in kind and expenses through payroll software.
If you are an employer and your business needs help with payroll and tax management, you can always come to the gbac team to benefit from a range of financial services.
Our accountants in Barnsley can help you get ahead of the benefit payrolling mandate, ensuring everything is running smoothly by the time it’s no longer voluntary. Simply call 01226 298 298 or email info@gbac.co.uk to find out what our accountants can do for you.
Under the Employment Rights Bill moving through Parliament, there will be some significant changes to Statutory Sick Pay (SSP), which are due to take effect by next spring.
Not only will workers be entitled to claim SSP from day one of their sickness, without a waiting period, but the government will also be removing the lower earnings threshold.
While other statutory payments are recoverable from HMRC, SSP is not, so the employer must bear the full cost. This means employers should revise their sick pay policies ASAP.
Here’s what employers should know to start preparing for SSP changes in April 2026.
Day one SSP entitlement
As of April 2025, the weekly SSP rate has increased from £116.75 to £118.75, but under current rules, workers must still wait at least three days to claim on their fourth day of absence.
Removing this waiting period means employees will be entitled to SSP from the first day of sickness, instead of only qualifying if their sickness lasts more than three days.
This day one right will ease financial pressure for employees, who will no longer have to choose between going to work while they’re ill and not getting paid. However, it will increase the cost for employers – who may also face lost productivity through increased absences.
To reduce sick leave abuse, employers should ask their employees to check in with them each day that they’re off sick, and hold a return-to-work interview every time.
No lower earning threshold
There is currently an earnings threshold to qualify for SSP, which means that an employee can only claim this statutory payment if they earn a minimum of £125 a week.
When the lower earnings limit is scrapped, workers who are off sick will be able to claim SSP even if they earn less than £125 a week. This makes sick pay more accessible for those with irregular working hours, part-time contracts, or low wages.
Employees will receive either the standard rate of SSP or 80% of their average weekly income – whichever is the lowest. This change means those who earn between £125–£148 a week will receive less per day, but they’ll still benefit from more qualifying days.
What should employers do about SSP?
While higher costs may be a concern, this is a beneficial opportunity for employers to upgrade their systems and policies for clearer and more consistent business planning.
If you’re a UK employer, to make sure you’re ready for the upcoming changes, you should:
- Revise budgets for increased sick pay costs (especially for lower-paid workers)
- Update payroll systems and HR policies to reflect the changes to SSP
- Implement fair absence management procedures to avoid discrimination
- Train managers to handle sickness absences with an inclusive approach
To help you plan for these adjustments, you should read through the official factsheet on the lower earnings limit removal, which is published on the government website.
Additionally, employers may find it helpful to outsource payroll services to ensure statutory payments are managed effectively. If you’re interested in this type of financial service, gbac has a team of accountants in Barnsley who would love to hear from you.
Call us on 01226 298 298 or email us at info@gbac.co.uk for more information!
A now-closed consultation by HRMC has provided further details about the Inheritance Tax (IHT) allowance for business and agricultural properties in the UK.
From 6th April 2026, to qualify for 100% relief, the total value of a property must be no higher than £1 million, while any eligible assets above this value will receive a reduced relief rate of 50%.
Under the new relief threshold, as an example, a business valued at £5 million could become liable for an additional £800,000 tax bill from next spring. This makes it crucial to get ahead in adapting to the upcoming changes to the £1 million IHT allowance for individuals.
Keep reading to learn more about how these changes will affect future estate planning.
How will business and agricultural IHT reliefs work?
Any lifetime transfers of business or agricultural property made within 7 years of death will use up the £1 million allowance. Similar to the nil rate band, the allowance will be renewed every 7 years.
Business and agricultural properties that only qualify for the 50% relief rate, including Alternative Investment Market (AIM) shares, won’t use up the full allowance.
While spouses and civil partners will qualify for their own allowances, any unused amount of each £1 million allowance won’t be transferable like the nil rate band.
IHT planning for business and agricultural properties
With unrestricted business and agricultural relief currently available, planning for IHT is important to ensure that 100% relief will still be available after the rules change.
From next year, there will be more incentive to make lifetime gifts if the allowance isn’t enough to cover the value of a business or agricultural property, which has implications for Capital Gains Tax (CGT).
Alternatively, putting a substantial gift into trust could be worthwhile – for example, gifting a £2 million agricultural property into trust would result in a lifetime IHT bill of just £35,000.
However, when making a lifetime transfer of such a property to a spouse or civil partner, this relief will only be available after the property has been held for 2 years.
Get help with IHT for a business or agricultural property
Annex A of HMRC’s Inheritance Tax reliefs consultation features several case studies illustrating how the allowance will be applied – but if you need more help managing your tax liabilities, you may want to speak to professionals like our accountants in Barnsley.
To discuss IHT planning with the team here at gbac, give us a call on 01226 298 298 to arrange a consultation, or send an email to info@gbac.co.uk and we’ll be in touch.
With Capital Gains Tax (CGT) rates increasing and the annual exempt amount reduced to just £3,000, it’s not surprising that HMRC is collecting considerably more revenue from CGT.
Basic rate taxpayers are facing almost double the CGT rate for disposals, up from 10% in 2024 to 18% in 2025, while higher rate taxpayers will also see an increase from 20% to 24%.
It’s important to keep up to date with the changes, as this will be an unpleasant hike – especially for couples who plan for the lower income partner to make taxable gains to reduce CGT.
So, are you staying on top of CGT planning for asset disposals this year?
What counts as a disposal for CGT?
‘Chargeable assets’ that are liable for CGT upon disposal include most personal possessions worth more than £6,000, property that isn’t a main residence, main homes that are very big or used for business, non-ISA shares, business assets, and (potentially) crypto-assets.
There’s a common misconception that CGT is only due if you sell an asset. However, giving an asset away to anyone other than your spouse or civil partner is also considered a disposal.
Similarly, exchanging an asset for something else or receiving compensation for an asset (such as an insurance claim if it has been lost or damaged) count as disposals, as well.
However, if you don’t receive any proceeds from gifting an asset, you might not have the funds to pay the CGT bill for the disposal – which will be calculated based on the asset’s market value.
Even if you sell an asset for less than it’s worth, its market value will still be used to calculate CGT liability, so you wouldn’t avoid this tax by selling the asset at an undervaluation.
In the case of cryptocurrency, if it’s used to pay for goods or services or there’s a currency conversion – such as switching Bitcoin to Ethereum – then there may be a taxable gain.
How can you reduce a CGT bill?
While there is now less scope for tax planning for CGT, there are still a few opportunities to help reduce your taxable gains, which include the following options:
- Making use of the £3,000 exempt amount every year (because it can’t be carried forward)
- Making personal pension contributions in the same year to reduce the rate from 24% to 18%
- Crystalising assets that stand at a loss (reducing gains without wasting the exempt amount)
Additionally, spouses and civil partners should continue to plan for CGT as a couple, as they can utilise two exempt amounts and the basic rate if only one of them is a basic rate taxpayer.
More information on the rules, allowances, and rates can be found in HMRC’s online CGT guide.
Another option is to seek professional tax advice from a financial consultant. Here at gbac, we have a team of accountants in Barnsley who can help you optimise disposals to reduce CGT.
To find out more, call us on 01226 298 298 or send an email to info@gbac.co.uk today.
With the annualised rate for daily penalties increasing by 250% alongside the late payment interest rate rising, it’s more expensive than ever to be late when paying VAT.
If you have missed the deadline for filing your VAT return and paying your tax bill, the last thing you should do is bury your head in the sand and ignore your VAT liability.
Here’s an explanation of how HMRC applies penalties and interest to late VAT payments, and what you can do to prevent your VAT debt from snowballing.
VAT late payment penalties
HMRC considers the payment and penalty for each VAT return separately, but the penalty can be avoided by making a payment within 15 days of the original due date.
If the late payment is made after this point, HMRC will charge an initial penalty of 3% (up from 2%).
However, if payment is made more than 30 days late, an additional 3% will be charged – totalling 6%.
Additionally, HMRC will immediately implement a daily penalty after this 30-day period. The annualised rate of the daily penalty has increased to 10% from the previous 4%.
VAT late payment interest
HMRC also charges interest from the day after the due date until the outstanding VAT is fully paid.
This means that even if payment is made in full within 15 days and there is no penalty, interest will still be charged for each day that the VAT bill was overdue.
The interest rate is calculated by adding 2.5% to the Bank of England base rate, but as of 6th April 2025, HMRC has introduced an additional 1.5% surcharge.
Currently, the Bank of England base rate is 4.5%, so the late payment interest rate is now 8.5%.
Late VAT repayment plans
The 8.5% late payment interest rate and 10% daily penalty rate are quite harsh, so it’s best to make a payment on account with whatever funds are available by the due date.
This will help you to avoid interest and reduce penalties on the outstanding amount.
If you can’t make a payment on time, you can ask HMRC to set up a ‘Time to Pay’ arrangement. This will allow you to pay in instalments and avoid further penalties.
However, this won’t remove any penalties you have already received, and you will still be charged interest. This type of VAT repayment plan is also unavailable for anyone using a cash accounting scheme or an annual accounting scheme.
Get help with VAT management
Of course, the best way to avoid penalties and interest charges is to make sure you file your tax return and pay the VAT due before the deadline for the relevant tax year.
To do this, you must keep accurate records and submit declarations on time – which may require help from professional tax consultants like our accountants in Barnsley.
Here at gbac, we offer a variety of bookkeeping and tax management services, so why not call us on 01226 298 298 to find out how we can help you manage VAT payments?
Alternatively, you can email your information to info@gbac.co.uk and we’ll be in touch.
Employed taxpayers who are liable for the High Income Child Benefit Charge (HICBC) will no longer need to submit a self-assessment tax return from summer 2025 onwards.
HMRC is introducing a new online service for employed taxpayers to report the charge instead.
Here’s what parents claiming Child Benefit need to know about paying the HICBC this year.
When is the HICBC payable?
For the 2025–2026 tax year, Child Benefit will be paid every 4 weeks at a rate of £26.05 a week for the first child and £17.25 a week for each additional child.
The High Income Child Benefit Charge will only apply if an individual receiving the benefit – or their partner – earns an annual income of more than £60,000.
For every £200 earned above this threshold, 1% of the benefit is removed. This means that when annual income reaches £80,000, the charge is 100%, reducing the benefit to zero.
This charge can lead to a high effective marginal tax rate for taxpayers with multiple children.
What is the HICBC online service?
If you’re an employed taxpayer, you’ll be able to use the new digital service from HMRC to report the amount of Child Benefit you’ve received. You’ll then have the choice to pay through PAYE.
There will be no need for you to submit a tax return unless you have other chargeable gains.
However, taxpayers who must file returns for other reasons will still be required to report the HICBC on their returns, and if you’ve submitted a return before, then HMRC will continue to send notices.
In this case, taxpayers need to be careful, because ignoring a tax notice could incur a penalty.
Paying the HICBC in 2025
Whether HMRC’s online service will reduce the issues associated with the HICBC remains to be seen. One of the main problems has always been lack of awareness, and with the new service, most employed taxpayers won’t be used to dealing with HMRC directly.
Guidance on the Child Benefit Tax Charge is available on the government website, but if you would rather seek out personal tax advice, you can contact our accountants in Barnsley.
If you don’t want to opt out of receiving Child Benefit, the team here at gbac could help you with adjusting investments and optimising allowances to stay below the HICBC threshold.
Just call us on 01226 298 298 or send an email to info@gbac.co.uk to set up a consultation.