With Inheritance Tax (IHT) nil rate bands unchanged for 16 years and currently frozen until 2030, more people are making lifetime gifts to reduce their estate’s IHT bill when they die.
However, anyone making lifetime gifts should be aware of the available IHT exemptions.
Regardless of size, gifts are exempt from IHT if the donor lives for another 7 years. The gift only becomes liable for IHT if the donor dies within 7 years of giving it away.
That said, it’s always prudent to make use of exemptions, especially for older donors.
The most useful ones are the annual exemption, gifts to spouses or civil partners, and gifts from income. Here’s what you should know to help you make the most of your IHT exemptions.
Gifts to a spouse or civil partner
Any gifts given to a spouse or civil partner will be exempt from IHT, as long as they live in the UK.
However, while married couples or those in a civil partnership can exchange as many gifts as they like during their lifetime, this won’t reduce their combined estate value.
If one partner is younger than the other or in better health, it would make sense for them to make family gifts, as they will be IHT-free if the donor survives for 7 years.
Annual exemption for gifts
Each tax year, an individual can give away £3,000 worth of gifts that will be exempt from IHT and won’t be added to their estate value. This can all be gifted to one person, or split between several people.
Any unused annual exemption allowance can be carried over for one tax year – so, if you didn’t use any this year, you could gift up to £6,000 the following tax year.
For example, a couple could use this annual IHT exemption to invest £6,000 a year in a Junior Individual Savings Account (JISA) for a child or grandchild.
Gifts from your income
Given that, in theory, the exemption for gifts from income is unlimited, this is probably the most useful one. However, it’s also the most complicated exemption.
Certain conditions must be met, as exempt gifts must be:
- Made out of income and not capital (income after tax, which becomes capital after 2 years, according to HMRC)
- Part of the donor’s regular expenditure (habitual spending from sufficient income)
- From qualifying surplus income (leaving enough for the donor to maintain their normal standard of living)
For example, a grandparent could use this exemption to pay for a grandchild’s school fees as a gift. However, they couldn’t use it to help with a house deposit, as this gift would be irregular.
Get advice on managing IHT
If you’re thinking about making lifetime gifts to reduce IHT, you should make sure you know the rules, as missteps could cost your estate. A basic guide to how IHT works is available on the government website, which includes details of the different exemptions.
From tax planning and managing IHT liabilities during your lifetime to creating a well-written will for optimised estate management after you pass away, we can help you here at gbac.
Our experienced accountants in Barnsley can assist with lifetime gift accounting, asset appraisals, tax reliefs, and more. Give us a call on 01226 298 298 to speak to our team.
Alternatively, you can email us at info@gbac.co.uk and we’ll be in touch to arrange a consultation.
From April 2026, it will become mandatory for sole traders and landlords to file tax returns through Making Tax Digital (MTD) if they earn more than £50,000 a year.
The annual income threshold for moving to MTD will then drop to £30,000 in April 2027 and £20,000 in April 2028, by which time most sole traders must use suitable MTD software.
Despite the introduction of quarterly filing with MTD being less than a year away for those over the £50,000 income threshold, a recent survey of sole traders (excluding landlords) revealed that nearly a third were still unaware of the requirements to join the digital tax platform.
Even amongst the sole traders who did know about the upcoming changes, many of them were yet to make any preparations. Considering there are an estimated 3 million sole traders in the UK, this means a worrying number of self-employed people aren’t ready for MTD.
Sole trader attitudes to Making Tax Digital
In recent years, the number of self-employed people in the UK fell considerably, but it’s now rising again. This is mostly due to people continuing to work beyond retirement age, as nearly a quarter of self-employed traders are 60 years old or above.
It’s these older sole traders who may struggle with the new digital system the most, as the aforementioned survey found that 25–34 year olds were more likely to be prepared for MTD. In fact, a majority of this age group believed MTD will positively impact their tax filing approach.
Meanwhile, some sole traders have deliberately been keeping their income below the £90,000 threshold for VAT registration – but anyone who does this is unlikely to welcome the additional administrative requirements of the three-line account approach.
Are you prepared for MTD as a sole trader?
The impact of being unprepared for MTD can’t be overstated, as the deadlines for quarterly submissions are tighter than the 10-month deadline for self-assessment tax returns.
This leaves just over a month to file each quarterly submission, but if you fail to meet the new deadlines, late submissions and late payments will lead to penalties and interest charges.
To avoid being caught out, sole traders of all ages and income levels should read HMRC’s online guidance to learn if and when they’ll be required to register for and use MTD for Income Tax.
It’s better to get to grips with MTDbefore it becomes mandatory – so if you need help setting up MTD for your small business, why not speak to our accountants in Barnsley?
Here at gbac, we can provide a range of tailored financial services to ensure your tax accounts are always up to date and compliant with the latest regulations and systems.
Simply call us on 01226 298 298 or send an email to info@gbac.co.uk to discuss our services.
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.