From 1 January 2027, the qualifying period for protection against unfair dismissal will be cut from two years to six months. At the same time, the cap on compensatory awards for unfair dismissal will be removed.
Currently, the dismissal of an employee might be considered unfair if the employee has been employed for at least two years and there is no fair reason for the dismissal, or the reason is not sufficient to justify dismissing the employee.
A fair reason for dismissal includes:
Gross misconduct: For example, if an employee has defrauded the business, physically assaulted another employee, or refused to accept reasonable orders from a supervisor.
Capability: When the employee is unable to do the work that they were employed for, or they do not have the right qualifications. Capability also covers long-term illness, but employers need to be very careful here, with dismissal only as a last resort.
A legal reason: For example, a lorry driver who has been banned from driving.
The changes
From 1 January 2027, employers will only be protected from claims for unfair dismissal for the first six months of employment. However, as is currently the case, employees will still have day-one protection against automatically unfair dismissal (for example, dismissal for making a flexible working request or being pregnant) and wrongful dismissal (for example, the employer does not give the correct notice period).
The changes will apply across England, Scotland and Wales, but not Northern Ireland where unfair dismissal legislation is devolved.
Compensatory awards
Unfair dismissal compensation is made up of two parts:
- The basic award is not going to change; this is based on an employee’s age, length of service and weekly pay.
- A compensatory award which reflects the employee’s actual financial loss. This is currently capped at the lower of 52 weeks’ gross pay or £123,543. Although the majority of awards are not affected by these limits, the ceiling will be removed from 1 January 2027.
In future, employers will need to be particularly careful if dismissing a highly paid employee.
Acas guidance on dismissals can be found here.
The population of directors and employees utilizing company vehicles decreased by 240,000 during the 2015/16 to 2020/21 period; however, this trend has reversed annually since then, primarily attributable to the favourable tax incentives associated with electric and hybrid vehicles.
According to HMRC’s most recent data for the 2024/25 tax year, the current figure stands at 920,000 directors and employees with company vehicles.
Lower Emission Vehicles
The most significant transformation concerns fully electric company vehicles. Prior to 2020/21, such vehicles represented a niche offering, yet adoption has accelerated substantially, now representing marginally over half of all company vehicles by 2024/25. When combined with low emission hybrid options (CO2 emissions ranging from 1 to 50 grams per kilometre), these vehicles comprise approximately three-quarters of the total. Specifically:
A low emission company vehicle carries substantially reduced tax implications relative to conventional petrol or diesel alternatives. In the current tax year, a fully electric company vehicle qualifies for a 4% benefit-in-kind rate.
This translates to an approximate annual tax liability of £990 for a higher rate taxpaying director operating a company-supplied Tesla Y Performance Auto—a vehicle with a market value exceeding £60,000.
Employers providing charging infrastructure for directors and employees to charge electric company vehicles at workplace or residential locations incur no taxable benefit, further enhancing the tax advantages.
The tax framework proves less favorable for low emission hybrids, with benefit-in-kind rates typically ranging between 10% and 16%. For a Toyota Prius plug-in hybrid priced around £38,000, a higher rate taxpaying employee faces an approximate annual tax obligation of just over £1,500; a comparatively modest amount.
Future changes
By 2029/30, the current benefit-in-kind rate of 4% will increase to a much less favourable 9%, putting up the annual tax cost of the Tesla to just over £3,300. Future increases will push up the tax cost of the Toyota Prius hybrid to around £2,870.
The tax cost of having a company car can be calculated using HMRC’s company car and car fuel benefit calculator.
The HMRC will commence the enrolment process for sole traders and landlords who were required to register for Making Tax Digital (MTD) in April 2026 but have not yet completed registration. In preparation for this, HMRC has made available an MTD exemption window for eligible taxpayers who would otherwise be mandated to join beginning next April.
Except for those who qualify for an MTD exemption, sole traders and landlords earning qualifying income exceeding £50,000 should have already filed their initial quarterly return for the 2026/27 tax year. Nevertheless, of the 864,000 taxpayers obligated to register for MTD, only 570,000 have completed registration, and merely 436,000 have successfully submitted their filings to date:
- HMRC has decided to start signing up the remaining taxpayers it believes are within the scope of MTD for 2026/27, rather than wait for those taxpayers to sign up themselves.
- Although no penalty points will be charged for late quarterly updates in 2026/27, HMRC is obviously keen for taxpayers to be aware that MTD is not optional.
Taxpayers signed into MTD by HMRC will receive a letter or digital message depending on contact preferences. They will be advised about the next steps, such as obtaining and using MTD-compatible software.
Exemption window
Self-employed individuals and property owners earning between £30,000 and £50,000 in the 2025/26 tax year will be required to participate in Making Tax Digital beginning 6 April 2027, provided they do not meet the criteria for digital exclusion. HMRC has recently made exemption applications available to eligible taxpayers. Qualification for an exemption may be granted if any of the following circumstances apply:
- Internet access: This means no internet access at home or business because of the location, and where access is not available at a suitable alternative location.
- Age, health or disability: Taxpayers will need to show that their age, health condition or disability stops them from using a computer, tablet or smartphone to keep digital records or submit them to HMRC.
- Religious reasons: This will apply to practising members of a religious society or order whose beliefs mean they do not use a computer, tablet or smartphone for business or personal use.
The fact that additional costs will be incurred, or that extra time will be required for MTD, is not a valid reason for HMRC to grant an MTD exemption.
HMRC guidance on applying for an exemption from MTD can be found here.
This July’s tax revenue increased by 17% compared to two years prior. The outlook is expected to deteriorate, with approximately 1.7 million additional savers now projected to incur tax on their savings during the current year, exceeding initial estimates.
Recent administrations have sought to circumvent public opposition to higher tax rates by employing a more subtle strategy: maintaining allowances and thresholds at their current levels.
This form of fiscal drag has progressively moved more taxpayers into elevated tax brackets, while simultaneously bringing previously untaxed individuals into the taxation system. Regarding capital gains tax (CGT), the government has taken more aggressive action, raising tax rates and substantially reducing the tax-free allowance. Consequently, CGT revenues have experienced considerable growth over the preceding twelve months.
Strategic CGT planning has become increasingly critical, and – where feasible – it may be prudent to consider retaining assets in anticipation that future government policy on investment taxation may become more favorable.
More savers forecast to pay tax
HMRC’s initial projection anticipated that 2.7 million savers would incur tax obligations on their savings income during 2026/27; however, current estimates indicate this figure has risen to approximately 4.5 million individuals facing tax liability:
- Beyond the effects of fiscal drag, savings rates have remained elevated. As of August 2026, NS&I continues to offer 4.82% on its one-year bonds, with marginally superior rates obtainable through alternative providers.
- The consequences of fiscal drag prove particularly severe for savings income. Wage growth and increased self-employed income will result in numerous savers transitioning from basic rate to higher rate taxation. Furthermore, their personal savings allowance has been diminished from £1,000 to £500.
Along with the 45% tax rate, anyone pushed into additional rate tax will have lost any entitlement to the savings allowance.
With rates of tax on savings income to increase by two percentage points across the board from 6 April 2027, the outlook for savers is somewhat bleak. Details of income tax rates and personal allowances for the current tax year can be found here.
The Autumn Budget date has now been set for 28 October, with the new Chancellor facing some familiar challenges.
Following a two-week period marked by numerous announcements from Prime Minister Andy Burnham and his restructured cabinet, a potentially pivotal statement emerged late Friday afternoon: the announcement of the Autumn Budget date. Chancellor John Healey released a video message disclosing that the Budget would take place on Wednesday, 28 October. This represents approximately four weeks earlier than the 2025 Budget timeline, yet provides sufficient opportunity for public discourse and analysis to develop.
So, what can we expect in late October from the second former defence minister named Healey to occupy 11 Downing Street? Among a long list to watch for are:
- Income tax: At the end of his first week, Burnham told The Times that the “frustration about the personal allowance” he experienced during his Makerfield by-election campaign had “lodged in my mind”. Shortly afterwards, he was more cautious: “There is no commitment at this point to change, but we will look at that at the Budget”. Any move away from the freeze that lasts until April 2031 would be costly.
- The VAT cut to electricity bills: This was Burnham’s first “breathing space” announcement, which the government said was “expected to take around £45 off the yearly Ofgem price cap in October”.However, it subsequently emerged the cut is only for six months, so it will be interesting to see whether Mr Healey makes any mention of its extension beyond March 2027.
- State pensions and tax: In her last Budget, Rachel Reeves said that “we are ensuring that people only in receipt of the basic or new State Pension do not have to pay small amounts of tax through Simple Assessment from April 2027”.No more detail has emerged since; in the meantime, many tax experts have highlighted a variety of complex issues raised by the seemingly simple goal.
- The fiscal rules: When announcing the date of his Budget, John Healey was careful to say that “It will meet our fiscal rules’’. At present, this could mean tax rises as the latest estimates suggest more than half of the all-important fiscal headroom has disappeared since March, due to the fallout from the Iran war.
As ever, if you wish to undertake any pre-Budget planning, do not delay.
The full Budget announcement can be found here. For any further information contact GBAC.
Currently, stablecoins are taxed in the same manner as other cryptoassets. However, this is anticipated to change in April 2027, when eligible stablecoins will likely be classified similarly to money for tax purposes.
Why choose stablecoins?
Stablecoins are predominantly US dollar-based, with over $300 billion in circulation. They offer significant convenience for investors looking to hold their funds while trading more volatile cryptoassets.
Stablecoins provide an efficient means of payment for goods and services, minimizing the costs typically associated with traditional payment methods like credit cards, particularly in cross-border transactions. Approximately 1.2 million individuals participate in stablecoin transactions, and the upcoming changes will simplify the tax framework.
Defining eligible stablecoins
An eligible stablecoin will be generally defined as a cryptoasset that maintains a stable value relative to a fiat currency. To support this stable value, fiat currency or other assets must be held.
Disposal of cryptoassets
Most disposals of cryptoassets incur capital gains tax (CGT). A disposal occurs when an individual:
– Sells a cryptoasset;
– Exchanges one type of cryptoasset for another;
– Uses cryptoassets to purchase goods or services; or
– Gifts cryptoassets to another person (except to a spouse or registered civil partner).
However, no disposal occurs if an individual merely transfers cryptoassets between different wallets.
Changes in tax status
Starting from 6 April 2027, the disposal of eligible stablecoins by individuals will be exempt from CGT. While most stablecoins do not accrue interest, any interest-like returns from holding eligible stablecoins will be classified as savings income and subject to income tax. The personal savings allowance of £1,000 or £500 may be applicable. The government’s policy paper on the taxation of stablecoins can be found here.
The legal framework in England and Wales is progressing towards equal treatment of married and unmarried couples.
“More than 3.5 million couples cohabit without marriage or civil partnership, a figure that has more than doubled in the last thirty years. Nevertheless, cohabiting couples and their children face significant financial vulnerabilities if their relationship dissolves.”
This statement is from the foreword of A Fairer End to Relationships, a comprehensive 100-page document from the Ministry of Justice that outlines recommendations regarding divorce for married individuals and civil partners, as well as separation and intestacy for those who are unmarried in England and Wales. The most notable recommendations pertain to unmarried couples, who currently enjoy far less legal protection compared to their married counterparts. For instance, while intestacy laws prioritize the surviving spouse as the primary beneficiary, the surviving partner in an unmarried couple is overlooked.
The proposed changes for unmarried couples would automatically apply to adults in “long-term, committed, and interdependent relationships” who have cohabited for a minimum of three years or who live together and share a child. However, there would be an option for both parties to opt out, provided they mutually agree and adhere to specific safeguards.
According to the suggested framework, the default position would be that each individual retains ownership of their legal assets. The court would then assess the needs of both parties, aiming to meet these needs in a manner that allows both individuals to “transition to independence… as far as resources permit.” This narrow interpretation of needs would ensure that cohabitants cannot achieve a more advantageous outcome than spouses in similar situations. The welfare of children would be the court’s foremost concern, ensuring their protection when resources are constrained.
While the settlement mechanisms would be similar to those currently applying on divorce, the goal would be to achieve a clean break wherever possible, with maintenance limited to exceptional circumstances, such as long-term ill health.
On intestacy, the proposal is that rights of inheritance should be extended to ‘qualifying cohabitants’. The minimum duration for qualification would not necessarily be the same as applied on separation and might be longer.
If you are in an unmarried relationship, do not wait for the law to change, which could take years – if it happens at all. Make sure your legal and financial planning works within the existing legal framework, which does not recognise common-law marriage.
The government’s proposal on reforms for unmarried couples can be read here.
Although no date for its introduction has yet been announced, the government has recently provided some details for the new first time buyer individual savings account (FTB ISA), which is set to replace the lifetime ISA (LISA).
Essential differences
The LISA never garnered a large take-up, so its replacement has some fundamental changes:
- Target: The FTB ISA is for first-time property purchasers only, whereas the LISA can also be used to save money for retirement.
- Age limit: To open a LISA, a saver must be 18 to 40, with no subscriptions allowed over age 50. With the FTB ISA, the only requirement is that a saver be 18 or over; there is no upper age limit.
- Bonus: With the LISA, the government bonus is paid monthly, so the saver benefits from interest or investment growth on bonus payments. However, with the FTB ISA, the bonus will only be paid when a property is purchased.
- Withdrawal penalty: The LISA comes with a withdrawal penalty of 25%, meaning a saver will end up with less than they paid in. There will be no penalty for withdrawing funds from the FTB ISA.
The government has said that any change to the property price cap of £450,000 will apply to both products.
Interaction
A saver who already has a LISA, or opens one before the FTB ISA is introduced, will be able to continue to contribute to it indefinitely. Although it will not be possible to transfer a LISA into the FTB ISA, a saver will have the choice each tax year whether to save into a LISA or FTB ISA. It will then be possible to combine the funds held in both accounts when making a property purchase.
Although there is no withdrawal penalty for the FTB ISA, the timing of the government bonus would seem to give the LISA a distinct advantage, although full details of the new product have yet to be announced. The government’s guide to lifetime ISAs can be found here.
The tax gap for the fiscal year 2024/25 has reached a new high of £59.2 billion, with small businesses responsible for approximately 62% of the uncollected taxes.
The tax gap refers to the disparity between the tax that should theoretically be paid to HMRC and the actual amount paid.
Upward trend
The tax gap for 2024/25 constitutes about 6.4% of the total tax owed. While the tax gap has historically been higher, it has generally shown an upward trend in recent years; for instance, it was recorded at 5.7% for 2021/22.
HMRC has, as is customary, updated figures for prior years. When the figures for 2023/24 were published, they indicated a general decline in the tax gap. However, the most recent data reveals that the tax gap for 2023/24 is now at 6.0%, an increase from the previously reported 5.3%, amounting to an additional £6 billion.
Small businesses under scrutiny
In 2024/25, small businesses represented 62% of the tax gap, marking a four percentage point rise since 2020/21. These businesses are primarily responsible, with HMRC estimating that around 45% of the corporation tax owed remains uncollected. It is therefore not surprising that identity verification measures have recently been implemented for company directors and individuals with significant control.
Behaviour
The largest share of the tax gap arises from a failure to exercise reasonable care, currently accounting for 35%—nearly £21 billion—up from 30% in 2020/21.
HMRC attributes this failure to a taxpayer’s carelessness, negligence, or inadequate record-keeping, but the growing complexity of the tax system and a decline in HMRC’s customer service also contribute to the issue.
When taxpayer errors are included, more than half of the tax gap is attributed to taxpayers who likely consider themselves compliant with tax regulations.
Actual tax evasion constitutes only 12% of the tax gap, while tax avoidance represents a mere 1% of the total. HMRC’s summary details of the latest tax gap figures can be found here.