Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.

While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.

 

 

Business and Agricultural Reliefs

Business Relief

In the context of companies, the main categories of property which are eligible for business relief comprise:

(i) unquoted securities which, either by themselves or in conjunction with other holdings owned by the transferor, give control of the company immediately before the transfer. Thus, unless the securities carry votes (which would be unusual), they will not be eligible for relief, even if they happen to be owned by the person who de facto controls the company.

(ii) unquoted shares; and

(iii) land, buildings, machinery and plant owned by the transferor which, immediately before the transfer, were used wholly or mainly for the purposes of a business carried on by a company controlled by the transferor.

The rate of business relief is 100% for properties in categories (i) and (ii), but only 50% for assets falling into category (iii).

Unquoted means that they are not listed on any recognised stock exchange (in the UK or elsewhere). Shares traded on AIM have always been treated as ‘unquoted’ for all tax purposes.

Securities mean fixed interest investments like debentures or loan stock.

With unquoted shares, any type of share is permissible (including nonvoting ordinary and preference shares). Relief is available for both active and passive shareholders. It is not a precondition that the shareholder has to be a director or employee of the company.

In relation to transfers of sole businesses and partnership interests, the main categories are:

(i) Transfers of sole businesses and partnership interests attract 100% relief. The interest of a member of an LLP falls into this category. An unincorporated business is valued on a net assets basis, but only liabilities incurred for the purposes of the business can be taken into account.

(ii) Land, buildings, machinery and plant owned by the transferor which, immediately before the transfer, were used wholly or mainly for the purposes of a business carried on by a partnership of which he was then a partner, attract a 50% relief. There is no necessity for control to be established.

Agricultural relief

The main categories are:

(i) agricultural property where the landowner has vacant possession (or virtually so); and

(ii) land which is subject to a farm business tenancy granted on or after 1 September 1995.

(iii) Shares in a farming company if the transferor had voting control of the company immediately before the transfer.

Relief is only given on the agricultural value of the farmland and buildings, so excluding any development value.

Any other agricultural property will normally qualify for 50% relief.

Farm equipment and machinery, derelict buildings, harvested crops, and livestock do not qualify for relief.

The Changes

For transfers taking place on or after 6 April 2026, 100% relief for qualifying business and agricultural assets will continue for the first £1,000,000 of combined business and agricultural property, but the value deduction will be 50% thereafter.

The new allowance of £1000,000  will be split proportionately across the various qualifying assets.

Assets currently enjoying a 50% relief will not exhaust any part of the post-5 April 2026 £1,000,000 allowance.

The allowance is not going to be transferable between spouses and civil partners.

It will, however, refresh every seven years on a rolling basis, like the nil rate band and chargeable transfers.

IHT liabilities relating to business and agricultural assets can be paid by equal annual instalments over a 10-year period. No interest is payable unless an instalment is late.

 

 

More on MTD

Threshold Test:

Income is the gross income before deducting expenses for every trading or property business carried on by the individual in a tax year.

So, this includes:

• Turnover from all trading activities, and
• Gross rents and other income received from property (including an overseas property business)

It does not include any income from a partnership.

The turnover test is based on the amounts shown on the self-assessment return. So, some income is excluded, such as:

• Small trading income where the £1000 trading allowance applies, and so no income is declared on the return. Where the income from that source exceeds the limit, the full amount is used.
• Where the taxpayer benefits from the rent room relief, so that no income is shown from this source on the tax return.
• Foster carers who have another business or rental income will not include their income from foster caring in their income calculation.

For the 2026 commencement, the 2024/25 return figures should be used to check thresholds, and for 2027, the 2025/26 return figures.

Where a taxpayer acquires a source of either self-employed income or property income, that source will not be mandated into MTD until a tax return has been filed showing that source, so the year following commencement.

Strictly, where a property is jointly let, each joint owner should record their share of each transaction as it arises and include these in their quarterly updates. However, there is an easement for jointly let property. If a taxpayer wishes, they may record and report on the quarterly submissions, their share of the gross rents for the properties, and annually (at the end of the year), their share of the expenses relating to the let property.

You should combine the information and make a single submission for all UK property income, and a separate submission for overseas property income.

Quarterly submissions

Where there is more than one obligation per quarter, these must be submitted separately. It is acceptable to use different digital record-keeping methods for each separate obligation. So if a client has two trades, these will be two separate submissions and where they have a trade and property income, this will also be two submissions.

It is possible to submit quarterly updates early, up to 10 days before the end of the quarter. It will require you to declare that there will be no further transactions in that quarter.

Penalty points will only accrue as a single point per quarter, so where you have both a trade and property income and are late with both submissions in a quarter, it will only attract a single penalty point.

 

 

AI and Tax Returns

In a recent survey three three-quarters of taxpayers surveyed said they would use an AI tool of some kind, with most citing ChatGPT, then  Microsoft Co-Pilot, with Gemini a long way behind.

Most respondents said that AI eases the stress and anxiety that they typically feel approaching the tax return season. 66% of people said they would benefit from more personalised AI tax information, potentially leaving the door open for professional help.  81% of people said that they wanted access to qualified professionals, such as accountants, when required.

This over-reliance on AI has been flagged in a number of recent tax tribunal cases.  Recently, a taxpayer was reprimanded by a tribunal judge after being caught using an AI chatbot to justify his argument against HMRC. It turned out the chatbot had simply made up fictitious cases, which the appellant then gave as supporting arguments to the court.

Research also found that people are relying on social media for assistance.

67% of those aged 55-64 said that HMRC is an important source of information.

The survey also found that men are more likely to use and trust AI when completing their tax returns than women.

 

 

Company Directors’ Tax Return Complexity

New requirements for 2025-26 onwards will require more comprehensive reporting, particularly for business owners and directors of UK resident companies.

Directors of close companies will need to include the following information for 2025-26 and future years in respect of each relevant close company:

• The name and registered number of the close company.
• The value of dividends received from the closed company for the year (reporting those dividends separately from other UK dividends received).
• Their percentage shareholding in the company during the year (based on the highest percentage shareholding at any point in the year if a holding changes during the year).

Broadly, a close company is a UK resident company which is under the control of five or fewer individuals. Most small and family businesses operated through limited companies in the UK are close companies.

It will also be mandatory to include a start and/or end date where a business operated by the taxpayer commences and/or ceases during a tax year.

A new penalty is required because these disclosures fall outside of the existing penalty framework. The penalty is £60 for each failure to correctly supply the additional information requested.

 

 

Deadline to Register for Self-Assessment

The deadline is/was Sunday 5 October and affects self-employed workers, landlords, gig workers and people with side hustles, among others, who earned untaxed income during the 2024-25 tax year, ending 5 April 2025. They must register for self-assessment by the deadline if they need to complete a tax return for the first time.

This is essential to ensure newbies to self-assessment are issued with a Unique Taxpayer Reference (UTR), which is needed to complete their tax return. Many more people are likely to be impacted this year, especially with high interest rates meaning that people could fall foul of the tax on savings above various thresholds, the popularity of side hustles, crypto investors, and the ever-growing number of users of online platforms to sell anything and everything.

If the deadline of 5 October is missed, this is ‘the deadline to notify chargeability’, but it is possible to sign up for self-assessment at any time. However, there are penalties for late notification.

Online self-assessment taxpayers have until 31 January 2026 to complete their tax return and pay any tax owed for the 2024-25 tax year.

Anyone who no longer needs to file a self-assessment tax return should let HMRC know as soon as possible. People will also need to tell HMRC if they have stopped being self-employed.

It is mandatory for anyone self-employed as a sole trader who earned more than £1,000 before taking off anything liable for claim tax relief, to submit a self-assessment tax return.

Those who are self-employed and earn below £1,000 and want to pay Class 2 National Insurance contributions (NICs) voluntarily to protect their entitlement to state pension and certain benefits also need to sign up for self-assessment.

Watch out for the high-income child benefit charge (HICBC) too, as if anyone claims child benefit and they or their partner had an income above £60,000, this kicks in. It is possible to opt out of the course.

Other reasons to have to do self-assessment are for claiming tax relief for an individual’s job expenses if this amounts to more than £2,500, capital gains tax (CGT) liabilities and declarations of foreign, offshore income.

 

 

Coming Soon! MTD for Income Tax

The income tax reporting system is changing radically in the next few years, with the first tranche of sole traders and landlords with a qualifying income over £50,000 required to use Making Tax Digital (MTD) for Income Tax from 6 April 2026.

This change will affect around 900,000 taxpayers.

HMRC expects MTD to reduce errors in tax calculations and improve record-keeping, thereby raising more income tax from this cohort.

Now there is an urgent call for taxpayers to sign up to trial MTD before it is introduced next year by registering for HMRC’s testing programme.

So far, only 9,000 taxpayers and accountancy firms are signed up to the trial, so HMRC is ‘urging eligible customers to sign up to a testing programme on gov.uk to familiarise themselves with the new service and start preparing now’.

 

 

Questions?

If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at alan.long@thelongpartnership.co.uk.