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.
7.2m Paid Higher Rate Tax
The number of higher rate taxpayers is on track to hit 7.70m in the current tax year according to the latest HMRC figures, up from 7.29m in 2025-26, and a huge two million increase in just three years.
Meantime, top rate taxpayer numbers are up to 893,000, with this figure set to soar to 1.29m by March 2027, up 44% from just three years ago.
Frozen tax thresholds have played a significant role by steadily pulling more workers into higher tax bands. Higher rate taxpayers are no longer a small group of top earners..’
The UK paid £93bn in income tax in 1999-20. The figure is set to hit £347bn in 2026-27 based on usually very accurate HMRC predictions.
Freezing tax thresholds has been an effective way of driving tax revenues in years where earnings inflation has been significantly higher than it was before the pandemic. But it has also meant the average tax rate paid by the workforce on their income has gone up significantly, as more of their income is taxed and more of it is taxed at higher rates.
The total number of taxpayers in the UK shot up by 2.2 million to 36.7m in 2023-24, from just 34.5m one year earlier as the government’s policy of maintaining frozen tax thresholds is now baked until until April 2031.
HMRC said the hike in the number was driven by the frozen personal allowance and income growth that leads to an increase in individuals liable for income tax.
The overall number of taxpayers is set to rise to 40.8m in the current tax year, based on HMRC projections for 2026-27, up more than 10% in just two years.
Company Share Buybacks
The consultation explores several potential reforms to the tax rules on distributions from companies, with a particular focus on shareholders within the charge to income tax.
A recent HMRC consultation document includes changes to the existing treatment of reductions of share capital, demergers and the company Purchase of Own Shares (POS) rules.
The changes being considered in the POS rules are likely to particularly affect owner managed businesses, especially those with succession plans to pass over control of the business in the future.
The POS rules apply where an unquoted trading company, or an unquoted holding company of a trading group, purchases the shares of a shareholder in one of two scenarios.
They are particularly useful in the case of a family company, where there may be a desire to keep the ownership within the family but none of the shareholders are in a financial position to buy out the departing shareholder personally.
They can also help avoid the need for an external investor, who may have different strategic goals or priorities to the remaining existing shareholders.
To qualify for capital gains tax (CGT) treatment under the rules, the purchase must either be for the benefit of a trade of the company (or a 75% subsidiary) or to discharge an inheritance tax (IHT) liability within two years after death.
The seller must also be UK resident at the time of the sale, and the shares need to have been held for at least five years (reduced to three years if acquired on a death) before the company purchases them. There must also be a substantial reduction of the shareholder’s interest in the company and the seller must not be ‘connected’ , as defined in the tax legislation, with the company after the sale.
In the consultation, HMRC proposes new conditions that a departing shareholder must meet to qualify for capital treatment including holding a minimum of 5% of the company’s equity for at least the two years prior to departure, and removing the ability to retain any shareholding or directorship in the company after the sale.
In addition, many buy backs are completed in stages over a number of years, but, under the proposals, the shareholder would need to complete their exit within two years to qualify for capital treatment.
HMRC also proposes tightening the requirement to work for the company throughout the five-year minimum ownership period.
The proposed changes could mean that only the more straightforward shareholder exits qualify for capital treatment in future.
The inability to qualify for capital treatment may be less important than in the past, given that gains covered by Business Asset Disposal Relief (BADR) are now subject to Capital Gains Tax at 18%, and taxpayers may also have used their £1m lifetime limit in previous disposals, in which case the rate of tax would be 24% in the case of higher and additional rate taxpayers.
Right to Join a Tade Union
Major changes to employee rights to access trade union representation at work are due to come into force from October 2026, affecting all companies.
The expansion of trade union rights is part of the Employment Rights Act 2025, which introduces significant reforms regarding trade unions, including a new duty on employers to inform employees about their right to join a trade union and granting trade unions enhanced access to workplaces.
The government’s aim is to bolster trade union presence within workplaces and support collective worker representation.
From October 2026, employers will be required to provide all new employees with a statement informing them of their right to join a trade union.
This statement must be issued alongside the written statement of particulars of employment, which employers are already obligated to provide.
This provision underscores the government’s commitment to increasing awareness of trade union rights among workers and ensuring employers comply with their obligations.
In addition to the duty to inform workers, the Employment Rights Act 2025 introduces a statutory framework to allow trade unions to access workplaces. The purpose of this access is to enable unions to meet, support, represent, recruit, or organise workers and to facilitate collective bargaining. This does not, it has been expressly stated, include the organisation of industrial action.
Equalising Capital Gains With Income Tax
Incoming prime minister Andy Burnham is reportedly considering bringing capital gains tax (CGT) into line with income tax – taking the rate from 24% to as much as 45%.
Assets are not income. Income arrives whether you like it or not; a gain only exists if you choose to sell.
Therefore, why sell if the tax on the gain on the asset is going to be taxed so high.
People would borrow against the asset, rent it out, pass it on, so the Exchequer collects nothing at all.
HMRC’s own modelling suggests a further 10-point rise in the top rate would reduce receipts by £3.6bn.
The UK abolished indexation years ago, so a 45% UK rate would tax paper gains that are partly just inflation.
Also, many entrepreneurs do not take their gains and run but reinvest. The founder who sells a business typically starts another, backs three more, and creates the jobs that pay the income tax and national insurance.
It has been said that if Mr Burnham wants more revenue from capital, the answer is the opposite of what he is considering. Cut the rate and people transact.
Personal Allowances – The 60% + Rateband
The phase down of the personal allowance was introduced by Alistair Darling in his final Budget. It reduced the personal allowance by one pound for every two pounds of adjusted net income above £100,000. For a 40% taxpayer, this effectively added an extra 20% to the marginal tax rate, creating a 60% marginal rate. In Scotland it is even higher.
When introduced, £100,000 was a substantial income and the measure affected only a small proportion of taxpayers. Over the 16 years since, inflation has pushed many more people into this band, and other policy changes have increased its impact. When you add 2% employee National Insurance and a 9% student loan repayment rate, the marginal rate for many individuals now reaches 71% or more.
Increasing numbers of people are refusing promotions or even reducing their hours to avoid falling into the 60% plus marginal rate trap.
The childcare cliff edge makes the problem worse. The support, £2,000 per child rising to £4,000 for a child with a disability, has a hard cut off at £100,000 of income. Unlike the personal allowance, this is not tapered. It is a cliff edge. A family with three children loses £6,000 of support if either parent earns even one pound above £100,000.
The result is that someone offered a promotion could be better off earning £99,999 than earning more than £120,000. This “doom loop” is now seriously distorting behaviour at the upper skilled end of the UK labour market, reducing the available pool of the workforce at an age when they are skilled, experienced and productive.
For owner managers, controlling salary and dividend flows provides flexibility. For employees and employers, options include:
- Increasing pension contributions to reduce adjusted net income
- Making charitable contributions, which can reduce adjusted net income even after the tax year.
- Negotiating a different compensation package, including benefits that are lightly taxed or untaxed, such as electric vehicles or additional training.
- Deferring income, although advisers must be cautious because earmarked funds can create tax complications.
- Using tax advantaged share schemes, which can reduce current tax liabilities while providing long term incentives.
- Employers offering access to independent financial advice to help employees navigate these complexities.
Tax Rates for Savings
Finance Act 2026 increases the savings rates of income tax on interest for 2027/28. The relevant rates are as follows:
Basic rate 22%
Higher rate 42%
Additional rate 47%
This represents an uplift of 2% across the board, although interest received on assets held within an ISA will remain entirely tax free.
Where an employee or the recipient of a private pension has tax to pay on savings income, that liability will normally be collected via an adjustment to their PAYE code.
Increasing the rates of tax on interest and other forms of savings income with effect from 6 April 2027 will bring about a mismatch between those rates and the tax rates which apply to employment and pension income.
For most taxpayers, this will lead to confusion and additional contact with HMRC, adding pressure to their customer support channels which already attract criticism for poor service.
The number of individuals with taxable savings income has increased significantly in recent years as interest rates have risen. Many more people now receive interest in amounts which are greater than the personal savings allowance. Remember that this allowance has not changed since its introduction 10 years ago in FA 2016. The extended freeze on the basic rate limit and the personal allowance until April 2031 will also bring more people within the charge to tax, some of whom will have interest income on which tax is payable.
Suspected £153m TikTok Tax Scam
HMRC issued a Press Release on 4 June 2026. Two people have been arrested for a suspected £153 million TikTok tax scam that involves two Romanian men who are suspected of using TikTok to persuade UK taxpayers to hand over personal tax details to be able to make fraudulent claims.
HMRC has warned the public to be ‘wary of social media posts promising financial rewards in exchange for personal tax details’.
Cybercrime investigators arrested the pair in east London after blocking £153 million of suspected fraudulent claims that are thought to have used personal tax details from TikTok users. The men, who are in their twenties and from Romania, are accused of using the social media platform to persuade taxpayers to hand over tax account details with the promise of financial rewards.
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.
