The tax code is fundamental to the operation of PAYE. It is made up of letters and numbers which take account of the allowances that you receive and also any deductions from those allowances, for example, to collect underpaid tax. If you have received a tax code for the 2026/27 tax year, it is important that you understand what it means and check that it is correct. The number in the tax code tells the employer or pension provider how much tax-free pay you are entitled to for

Where an employee is provided with a company van that is available for private use, a tax charge may arise under the benefit in kind legislation. However, this will not always be the case. Unlike company cars, where a van benefit charge does arise, it does not depend on CO2 emissions. Instead, it is a set amount. If fuel is provided for private use in the van, a fuel benefit charge may also arise. Electric vans The van benefit for a zero-emission van is nil, regardless of the

Where first year allowances, such as the Annual Investment Allowance or full expensing, are not claimed in respect of capital expenditure on plant and machinery, or not claimed in full, relief is instead given by way of writing down allowances (WDAs). The rate at which the allowance is given depends on whether the expenditure is main rate expenditure of special rate expenditure. Special rate pool Expenditure is allocated to the special rate pool where it relates to integral f

When an employee works from home, they may incur additional costs as a result, such as higher gas and electricity bills. The tax system offers some help where the employer meets some or all of these additional costs. However, the relief that was previously available where employees met these costs themselves is withdrawn from 6 April 2026. Expenses reimbursed by the employer No tax liability arises where an employer makes a payment to an employee in respect of reasonable hous

As announced at the time of the 2025 Autumn Budget, the ordinary and upper dividend tax rates are increased by two percentage points from 6 April 2026. The additional dividend rate remains unchanged. The increase will affect those with investments in shares who receive dividend income and also shareholders in personal and family companies who extract profits by way of dividends. All taxpayers, regardless of the rate at which they pay tax, receive a dividend allowance. This is

The non-resident landlords scheme (NRLS) is a tax deduction scheme for taxing UK rental income of non-resident landlords. Where the let is managed by a letting agent, the letting agent must deduct tax from the landlord’s UK rental income and pay it over to HMRC. Where there is no letting agent, the obligation to deduct tax and pay it over to HMRC falls on the tenant if the tenant pays rent of more than £100 per week to a non-resident landlord. In certain circumstances, the no

The Annual Tax on Enveloped Dwellings (ATED) is a tax on residential property owned by a non-natural person, such as a company, which is valued at £500,000 or more, unless an exemption applies. Where a property is within the charge to the ATED, the amount payable depends on the value of the property. Properties are revalued every five years for the purpose of the charge. The 2026/27 charge is based on the value of the property on 1 April 2022 or, where the property was acquir

Where a landlord lets a residential property (including from 6 April 2025 onwards, a furnished holiday let), they are not entitled to tax relief when they purchase domestic items, such as furniture, furnishings, household appliances, and kitchenware. Instead, relief is given for the cost of replacing the item. For the relief to be available, four conditions must be met. Condition A is that the individual or company seeking to claim the relief is carrying on a property busines

Starting in self-employment can feel daunting. There may be a website to create, a business bank account to open, pricing to set and possibly premises to secure. In the midst of these priorities, many new sole traders overlook a key requirement – registering with HMRC. Failing to register on time can lead to penalties, including possible backdated obligations. Is registration mandatory? Registration becomes mandatory when gross income exceeds £1,000 in a tax year. Termed the

Most businesses expand via recommendation; however, there may come a time when a more effective method of expansion is needed such as acquiring another business. When one company buys another, the arrangement is usually structured either via a share purchase or an asset purchase. Each method has its advantages and each method its own specific tax issues. Share purchase In a share purchase, the buyer acquires the shares of the target company and takes ownership of the entire b

There are many reasons why shareholder-directors of private family companies may decide to split a single business into two or more separate entities. Often, these companies have grown to a point where different members are responsible for distinct divisions or activities and, as the business expands, individuals may wish to take control of their own area independently. Disagreements about strategy or management can also lead to separation, each shareholder director taking ov

A supplement applies on top of the residential stamp duty rates where a person has two or more residential properties. The supplement is set at 5% and applies where the consideration for the second or subsequent property is £40,000 or more. However, special rules apply where a person replaces their main residence and the SDLT supplement is not payable where both of the following conditions are met: · the new property replaces the main residence; and · the former main residenc

Where a property business is operated through a company, the profits need to be extracted if they are to be used personally. One of the ways of extracting profits in a tax-efficient manner is to pay dividends, particularly if the shareholder’s personal allowance has been used elsewhere. All taxpayers regardless of the level at which they pay tax are entitled to a dividend allowance. For 2025/26 this is set at £500 and will remain at this level for 2026/27. There is no persona

The abolition of the furnished holiday lettings regime abolished day counting for tax purposes from 6 April 2025 onwards. However, where a property is let as a holiday let, there is still a need to count the days on which the property is available for letting and actually let to check that the property is within business rates rather than council tax. As many holiday lets will be eligible for small business rate relief, this is a definite bonus, as there will be nothing to pa

A director’s loan account (DLA) is an accounting record that tracks funds owed by a company and its individual directors. Usually, a DLA will be in debit (i.e. the director has taken more money out of the company which has not been otherwise repaid in the form of salary, dividends or reimbursement of expenses). However, there may be occasions where the DLA is in credit (i.e. when the director has put more money into the company than they have taken out). This can arise throug

Directors of limited companies are generally not personally liable for unpaid corporation tax as limited liability usually protects them. A company is a separate legal entity and limited liability is one of its core features. However, in some circumstances, HMRC may pursue directors personally. The risk increases where non-payment of corporation tax is due to deliberate behaviour, negligence or fraud. If directors pay themselves rather than settling their company tax bills th

For owner-managed businesses, paying school or university fees through the company can appear attractive, especially if the company has surplus cash. However, tax consequences may arise for the individual. Should the company reimburse the individual, the amount counts as earnings subject to PAYE income tax as well as employee and employer Class 1 NIC. Therefore, reimbursement is generally the least efficient method of funding. Company’s tax position Where a company pays for a

In personal and family companies, director shareholders often borrow money from the company. Where a company is close, as most personal and family companies are, if a loan to a director or other participator remains outstanding on the corporation tax due date for the period in which the loan was taken out, the company must pay tax on the outstanding amount of the loan. Corporation tax is due nine months and one day from the end of the accounting period. The tax that is due on

From 6 April 2026, the 100% rate of agricultural property relief (APR) and business property relief (BPR) is only available on the first £2.5m of qualifying business and agricultural property. The allowance was increased to £2.5m from £1m following extensive lobbying by farmers. APR Agricultural property relief (APR) allowances a person to pass on agricultural property either free of inheritance tax or at a reduced rate either during their lifetime or on their death. Agricult

As the tax year draws to a close, directors of personal and family companies should consider whether it is worthwhile paying a dividend before 6 April 2026. However, it is only possible to pay a dividend where the company has sufficient retained profits from which to pay it. Also, where a class of share has more than one shareholder, dividends must be paid in proportion to shareholdings. Unused allowances Where a shareholder has not used their dividend allowance (set at £500