Author: Glenn

If your business has transitional profits from basis period reform, spreading over five years may reduce the cash flow impact, but it is important to understand the deadlines.

The self-employed basis period reform has changed the way trading income is allocated to tax years. Under these reforms, the basis of assessment moved from a current year basis to a tax year basis.

As a result, all sole traders and partnership businesses are now required to report their profits on a tax year basis. This change fully came into effect from the self-assessment return due by 31 January 2025, covering the 2023–24 tax year.

Under the old rules, businesses could have overlapping basis periods. This sometimes resulted in profits being taxed twice, with corresponding overlap relief usually given when the business ceased. The move to a tax year basis removed the basis period rules and prevented the creation of any new overlap relief.

The spreading rules for the payment of transitional profits are still available. By default, transition profits are spread evenly over five tax years, from 2023–24 to 2027–28, helping to ease cash-flow pressures. Taxpayers can also elect to accelerate the taxation of transition profits if they wish, but spreading continues to apply automatically unless an election is made.

If your business ceases on or before 5 April 2027, any transition profit remaining after overlap relief that has not yet been taxed must be brought into charge in the final year of trading.

With the balancing payment and first payment on account both due on 31 January 2026, it is worth checking your options early if funds are tight.

The final balancing payment for the 2024–25 tax year is due by 31 January 2026, which is also the deadline for filing your self-assessment tax return. This payment will settle any remaining tax owed for the year after taking account of payments on account already made.

In addition to the balancing payment, many self-assessment taxpayers will also have a first payment on account for the 2025–26 tax year due on the same date, which can make January a particularly challenging month for cash flow.

If you are struggling to meet the tax payments due by 31 January 2026 deadline, it is important to take action early, as there are options available to help manage the payment.

Taxpayers with self-assessment liabilities of up to £30,000 can use HMRC’s online Time to Pay (TTP) service to set up instalment payments. This can be done without speaking directly to an HMRC adviser and is available up to 60 days after the payment deadline.

To use the online Time to Pay service, you must:

• Have no outstanding tax returns
• Have no other unpaid tax debts
• Have no existing HMRC payment plans

If you do not meet these criteria, it may still be possible to agree a bespoke Time to Pay arrangement by contacting HMRC directly. These arrangements are assessed on a case-by-case basis and are usually based on your personal or business financial position.

HMRC will generally agree to extended payment terms where they believe the tax can be paid in full over time. However, if HMRC considers that delaying payment will not resolve the issue, they may seek immediate payment and can take enforcement action if the debt remains unpaid.

If you anticipate difficulty in paying your January 2026 tax bill, please do not ignore the problem. Please let us know and we can help you understand what options are available to you.

There are a number of annual payroll reporting issues that employers are required to complete. With the tax year ending on 5 April 2026, this means there are several key payroll reporting chores that will need to be considered over the coming months.

One of the main requirements is submitting a final PAYE return for the tax year. The final Full Payment Submission (FPS) must be sent to HMRC on or before employees’ final payday in the 2025–26 tax year to ensure payroll records are correctly closed for the year.

Employers must also remember to provide employees with a P60 by 31 May 2026. A P60 must be issued to all employees who are on the payroll on the final day of the tax year, 5 April 2026. The P60 summarises an employee’s total pay and the tax deducted during the year and can be provided either in paper form or electronically.

Employees should be advised to keep their P60s safe, as they are an important record of tax paid and may be needed to reclaim overpaid tax, apply for tax credits, or provide evidence of income when applying for a loan or mortgage. Employees who leave during the tax year will not receive a P60, as the relevant information will already have been provided on their P45.

In addition, employers must report any Class 1A National Insurance contributions and submit P11D and P11D(b) forms to HMRC for the tax year ending 5 April 2026. The deadline for these submissions is 6 July 2026.

CGT on certain UK residential property sales often has a strict 60-day reporting and payment deadline, so early planning can avoid penalties.

If you are selling a second property, such as a buy-to-let or a former home that is no longer your main residence, CGT will usually apply. This is different from selling your main home, which is often covered by Principal Private Residence (PPR) relief and therefore exempt from CGT.

The annual exempt amount applicable to Capital Gains Tax (CGT) is currently £3,000. CGT is normally charged at a simple flat rate of 24% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 18%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 24% CGT. 

Most homeowners do not pay CGT when selling their main family home, as PPR relief usually applies. However, CGT is commonly payable on gains from:

• Buy-to-let properties
• Second homes or holiday homes
• Business premises
• Land
• Inherited property (based on the increase in value since inheritance, not since original purchase)

Any CGT due on the sale of UK residential property must usually be reported and paid within 60 days of completion. This requires submitting a UK Property CGT return and making a payment on account within that timeframe.

Failing to meet the 60-day deadline can result in penalties and interest, so it is important to plan ahead and obtain advice as early as possible when selling a property that is not fully exempt.

If one partner earns under £12,570, you could transfer part of their unused personal allowance and cut your tax bill by up to £252 a year.

The Marriage Allowance applies to married couples and civil partners where one partner does not pay Income Tax, usually because their income is below the personal allowance. For the 2025–26 tax year, this means the lower-earning partner must earn less than £12,570.

The allowance means the lower-earning partner can transfer up to £1,260 of their unused personal allowance to their spouse or civil partner. This transfer is only permitted if the recipient is taxed at no more than the basic rate of Income Tax. This means the higher-earning partner must usually have an income between £12,571 and £50,270. For those living in Scotland, this generally applies where income does not exceed £43,662, which is the point at which the Scottish higher rate begins.

By using the allowance, up to £1,260 of unused personal allowance can be transferred, resulting in a tax saving of up to £252 per year for the higher-earning partner, calculated at 20% of the amount transferred.

If you meet the eligibility criteria and have not yet claimed the Marriage Allowance, you can backdate your claim for up to four previous tax years. At present, claims can be backdated to the 2021–22 tax year, meaning you may be able to claim for 2021–22, 2022–23, 2023–24, 2024–25 and the current 2025–26 tax year. This could result in a total tax saving of up to £1,260 across those years. Claims, including backdated claims and applications for the current year, can be made online via GOV.UK.