Author: Glenn

The tax legislation requires the deduction of tax from yearly interest that arises in the UK. This typically refers to interest that is subject to Income Tax or Corporation Tax.

The legislation requires the deduction of tax from yearly interest, if:

• paid by a company, a local authority, a firm in which a company is a partner, or
• paid by any person to another person whose usual ‘place of abode’ is outside the UK.

The tax must be deducted by the person or entity making the payment at the savings rate in force for the tax year in which the payment is made. In practice, the main circumstances where tax is deducted are where a company makes a payment of interest to an individual or other non-corporate person, or where interest is paid by a person (individual, trustee or corporate) to another person whose usual place of abode is outside the UK.

However, some exclusions apply. For example, interest paid by deposit takers, interest paid to a bank or building society, interest paid from UK public revenues or under the former Mortgage Interest Relief At Source (MIRAS) scheme. Companies, local authorities and ‘qualifying firms’ (a firm which includes a company or local authority as a partner) are also exempt from the requirement to deduct tax from interest paid to certain recipients.

It is important to note that statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998, is not classified as yearly interest and does not fall under these rules.

Exports from Great Britain or Northern Ireland can be zero-rated for VAT, provided businesses obtain valid export evidence within three months of sale and meet all HMRC documentation rules; accuracy and record-keeping are key to keeping the 0% rate.

Businesses are required to charge VAT on most goods that are sold within the UK. However, there are VAT exemptions in place on goods that you export outside of the UK.

Under the VAT rules, businesses can "zero rate" the sale of qualifying goods that are exported. Where this is the case this would mean that no VAT is charged on the goods.

This applies to:

• Goods exported from Great Britain to a destination outside the UK.
• Goods exported from Northern Ireland to a destination outside the UK and EU.

To qualify for VAT zero-rating, businesses must ensure they have sufficient evidence that the goods were exported. This evidence should be obtained within three months of the ‘time of sale’. A longer period may apply in cases where goods need to be processed before export or for thoroughbred racehorses.

The ‘time of sale’ for VAT purposes is the earlier of when the goods are dispatched to the customer or when full payment is received.

It is important to note that businesses cannot zero-rate sales if a customer requests delivery to a UK address. If a customer arranges for collection from the seller (an indirect export), VAT zero rating may still be possible if certain conditions are met.

Maintaining accurate records and ensuring compliance with export requirements is essential to benefit from the VAT zero-rate provisions. Businesses must ensure that they hold proper export documentation and follow the guidelines carefully to avoid penalties and ensure the correct VAT rate is charged.

Business Asset Disposal Relief (BADR) offers a significant tax benefit by reducing the rate of Capital Gains Tax (CGT) on the sale of a business, shares in a trading company or an individual’s interest in a trading partnership.

On 6 April 2025, the BADR CGT rate increased from 10% to 14% for disposals made in the 2025–26 tax year. However, the rate is set to rise again from 6 April 2026, to 18%. This means that qualifying disposals made after April 2026 will be subject to a higher CGT rate once again.

The lifetime limit for claiming BADR remains at £1 million, allowing individuals to claim the relief multiple times as long as the total gains from all qualifying disposals do not exceed this threshold.

In addition to changes to BADR, there were also changes to Investors’ Relief. Since 30 October 2024, the lifetime limit for Investors' Relief has been reduced from £10 million to £1 million. The CGT rates for Investors' Relief also align with those for BADR, currently set at 14% and also rising to 18% from April 2026.

These increases in CGT rates are significant and will impact tax planning strategies for business owners and investors. It is also important to note that further changes may be announced in the forthcoming Budget that could further chip away to the benefits of this relief.

The remittance basis of taxation for non-UK domiciled individuals (non-doms) was replaced with the new Foreign Income and Gains (FIG) regime from April 2025. This new regime is based on tax residence rather than domicile. Under the new rules, nearly all UK-resident individuals must report their foreign income and gains to HMRC, regardless of whether they had previously claimed remittance basis or are claiming relief under the FIG regime.

Former remittance basis users not eligible for the new FIG relief are now taxed on newly arising foreign income and gains in the same way as other UK residents. However, they will still be taxed on any pre-6 April 2025 FIG that is remitted to the UK.

A key feature of the new regime is the 4-year FIG relief. This is available to new UK residents who have not been UK tax resident in any of the 10 preceding tax years. These individuals can opt in to receive full tax relief on their FIG for up to four years. Claims must be made via a self-assessment return, with deadlines falling on 31 January in the second tax year after the relevant claim year. The FUG relief lasts for a maximum of 4 consecutive years starting from when a person first became a UK tax resident. Claims can be made selectively in any of the four years, but any unused years cannot be rolled over.

The types of foreign income which are eligible for relief includes:

• profits of a trade carried on wholly outside the UK
• profits of an overseas property business
• dividends from non-UK resident companies
• interest, such as interest paid on a foreign bank account

An individual’s ability to qualify for the 4-year FIG regime will be determined by whether they are UK resident under the Statutory Residence Test (SRT).

In today’s competitive market, many businesses feel pressured to extend generous payment terms to win new contracts. However, offering long or risky credit arrangements can strain cash flow and expose you to unnecessary financial risk. The good news is that there are other, more sustainable ways to attract and retain valuable clients.

One effective strategy is to focus on value rather than price. You should emphasise the quality, reliability and consistency of your service. Clients are often willing to pay on standard terms if they see that your business delivers dependable results and reduces their own risks. Highlight testimonials, case studies, and evidence of past performance to reinforce this message.

Second, improve transparency in your proposals. Set out clear timelines, deliverables and support arrangements. Buyers are more likely to accept normal payment terms when they feel confident about what they are getting and when they will get it.

Third, consider flexible but controlled options such as staged payments or deposits. These can balance client confidence with your need for steady cash flow. For example, 30% on order, 40% on delivery, and 30% on completion is often easier for clients to manage than a lump sum.

Finally, build strong relationships. Personal trust remains one of the most powerful negotiating tools. When clients view you as a partner rather than just a supplier, they are less likely to demand extended credit. The aim is not to win contracts at any cost, but to win them on fair, sustainable terms that support both sides.