Author: Glenn

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.

The High Court recently ruled on the interpretation and enforceability of “discretionary” bonus provisions in employment contracts. Mr. Gagliardi brought a breach of employment contract claim against a former hedge fund which had contracted him as a senior portfolio manager. The contract in question included a salary, a sign-on payment, a new-issue bonus, and a discretionary bonus based on profitable revenues. Mr. Gagliardi was specifically recruited by the CEO to expand into the US market owing to his expertise in block trading and his valuable relationships with major US banks. The hedge fund’s primary goal was to secure the benefit of these relationships and scale its business quickly, with the CEO tacitly acknowledging that they were essentially “buying his relationships,” hiring Mr. Gagliardi on a “trade and get paid” basis.

Upon joining, Mr. Gagliardi immediately began actively trading in the A1 share class without completing his onboarding process or receiving formal risk limits, leading to conflict with the CIO and risk manager. However, the CEO consistently prioritised Mr. Gagliardi’s trading activity over internal procedure, despite him often exceeding specified trading limits, frequently granting retrospective approval. Mr. Gagliardi’s lack of attention to compliance was also overlooked, as the CEO continued to prioritise profitability. However, a market-wide regulatory inquiry into block trading led to subpoenas to the claimant and the hedge fund by early 2022, prompting the fund to withhold payment of his discretionary bonus. This led the claimant to sue the hedge fund for breach of contract.

The High Court ruled in favour of Mr. Gagliardi, awarding him $5.385m in damages (plus interest), determining that his former hedge fund had indeed breached its contractual obligations in failing to award him any discretionary bonus for his trading activities in 2021. The Judge ruled that the hedge fund’s contractual discretion (governed by Delaware law) was neither broad nor unfettered and, as such, was subject to prescribed contractual criteria.

Despite the use of the term “discretionary,” the High Court has affirmed the principle that an employer’s discretion is not absolute where a bonus is tied to measurable performance criteria such as revenue contributions and profits. This ruling emphasises that, where an employee delivers exceptional financial performance, an employer cannot arbitrarily or irrationally refuse to pay a bonus, as this would constitute a breach of contract, irrespective of any allegations of minor breaches, misconduct or poor attitude that did not reach the threshold for disciplinary action or termination over the period in question. Employers should thus take care over phraseology when structuring discretionary bonuses into contracts.

If your company profits sit between £50,000 and £250,000, marginal relief can soften the jump from 19% to 25% Corporation Tax.

The Corporation Tax main rate applies to companies with taxable profits above £250,000 and is currently set at 25%. Companies with profits of up to £50,000 are subject to the Small Profits Rate, which remains at 19%.

For companies with profits falling between £50,000 and £250,000, marginal relief applies. This creates a gradual increase in the effective rate of Corporation Tax between the small profits and main rates, rather than a sudden jump. The lower and upper profit limits are proportionately reduced where an accounting period is shorter than 12 months or where a company has associated companies.

The effect of marginal relief is that the effective Corporation Tax rate increases steadily from 19% once profits exceed £50,000, reaching the full 25% rate when profits exceed £250,000.

In practice, Corporation Tax is calculated by applying the main rate of 25% to total taxable profits and then deducting the marginal relief due. The marginal relief standard fraction is 3/200. HMRC provides an online marginal relief calculator to help companies determine the correct amount of Corporation Tax payable based on their profit level and circumstances.

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.

The Chancellor, Rachel Reeves has confirmed that she will deliver the Spring Statement to the House of Commons on Tuesday, 3 March 2026.

The Spring Statement is used to give an update on the state of the economy and will respond to the economic and fiscal forecast published by the Office for Budget Responsibility (OBR). The Spring Statement also presents an opportunity for the government to publish consultations, including initiating early-stage calls for evidence and consultations on long-term tax policy issues.

The OBR has executive responsibility for producing the official UK economic and fiscal forecasts, evaluating the government’s performance against its fiscal targets, assessing the sustainability of and risks to the public finances and scrutinising government tax and welfare spending.

Usually, major policy and tax changes are announced at the Budget, and it remains to be seen whether there will be any significant announcements in the upcoming Spring Statement. The next Budget is expected to take place later this year in the Autumn.