HMRC has delayed mandatory payrolling of benefits in kind by a year to April 2027, giving employers and software providers more time to prepare. Penalties will be eased in the first year.

The requirement to report Income Tax and Class 1A National Insurance Contributions for most BiKs and expenses through Real Time Information (RTI) will now begin from 6 April 2027, rather than 6 April 2026 as previously announced.

From April 2027, employers will report BiKs and expenses via the Full Payment Submission (FPS), aligning with the method currently used for reporting salaries. The number of RTI fields will be expanded to reflect the data currently captured through P11D and P11D(b) forms.

The deferral is intended to give payroll professionals, software providers, tax agents and others additional time to prepare for the transition. From April 2027, employers will also have the option to payroll employment-related loans and accommodation on a voluntary basis.

To support a smooth rollout, HMRC will waive penalties for inaccuracies related to mandatory payrolling for 2027–28, provided there is no evidence of deliberate non-compliance. However, existing late filing, late payment penalties, and interest will continue to apply.

HMRC has confirmed that its Basic PAYE Tools software will also be updated to support payrolling of benefits in kind from April 2027.

The £3,000 reporting threshold for trading, property, and other income will simplify tax returns—300,000 people could be freed from filing. A digital alternative is also coming.

As part of the Spring 2025 Tax Update: Simplification, Administration and Reform, the government confirmed changes to the Income Tax Self Assessment (ITSA) reporting thresholds for trading, property, and other taxable income. From a future date within this Parliament, these thresholds will all be aligned and increased to £3,000 (gross) each.

This reform is designed to streamline the tax system and reduce unnecessary reporting. As a result, up to 300,000 taxpayers will no longer be required to submit a self-assessment return if their taxable income falls below the new threshold. Of those affected, an estimated 90,000 individuals will have no tax to pay at all and will not need to report their trading income to HMRC in the future.

For those with income below the threshold who do have tax to pay, a new digital reporting service will be introduced, offering a simpler alternative to self-assessment Taxpayers will also retain the option to remain in self-assessment if they prefer.

The government has said that they will release further details in a transformation roadmap set to be published later this year.

Gross profit is one of the clearest indicators of how well your business is performing. It’s the money left after deducting the direct costs of producing goods or services from your turnover. If your gross profit margins are tight, your business will struggle to cover overheads, let alone make a net profit. So, here are a few practical tips to help boost your gross profit returns.

Review Your Pricing Strategy

One of the quickest ways to increase gross profit is to charge more. That sounds simple, but many small business owners hesitate to raise prices out of fear of losing customers. If you’ve not reviewed your prices in the last year, you’re probably overdue. Inflation, supplier costs and market demand all change – and your pricing should reflect that. Even a modest price increase can make a noticeable difference to your bottom line.

Cut Direct Costs Without Cutting Corners

Take a close look at your cost of sales. Can you negotiate better terms with suppliers? Are there alternative materials or services that are more cost-effective without affecting quality? Regularly benchmark your supplier costs and don’t be afraid to shop around. That said, cutting quality to save money usually backfires. The goal is value, not just cheapness.

Upsell and Cross-Sell

Increasing the average transaction value is a smart way to lift gross profit. Train your team (and yourself) to spot opportunities to upsell or cross-sell. For example, if you sell coffee, can you offer a pastry at a discounted rate? If you're in professional services, can you bundle related services together? It’s often easier to sell more to an existing customer than to find a new one.

Streamline Production or Service Delivery

Time is money, especially if you sell services. Look at how you or your team deliver work. Are there steps that can be automated or removed? Can you reduce waste, rework, or idle time? The more efficiently you operate, the more profit you keep.

Monitor Your Margins

Finally, don’t rely on gut feel – use your accounts. Regularly track your gross profit margin by product, service, or client type. This helps you spot what's making money and what's not. Focus your energy where the returns are highest.

For many small and medium-sized enterprises (SMEs), the core business keeps the lights on, but additional income streams can provide much-needed stability and growth. Whether you're a service provider, a retailer, or run a niche consultancy, diversifying your revenue can cushion seasonal dips, economic shocks, or customer churn. Here are some practical ways to bring in extra income without straying too far from your core business.

Offer Online Courses or Webinars

If you’ve got specialist knowledge, turn it into a digital product. Creating online courses or hosting webinars allows you to monetise what you already know. This works particularly well for consultants, tradespeople, or niche service providers. Platforms like Teachable or Thinkific make setup relatively easy.

Introduce Subscription Services

Subscription models work for more than just magazines. If you sell products, consider offering a monthly bundle or repeat-order service. If you’re in a service industry, a retainer model or premium membership can offer exclusive content, support, or discounts to subscribers.

Rent Out Equipment or Space

Do you have tools, machinery, or office space that sits idle some of the time? Renting these out, even on an occasional basis, can generate passive income. This is especially useful for creative or construction businesses that own specialist gear.

Sell Branded Merchandise

If you’ve built a recognisable brand, merchandise could be a low-effort income stream. Think branded mugs, notebooks, tote bags, or even digital downloads like planners or templates. Print-on-demand services mean you don’t need to hold stock.

Affiliate Marketing or Product Referrals

If you already have a mailing list or online presence, recommending relevant products or services could bring in commission. Just ensure the partnerships are relevant and credible to maintain trust with your audience.

Create a Paid Newsletter or Exclusive Content Channel

If your business produces insights or useful information, consider launching a paid newsletter or members-only blog. Tools like Substack or Patreon allow you to test this with minimal upfront cost.

Offer Freelance or Consulting Services

If your business has a quiet season, consider offering your skills on a freelance basis. This works well for design, IT, marketing, or finance professionals looking to supplement core revenue.

Need help tailoring any of these ideas for your business? Call now so we can discuss your options.

Not all state benefits are tax-free! Some, like the State Pension and Carer’s Allowance, are taxable, while others, like PIP and Universal Credit, are not. Knowing the difference can help you stay on top of your tax responsibilities and avoid surprises.

HMRC’s guidance outlines the following list of the most common state benefits on which Income Tax is payable, subject to the usual limits:

• Bereavement Allowance (previously Widow’s Pension)
• Carer’s Allowance or (in Scotland only) Carer Support Payment
• Contribution-Based Employment and Support Allowance (ESA)
• Incapacity Benefit (from the 29th week you receive it)
• Jobseeker’s Allowance (JSA)
• Pensions Paid by the Industrial Death Benefit Scheme
• The State Pension
• Widowed Parent’s Allowance

The most common state benefits that are not subject to Income Tax include:

• Attendance Allowance
• Bereavement Support Payment
• Child Benefit (income-based – use the Child Benefit tax calculator to see if you’ll have to pay tax)
• Disability Living Allowance (DLA)
• Free TV Licence for Over-75s
• Guardian’s Allowance
• Housing Benefit
• Income Support – though you may have to pay tax on Income Support if you’re involved in a strike
• Income-Related Employment and Support Allowance (ESA)
• Industrial Injuries Benefit
• Lump-Sum Bereavement Payments
• Maternity Allowance
• Pension Credit
• Personal Independence Payment (PIP)
• Severe Disablement Allowance
• Universal Credit
• War Widow’s Pension
• Winter Fuel Payments and Christmas Bonus

Understanding which state benefits are taxable and which are tax-free is important in order to understand the tax implications and ensure compliance with HMRC rules. If you are receiving any of the benefits listed and are unsure about your tax obligations, please do not hesitate to contact us.