Limited Company FAQs

Find quick answers to common questions about our contractor services, agency partnerships, and compliance support

No, you do not pay Capital Gains Tax when you make a gift to your husband, wife or civil partner – as long as you lived together  for at least part of the tax year in which you made the gift.

However, if your spouse later sells the asset, the recipient spouse or civil partner is treated as having owned the asset from the date the transferring spouse acquired it (or the 31st March 1982, if later).

If you gift an asset to someone, there is no physical receipt of cash but the asset still has an intrinsic value.

The rules depend partly on who you make the gift to and also includes if you sell something for less than its market value. There are reliefs available if you gift business assets though. 

You do not pay Capital Gains Tax when you inherit an asset, but you may have to pay Capital Gains Tax if you sell, give away or exchange an asset you inherited and it has increased in value since the date of death.

If the asset you inherited increases in value between the date of the deceased’s death and the date you dispose of it, the increase is a capital gain.

Yes – if you are UK resident you may be liable to Capital Gains Tax on disposals of assets located anywhere in the world, (not just in the UK).

Non residency:

If you are non-resident, you may also be liable to Capital Gains Tax on the disposal of UK land and property:

Disposals of other UK land and property from 6 April 2019

If you owned the non-residential land or property before 6 April 2019, then broadly you will only be liable to the part of the gain which has accrued from 6 April 2019.

If you purchased the property after 6 April 2019, then the whole gain will be chargeable.

You must report the disposal within 60 days of completion using HMRC’s Report and pay CGT on UK property service on GOV.UK. 

There are several other considerations to be mindful of when disposing of or looking to improve an asset.

In terms of proceeds, if you give away an asset HMRC will treat you as having sold it for what it is worth (that is, the market value), even though you have not received any proceeds.

If you are selling an asset you owned at 31 March 1982, you use the market value as it was on 31 March 1982 for the cost value.

When you improve or add to your asset, you can deduct this cost in the calculation (this will reduce the gain), but you can only include improvements, for example, an extension to a house, and not general repairs and maintenance.

Similarly, you can deduct the incidental costs of buying and selling in the calculation. Typical costs include legal expenses and estate agents’ fees for property, and broker’s commission on the purchase and sale of shares.

There are also more rules to consider if you sell part of a piece of land you own and if you sell blocks of shares in the same company acquired at different times. 

From 6th April 2025 onwards, Capital Gains Tax is charged at the rate of either 18% for basic rate taxpayers and 24% for higher rate taxpayers.

The rate of Capital Gains Tax you pay depends partly on what type of chargeable asset you have disposed of and partly on the tax band into which the gain falls when it is added to your taxable income.

Capital Gains Tax is a tax charged if you sell, give away, exchange or dispose of an asset and make a profit or ‘gain’.

Some gains though are free (or exempt) from Capital Gains Tax. For instance:

  • Private motor cars, including vintage cars
  • Gifts to UK registered charities
  • Some government securities
  • Personal belongings (or ‘chattels’) where the sale proceeds (or value when given away) are less than £6,000
  • Prizes and betting winnings
  • Cash
  • Assets held in ISAs
  • Foreign currency held for your own use

It is something that you own such as a house, shares in companies or other possessions.

Capital Gains Tax is a tax charged if you sell, give away, exchange or dispose of a capital asset and make a profit or ‘gain’.

The amount of tax you pay is based on the gain and not the amount you actually receive. To calculate the gain, it is the difference between the cost (or value of the asset) when acquired and the disposal proceeds (or value when disposed of).

Yes – you can stop the cessation process  if you change your mind – but if you have submitted your striking off form (DS01) to Companies House, then you have advised Companies House of your intention to dissolve your company.

If you change your mind at this point, then you have approximately two months to stop your company being dissolved if you still wish to retain it. 

In these circumstances, you can submit a DS02, withdrawal of a striking off application by the company. However, if you are approaching the two month period following the submission of your DS01 to Companies House, then the striking off process cannot be stopped (Companies House will generally advise you of this). If these circumstances apply to you, then you should contact Companies House to advise you wish to keep your company. 

From a practical point of view, if  you have changed your mind with regards closing your company, then you do have to return it to its former status – so any HMRC schemes such as PAYE and VAT will require setting up again to allow you to continue as before. 

This three month window is set by Companies House. Companies House states that a company cannot make an application for voluntary strike off unless all qualifying criteria have been met in the last three months.  

The criteria is that:  

  1. You haven’t traded or otherwise carried on business  
  2. You haven’t changed the name  
  3. You haven’t disposed of property or rights  

The three month delay window is to establish intention of cessation of trade. 

The cessation date is generally the date of the last invoice raised or expense incurred. Your company will continue to collect debts and pay creditors after it ceased to trade, but it shouldn’t raise sales invoices or incur expenses unless they relate to the period of cessation. These will be accrued in your cessation period as they relate to that period of trade. 

 

You may not have raised sales invoices recently, but if you have incurred company expenses then this is deemed carrying on in business, hence the requirement to cease incurring further costs in the three month window set by Companies House.

We need to be certain that your company has completely ceased trading. The company is permitted to make a deduction for accountancy cessation fees paid in the cessation accounts period. Companies House states that a company cannot make an application for voluntary strike off unless all qualifying criteria have been met in the last three months.

These criteria are:  

  1. You haven’t traded or otherwise carried on business  
  2. You haven’t changed the name  
  3. You haven’t disposed of property or rights  

  

Before cessation of a limited company can begin, there is a three-month window to establish cessation of trade, then it takes around three months to prepare cessation accounts. There may also be other activity that can take extra time to complete.   

After the initial three-month period has passed – to ensure that all financial and other activity has completely finished – the preparation of the cessation accounts can begin. This process usually takes another three months or so, however, there are many activities which could require further work in the limited company to finalise things, which will therefore extend the time to complete. This extra work can include waiting for HMRC to process refunds to the company for overpaid liabilities or reconciliations that require further work to confirm your financial statements are correctly stated. 

Cessation accounts are the final set of accounts your company will prepare and are in the same format as your annual financial statements. They cover all the activity from the date your company started trading – or when the last set of financial statements were prepared – up until your date of cessation.

As well as preparing accounts, formally closing a company involves deregistering HMRC schemes such as PAYE and VAT by advising them of cessation of trade. The work includes:  

  • Reviewing accounting records and preparing ongoing PAYE/VAT returns until the process is concluded. 
  • Preparing your cessation accounts. 
  • Completing your P45 and issuing any other payroll forms required. 
  • Applying to remove your company from the register at Companies House.

Yes – but this should be one of the last things you do as part of the cessation process.

You  should keep your company bank account open until you have completed and agreed your cessation accounts,  settled all your company liabilities and withdrawn any final amounts you are entitled to do so either as dividends or as a capital distribution based on your circumstances. Once this has been done, you can then close your company bank account.

Whilst undertaking the cessation process for your limited company, there are a number of processes which necessitate you having a functioning bank account. For instance, you may be waiting for a refund from HMRC. In these circumstances, we would not advise that you to close your company bank account until you receive all funds due to your company and completed all aspects of the cessation process.

All tax refunds are generally processed within the three-month timeframe allowed for cessation, after the initial three-month monitoring period has ended.

As part of the cessation process, we will calculate any final Corporation Tax payment and the final dividend and/or capital distribution you can take from the remaining funds.  

Once you have approved the cessation accounts, we will advise of you of your final Corporation Tax payment and – if applicable – any final dividend and /or capital distribution you may take from the company. You need to take this final dividend/distribution before the DS01 striking off form is submitted to Companies House. If you need additional tax advice on extracting larger sums of money out of your business bank account, taking advice from our tax specialists can help you save  money. 

Dormant companies mean different things to Companies House and HMRC. For Companies House, ‘Dormancy’ is the status of a Limited Company that has not had any significant accounting transactions during its financial year. For HMRC, a dormant company is one that is not active, not liable for Corporation Tax or not within the charge to Corporation Tax.

Companies House

For Companies House purposes ‘Dormancy’ is the status of a Limited Company that has not had any significant accounting transactions during its financial year.

Certain expenses are not considered significant. These significant transactions don’t include: 

  • filing fees paid to Companies House 
  • penalties for late filing of accounts 
  • money paid for shares when the company was incorporated. 

If a company has more expenses than these, then the company isn’t dormant and must prepare and submit financial statements and its confirmation statement as usual. 

HMRC

From a HMRC perspective, a dormant company is one that is not active, not liable for Corporation Tax or not within the charge to Corporation Tax. This means that you should have no taxable income at all – so if you have rental income, receive bank interest etc., in HMRC’s eyes you are receiving taxable income therefore you are not dormant. 

HMRC are unlikely to determine your company as dormant if they are waiting for a company tax return where you have trading activity included. Once this is submitted, and you are clear that in your new accounting period you will not have any taxable income going forward, you can advise HMRC of this.

From a Companies House perspective, if your company is truly dormant, then it only incurs Companies House fees annually. In these circumstances, then you can submit  dormant accounts which comprise a simpler Statement of Financial Position (formerly a Balance Sheet) and notes. 

However, one of the main benefits of being dormant from a HMRC perspective, is that you are no longer required to submit a company tax return if your current accounting period does not have any taxable income. You do have to advise HMRC of this -and if you return to trading after a period of time, it is your responsibility to notify HMRC. If you don’t, then there are penalties for failure to notify HMRC that your company is now liable for corporation tax.

The dormant status of your company is a matter of fact – in that, if your company is truly dormant, then it only incurs Companies House fees annually. In these circumstances, then you can submit dormant accounts which comprise a simpler Statement of Financial Position (formerly a Balance Sheet) and notes.

If you wish to retain your company, then you are obliged, as a minimum, to submit annual “simple” statutory accounts to Companies House (comprising a Statement of Financial Position (formerly a Balance Sheet) and notes. 

In addition, an annual confirmation statement is required to be submitted to Companies House. In most instances, though, a company is not really deemed dormant from a Companies House perspective. 

This is because as well as incurring the confirmation statement fee, it may pay accountancy fees to administer its company whilst in a non- trading state. In addition, the directors may make withdrawals or settle prior period liabilities. In this respect, the company is in a non- trading status. If you company is in a non- trading status, in most instances, you would continue to submit a corporation tax return to HMRC, to ensure all non- trading income such as bank interest received is included on the corporation tax return. 

No – Brookson offers a non-trade solution but not a dormancy service.

Brookson are able to offer assistance with every aspect of your company accounts, including cessation if you want to close your company down. However, if you are no longer trading but wish to retain your company, as a minimum, you are required to: 

  • Submit annual “simple” statutory accounts to Companies House (comprising a Statement of Financial Position (formerly a Balance Sheet) and notes. 
  • Annual confirmation statement to Companies House. 
  • Corporation tax return to HMRC. 
  • Vat/PAYE returns during your non- trading period (if required). 

If you are no longer trading but wish to retain your company, as a minimum, you are required to prepare a series of documents.

Documents Required

  • Submit annual “simple” statutory accounts to Companies House (comprising a Statement of Financial Position (formerly a Balance Sheet) and notes. 
  • Submit annual confirmation statement to Companies House. 
  • Submit annual corporation tax return to HMRC. 
  • Submit Vat/PAYE returns during your non- trading period (If you are still registered for VAT and in a PAYE scheme then these submissions are mandatory too). 

If you do not perform the above, then there is the risk that Companies House will dissolve your company and the Treasury will seize any assets it holds. Therefore, keeping on top your company requirements is essential- there are deadlines for submitting the above information to Companies House and HMRC and monitoring these deadlines is part of the non- trading service. 

An annual confirmation statement must also be prepared and submitted to Companies house annually. This is to provide an overview of relevant company details, such as name of the Director(s), registered office address, secretary details and details of any shareholders. 

It is important that any company changes are updated when they happen to ensure your company details are accurately presented on public record. You must tell the Companies House when there is: appointment of a director (AP01), change of director’s details (CH01) and termination of an appointment director (TM01).

You must update your register of any changes, such as change of personal details or nature of control-this must be done within 14 days of the change–these changes need to advised to Companies House too.

The PSC register records people’s details at Companies House who hold more than 25% of shares in the company, more than 25% of voting rights in the company or the right to appoint or remove the majority of the board of directors

The following details need confirming with each person of significant control, before they can be recorded in your register.

  • Name
  • Date of birth
  • Nationality and country of residence
  • Correspondence address – known as the ‘service address’
  • Home address (this must not be disclosed)
  • The date they became a PSC of the company
  • The date you entered them into your PSC register
  • All natures of control which apply

You must include the level of their shares and voting rights, within the following categories:

  • Over 25% up to (and including) 50%
  • More than 50% and less than 75%
  • 75% or more

A person with significant control is someone who owns or controls your company. They’re sometimes called ‘beneficial owners’.

You must identify your person with significant control and tell Companies House who they are. This might be you, or someone associated with your company. A company can have one or more of these people.

You must record your details on your company’s person with significant control register, and you’ll need to include this information when you incorporate your company.

A person of significant control are those who hold:

  • More than 25% of shares in the company
  • More than 25% of voting rights in the company
  • The right to appoint or remove the majority of the board of directors

Most limited companies are ‘limited by shares’. This means they’re owned by shareholders, who have certain rights. Most companies have ‘ordinary’ shares, but you can apply an alphabet share that will provide different rights to a share. An ordinary share means directors get one vote on company decisions per share and receive dividend payments.  A company limited by shares must have at least one shareholder, who can be a director. If you’re the only shareholder, you’ll own 100% of the company.

The price of an individual share can be any value. Shareholders will need to pay for their shares in full. In most instances, the share value is a small amount (for example, £1) to limit the shareholders’ liability to a reasonable amount.

What rights does a shareholder have?

Share rights are set out in the company’s constitution (articles of association) and usually entitle shareholders to:

  • Dividends.
  • Payment on the winding-up of the company.
  • Participation in meetings of the company (including voting rights).

There is no official definition as to what a personal service company is (PSC) – but it usually refers to a limited company which has been set up to provide the services of a single contractor, who is usually the sole shareholder and company director of the business.

The term ‘Personal Service Company’ also features heavily in the context of the government’s rules to determine employment status – also known as IR35.  These rules ensure workers are classified correctly as employed, or self-employed and pay the correct amount of employment tax.

A PSC, as a company limited shares, must meet Companies House requirements and the Companies Act 2006.

A Limited Company (ltd) is a company “limited by shares”

This means the company:

  • Is legally separate from the people who run it
  • Has separate finances from your personal ones
  • Has shares and shareholders
  • Can keep any profits it makes after paying tax

The company also has “limited liability” Once created, the company is a separate legal entity with finances that are separate from yours. This means that, in the event of liquidation or litigation, the most you can be liable for personally is the face value of your share in the business. Any further liability must be paid out of the company’s assets. Any private assets you have will (usually) be safe.

Not filing your confirmation statements, annual returns or accounts is a criminal offence – and directors could be personally fined in the criminal courts.

Failing to pay your late filing penalty can result in enforcement proceedings. Any criminal proceedings for not filing confirmation statements, annual returns or accounts is separate from (and in addition to) any late filing penalties issued by Companies House against the company.

There’s no penalty for filing your confirmation statements or annual returns late – but the registrar could take steps to strike off your company. If your company is struck off as a result of non-compliance then any assets are passed to the Crown and are legally known as “bona vacantia” (ownerless property).

Failure to deliver accounts on time is a criminal offence. In addition, the law imposes a civil penalty for late filing of accounts on the company. The amount of the penalty depends on how late the accounts arrive and whether the company is private or public at the date of the balance sheet.

Length of periodPrivate companyPublic company
Not more than 1 month£150£750
More than 1 month but not more than 3 months£375£1,500
More than 3 months but not more than 6 months£750£3,000
More than 6 months£1,500£7,500

The penalty will be doubled if accounts are filed late in 2 successive financial years.

Your accounting reference date (often abbreviated as ‘ARD’) is the final day of your company’s financial year – and the date that your annual accounts must be made up to. It is automatically set by Companies House as the anniversary of the last day of the month of company incorporation.

Unless you are filing your company’s first accounts, the time normally allowed for delivering accounts to Companies House is 9 months from the accounting reference date.

If you are filing your company’s first accounts and those accounts cover a period of more than 12 months, you must deliver them to Companies House:

  • Within 21 months of the date of incorporation for private companies.
  • If the first accounts cover a period of 12 months or less, the normal times allowed for delivering accounts apply.

As a director, you’re legally responsible for running the company and making sure information is sent to Companies House. You also have general duties you must adhere to in line with the Companies House 2006.

Director’s Responsibilities to Companies House:

This includes:

  • The confirmation statement
  • The annual accounts, even if they’re dormant
  • Any change of director or their personal details
  • A change to your company’s registered office
  • Allotment of shares
  • Registration of charges (mortgage)
  • Any change in your company’s people with significant control (PSC) details

You can hire other people to manage some of these things day-to-day (for example, an accountant) but you’re still legally responsible for your company’s records, accounts and performance.

You must file a confirmation statement at least once a year, this includes every company, even those that are dormant and non-trading. It confirms the information Companies House hold about your company is up to date. Before filing your confirmation statement, you should check your company details are correct and you must update your records if any information is incorrect or out of date.

Changes you must make before sending your confirmation statement

Before confirming your records are up to date, you must tell us about changes to your:

  • Directors and secretary
  • People with significant control (PSC)
  • Company’s registered office address

Changes you can make when you file your confirmation statement

The confirmation statement has an additional information section. You can complete this if there have been changes to your:

If nothing has changed

You must file a confirmation statement even if there have not been any changes to your company during the review period. This confirms that your records are up to date and the information we hold is correct.

When do I need to submit a confirmation statement?

You must file at least one confirmation statement every 12 months. Your 12 month review period starts on either:

  • The date your company incorporated
  • The date you filed your last confirmation statement

You must file your statement within 14 days of the end of your review period.

If you do not file your statement within 14 days of the end of your review period, your company and its officers may be prosecuted. Your company may also be struck off the register.

No, you do not need a company secretary for a private limited company. Some companies use them to take on some of the director’s responsibilities. Even if you have a company secretary, the directors are legally responsible for the company.

Yes, a director must be 16 or over and not previously been disqualified from being a director. Your company must always have at least one director. Directors are legally responsible for running the company and making sure company accounts and reports are properly prepared. All directors need to verify their identity before filing their company’s next confirmation statement, otherwise the filing will be rejected.

Other Considerations

Directors do not have to live in the UK but companies must have a UK registered office address.

Directors’ names and personal information are publicly available from Companies House.

A Director cannot be an ‘undischarged bankrupt’ – unless they have permission from the court. The restrictions placed on a person when they’re made bankrupt usually end when they’re free from their debts (known as ‘discharged’). You can check if someone has been discharged using the Insolvency Register.

Directors must provide a service address (or ‘correspondence’ address), which will also be publicly available. If you use their home address, they can ask Companies House to remove it from the register.

Companies House main responsibilities are to incorporate and dissolve limited companies, examine and store company information and make this information available to the public.

Company registrations for England and Wales are carried out in Cardiff.

The “Registrar of Companies” is an individual who is the Chief Executive of Companies House. There is a registrar for England and Wales, Scotland and Northern Ireland respectively.

You can claim costs such as providing equipment, services and supplies to an employee who works from home – this is on the basis that they are used only for business purposes and any private use is insignificant.

This includes laptops, tablets and computers. Also you should consider the following:

Personal mobile phone costs 
Ideally you should ensure your mobile phone contract is in your company name- this will enable you to benefit from tax relief on the total cost of your phone bill. However, your company can reimburse you for the itemised business calls you incur using your personal mobile phone.

Home phone
Similarly, your company can reimburse you for itemised business calls you incur using your personal home phone. If you have a dedicated business line separate to your own personal line then this is claimable in full.

Broadband
Additional household expenses may include your broadband charges in certain circumstances. If you begin to work from home under home-working arrangements and are already paying for a broadband internet connection at home, there is no additional expense to be claimed. However, if you require this to be installed, then this is an additional cost of working from home and therefore can be claimed. In this case, it must be principally for business use with insignificant private use.

You can also claim general running costs you can claim listed here

Yes, you can invite other guests, but here is the key: to be eligible to reclaim VAT and for corporation tax relief, the costs must solely be to entertain employees.

Former and previous employees don’t qualify, nor do subcontractors and nor do shareholders who don’t work in the business. An employee has to be someone who is on your business’s payroll and being paid a salary so this would also exclude clients or friends of employees. If you want to entertain a mix of employees and non-employees at the same event you can, however you will only be able to claim tax relief on the costs of the employees’ entertainment. 

If the cost per person exceeds £150, you need to be aware of the following tax impact-the company benefits from tax relief on the expenditure- but the full amount will be a taxable benefit on your staff.

Let us look at a real-life example:

Scenario:

You decide to take all your employees out for an annual summer party, the costs associated with this function are as follows:

  • £50 (including vat) for travel per person
  • £100 (including vat) for a ticket to the event

Overall cost is £150 (including vat) per person which is at the £150 per head limit per year-so the company benefits from tax relief in full and there are no personal tax implications on the employee.


Absolutely! A limited company can pay for an annual event, and there are no personal tax implications if the total does not exceed £150 per head and is open to all members of staff.

This doesn’t need to be one event either, just “annual”. So, you could have a Christmas Party and a Summer BBQ, and both would be allowable for Corporation Tax purposes provided the total of both doesn’t exceed the £150 per head limit (if it goes even £1 over then the whole amount, becomes a benefit in kind, so tread carefully).  The costs can include food, drink, tickets to events, accommodation and a taxi fare home.

 If you are VAT registered, under the standard rated scheme, then you can claim the VAT on staff entertaining (as long as VAT is charged on invoices presented) and the entertaining is solely for staff.

When entertaining employees, this might be allowable for tax relief, but it could also end up being considered a benefit that your employees will be required to pay some tax on.

Remember: There can be exceptions and more complex rules, so it is always a good idea to talk to your accountant here at Brookson to keep you on track.

For clients or suppliers, you may send cards, but any gifts should be also under the value of £50 and mainly sent for promotional reasons. This doesn’t include food, drink, cigarettes, or gifts vouchers though.

As a director of your limited company, you can get your company to cover some of the business-related entertaining expenses. Entertaining expenses cover things like treating clients or buying business-related gifts.

HMRC classes entertainment as “business entertainment” when it is provided free of charge to people who are not employees of your business. But as a general rule of thumb, business entertaining is not an allowable tax-deductible expense. This means that although the business can pay for it, it is not deducted from the company profit before corporation tax is calculated. Also, you cannot claim VAT on this expenditure.

Yes, if the sponsorship is considered capital expenditure e.g., buying  a racehorse or car) or if it falls under specific disallowed expenses like entertainment expenses.

Example: You purchase a racehorse as part of a sponsorship deal this expense would be classed as capital expenditure and not tax deductible.

Ideally, you should ensure that you have a written sponsorship agreement in place that details the sponsorship’s value, duration and expected return on investment.

The return on investment doesn’t necessarily have to be monetary. It can be about wider benefits, such as greater brand awareness or increased website traffic. We would advise to include a termination clause if you don’t see any returns and be sure to keep your paperwork up to date in case HMRC ask for proof.

Costs may be disallowed if you pay the sponsored party and there is no clear business benefit to the company.

You should not sponsor your personal hobby, as there would be a duality of purpose. Similarly, any payments to relatives under the guise of sponsorship could be deemed to be providing disguised earnings to them, therefore the related sponsorship costs would not benefit from a tax deduction.

Sponsoring an event unrelated to your customer base or business activities could also be a reason.

Failing to explore other sponsorship options or not reviewing the impact on your business trade might lead to disallowance.

Example: If you agree to pay any amount to a sponsored event request without discussing the value for your business, HMRC might disallow the expense.

HMRC considers the commercial benefit to your business, looking at factors like negotiation, location relevance, exploring alternatives, and the impact on your business trade. 

Example: If you sponsor a national conference in your industry, held in a city where many potential clients are based, HMRC would likely view this as a reasonable business expense.

Sponsoring a relative, close friend, or having a personal involvement in the sponsored activity could be seen as non-business purposes.

Example: Sponsoring your cousin’s art exhibition, even if you enjoy art, may not be considered a business–related expense. This is because there is a “duality of purpose”- the expense incurred isn’t wholly and exclusively for the purpose of your business and you are also receiving personal enjoyment from same.

Yes, but you must establish that the sponsorship primarily benefits your business and you receive some business benefit in return.

Example: If you sponsor a trade show in your industry, and it brings in potential clients who attend because of your sponsorship, this can be claimed as a legitimate business expense.

HMRC is cautious to ensure that expenses claimed as sponsorship genuinely serve business purposes, preventing misuse.

Example: If you sponsor a sports team purely because your friends with the coach and it doesn’t relate to your business, HMRC may disallow the expense. Its important to note here than you must receive something in return for your sponsorship- therefore advertising your business on football shirts would be allowable.

If there’s a non-business purpose involved, you won’t be able to claim those costs as expenses.

Example: If you sponsor a family member’s personal event, like a wedding, the sponsorship costs won’t be considered legitimate business expenses.

Yes, but there’s a condition: sponsorship costs must be exclusively for business purposes to be tax-free.

Example: If you sponsor a local charity run and your logo is featured on the event’s t-shirt, this expense can be claimed as it promotes your business within the community.

Sponsorship is a way to promote your business by associating it with events, shows, personalities, or clubs. It offers advertising opportunities, hospitality perks, tickets, and more, helping you reach a wider audience.

Examples: Let’s say your IT consulting company sponsors a local technology conference. In return, your company’s logo is displayed prominently, and you get a booth to showcase your services. This helps you to reach potential clients attending the event.

Stationery and postage costs may be claimed if in the performance of your duties. This can  cover printer consumables, general stationery used and necessary postage, courier and carriage costs.

It is possible to claim for the costs of computer software, consumables and website costs subject to HMRC guidelines.

These costs include:

  • Software for annual licences for permission to use certain software (these can usually be expensed against profit).
  • Software purchased outright to improve computer services – if a lump sum is made, you should consider whether the software will have enduring benefit to the business – if more than two years, then the software should be classed as an asset.
  • Consumables which are generally small in nature and are regularly replaced/consumed can be expensed against profit.
  • Website costs- generally design and content development costs should normally be treated as capital expenditure to the extent that an enduring asset is created.

Where a website directly generates sales, subscriptions, advertising or other income this will normally be considered to be an enduring asset. It is, however, also necessary to confirm that the website will have the lifetime normally expected of a capital asset (as noted above, anything under two years is likely to be accepted as revenue expenditure). HMRC’s position is that the following should normally be treated as capital expenditure:

  • Application and infrastructure costs.
  • Domain names.
  • Hardware.
  • Operating software that relates to the functionality of a website.

However, not all website related costs will be capital in nature.  In particular, HMRC will normally accept that the following are revenue costs:

  • Initial research and planning costs prior to deciding to proceed with development.
  • Costs associated with maintaining or updating a website (for these purposes the website can be thought of as similar to a shop window – the cost of constructing the window is capital, but the costs of changing the display from time to time is revenue).

You may claim for annual subscriptions for approved professional bodies or societies provided it is in relation to the type of work undertaken by you and is either on HMRC’s approved list and or is a pre-condition to be able to undertake your work.   

We recommend you claim for the actual costs incurred when working overseas, however it is possible to claim the approved HMRC worldwide subsistence rates if the rates are favourable. Temporary workplace rules (24-month rule) apply to the worldwide subsistence rate expenses. 

You may be able to claim for work related training subject to HMRC guidelines as long as it meets the criteria.

This criteria is as follows:

  • Should relate to the current trading activity of the company and not to develop a personal interest;
  • Can include first aid and health and safety in the workplace;
  • Can include leadership development as long as beneficial to the company.

You can claim for the cost of one business mobile phone, telephone or broadband, subject to HMRC guidelines. 

These costs include:

  • Mobile phone contracts, which must be held in the company name – one phone is allowable. If the contract is in your personal name, you can only claim for specified business calls (not the line rental)
  • Home telephone costs can be claimed, if you have a separate business phone line. If you are using a personal line, you can only claim for specified business calls (not the line rental)
  • Broadband costs can be claimed if wholly and exclusively used for business use

The cost of necessary medical treatment should you fall ill or get injured may be claimed in certain circumstances subject to HMRC guidelines.

These costs include:

  • One health screening and one medical check-up per year
  • Medical treatment abroad whilst working on company business overseas
  • Eye test, glasses and contacts, if wholly for VDU business use

Health screening is to identify who may be a particular risk of ill-health and must be carried out by a health professional. The above expenses would not incur a benefit in kind.

The company may be able to pay for your moving or relocations costs in certain circumstances subject to HMRC guidelines. 

These costs include:

  • Maximum value is up to £8000 per move without personal tax implications
  • Must be for a new job or assignment
  • Should be within reasonable commuting distance to your new place of work and significantly closer than your former residence

The cost of food and accommodation provided for directors arranging training courses for the purpose of the trade is an allowable expense. If food and accommodation provided as part of training are given to any other person free of charge, the cost is classed as entertainment and is therefore disallowable.

Costs of certain types of clothing are allowable as a business expense, subject to HMRC guidelines, where your duties require them to be worn. 

These types of clothing include:

  • Uniforms
  • Safety clothing and equipment including safety helmets, gloves, eye protection, high-visibility clothing and safety footwear

The cost of the upkeep, repair and replacement of protective clothing and uniforms is allowable where your duties require such items to be worn.

The cost of train or airfares for business-related journeys is allowable. Additional costs such as excess baggage claims are also allowable if they are incurred in the performance of your duties and have no personal element. 

Allowable travel costs include bridge, tunnel and road tolls, bus and taxi fares, car-parking charges and congestion charges provided they have been incurred on a business trip. The cost of overseas travel is allowable where you are obliged to incur the expense in the performance of your duties.

The costs of accommodation for nights spent away from home for business purposes may be claimed as a business expense subject to HMRC guidelines.

These expenses include:

  • Hotel or B&B for nights spent away from home on business;
  • Renting and running costs of a rental property, excluding furnishings, as long as it’s not your main residence and there is regular commuting back to your main home.

Adding a second shareholder is straightforward, but may create issues you should be aware of. If the procedure is not carried out correctly, HMRC may deem the appointment of a second shareholder as ‘income shifting’. This means transferring some of the taxable profits you have made to another individual with less tax liability, thereby reducing your own tax liability.

If you set a director’s fee below £125 per week for 2025/26 (£129: 26/27) and do not have any other income subject to National Insurance, this may affect your eligibility for future benefits.

No – you don’t need a director’s fee as you can potentially utilise your personal allowance to offset against income taxed at source by the umbrella company paying you.

The main reasons to process a director’s fee is to utilise your personal tax allowance efficiently( if you have no other employment income or pension income), benefit from corporation tax relief on this payment and ensure that you making adequate credits towards your state pension.

If you are working through an umbrella company for the full tax year, then no funds are paid to your limited company and it is generally more tax efficient to utilise your personal allowance against umbrella income which is taxed at source.

If there are no profits in your PSC, then the provision of a director’s fee as an additional company expense would not provide any further tax relief in the accounting period. In addition, NI credits are still being maintained to your state pension via NI deductions from your umbrella employment income.

No – a director’s fee isn’t needed as you can potentially utilise your personal allowance to offset against income taxed at source when paid by your agency into your company.

The main reasons to process a director’s fee is to utilise your personal tax allowance efficiently (if you have no other employment income or pension income), benefit from corporation tax relief on your director’s fee  and ensure that you making adequate credits towards your state pension.

If you are working through your company when captured by IR35 then funds paid into your company are received net of income tax and National Insurance. As a result, it is generally more tax efficient to utilise your personal allowance against this income taxed at source by the feepayer (usually the agency paying your company). In addition, NI credits are still being maintained to your state pension. If you are captured by IR35 for the full year, then your income has already been taxed so there is no further corporation tax liability. Therefore, the provision of a director’s fee as an additional company expense would not provide any further tax relief in the accounting period.

As non-spouses cannot benefit from the exemption available for spouses, it is likely that only dividend sharing with a commercial basis will be acceptable to HMRC.

Where the arrangement with your second shareholder has a commercial basis this will support dividends being taxed separately. Your second shareholder does not need to be able to carry on your profession to be of commercial benefit to the business. They can provide assistance with administration, financial management or funding.

The efforts of the non fee-earning shareholder should be documented clearly to emphasise the commercial basis of the arrangement.

Yes – the issue of income shifting was formally clarified in respect of shareholders who are married or in civil partnerships.

Specifically, following a HMRC court case against a company called Arctic Systems Limited, the House of Lords agreed with HMRC that the shareholdings in the company had been set up to minimise the tax paid by Mr. and Mrs. Jones (Directors).

Because the gift by Mr. Jones had been made to his wife and the gift was of an ordinary share, an exemption applied.

This exemption only applies to married couples and civil partnerships, and says that if you make a gift to your spouse/civil partner of a share (which comprises more than just income) and it is an outright gift, you should not be taxed on the income arising from that gift (i.e.dividends).

For the gift to be seen as an outright gift the dividend should be paid into the bank account of each shareholder not into a joint bank account.

If you are a company director, then you have a legal duty to protect the company’s assets and to carefully consider whether you have sufficient funds to pay its liabilities (for example, upcoming VAT and corporation tax payments) before a dividend can be paid.

You should also consider:

Do I have sufficient retained profits to pay a dividend?

“A dividend or distribution to shareholders may only be made out of profits available for the purpose.”

Therefore, dividends can only be paid out of prior period retained profits +current period’s retained profits (after providing for corporation tax and current dividends already paid in the current year).

What paperwork should I need to keep when I pay a dividend?

Even a sole director, you should keep minutes from meetings where you confirm the amount of dividends taken.

Also shareholders should receive a tax voucher -as a receipt for tax purposes. It should show the dividend rate per share and dividend figure.

Most directors pay interim dividends. These are declared and paid in the middle of an accounting year i.e. before the accounts are finalised. Before these are withdrawn, you should check you have sufficient accumulated profits in your company to facilitate the payment.

The shareholders of a company who appear in the register of members are usually entitled to receive dividends on an equal basis. Share classes (or alphabet shares, such as ‘A’ shares, ‘B’ shares etc.) are utilised when a company wants to vary one or all of the core rights so that they do not rank equally.

A dividend is a distribution of post-tax profits of the company to its shareholders. It is payable to all shareholders (of the same class of share) in proportion to their shareholdings and in accordance with the company’s constitution (articles).

You can apply to reduce your payments on account. You can do this at any time using form 303 either online or in paper form up to when the balancing payment is due. You can also make the claim on the previous year’s tax return giving details of the circumstances in the additional information box at the end of the form.

If you completed a self-assessment return last year, you need to continue to complete a self-assessment return annually.

However if you are issued with a notice to file a tax return and you do not consider you need to complete one, because, for example, your tax affairs are no longer complicated, you can phone HMRC and ask for the tax return to be withdrawn and for you to be removed from self-assessment in the future.

But if you are issued with a notice to file a tax return, you have a legal obligation to complete one.

If you receive a tax return you have to complete it, even if you are an employee and pay all your tax through PAYE.

A self-assessment return is sometimes required for other reasons, for example, to check the correct tax has been paid overall. If you are sent a self-assessment return you must fill it in and send it back even if you believe that you have no extra tax to pay. Failure to do this by the deadline of 31 January following the end of the tax year (for online filing) will result in a penalty of £100 (which could increase if the tax return remains outstanding).

You must notify HMRC within 6 months following the end of the tax year (5 October) that you need to complete a tax return. This is to ensure that HMRC has enough time to issue a tax return to you and for you to complete and submit it to HMRC. Failure to notify the HMRC by this date will result in a £100 penalty.

Tax Returns are issued directly to your home address on 6 April of each year. HMRC can also issue tax returns part way through the year where they become aware that one is required.

If your previous tax return was submitted online, then you will not receive the actual tax return. HMRC will send you a Notice to Complete a Return (SA316). If you have not previously completed a tax return you should contact your local HMRC office and advise them that you need to be registered under self-assessment explaining why.

If you have a Student Loan, your employer is legally obliged to make a repayment every month from your salary.

All employers – including umbrella companies – have to make deductions from your earnings to help repay your student loan. The amount deducted is forwarded to the government for credit to your Student Loan account. Each plan has a threshold for your weekly or monthly income. So you don’t make a payment if your earnings are under the threshold. If they are over the threshold, the repayment is calculated on the difference between the two. So if you earn above the threshold for Plan 1, 2 , 4 and 5 your repayment will be 9% of the amount you earn above it.

You only repay 6% of the amount you earn over the threshold for the Postgraduate Loan.

Thresholds for 26/27

Plan 1
£26,900 (previously £26,065 for 25/26)

Plan 2
£29,385 (previously £28,470 for 25/26)

Plan 4
£33,795 (previously £32,745 for 25/26)

Plan 5
£25,000 (first year in operation)

Postgraduate Loan

£21,000 (unchanged)

Self-assessment is a method of collecting tax with the idea being that you are responsible for completing a tax return each year if you need to and for paying any tax due for that tax year. It is your responsibility to tell HM Revenue & Customs (HMRC) if you think you need to complete a tax return.

Under self-assessment, certain taxpayers must complete a self-assessment return (also known as a form SA100) where they need to show all their income and capital gains as well as claim any applicable allowances and reliefs.

As a legal document, it’s important that you don’t omit any sources of income from the return and also to include any tax has been deducted at source.

Most employees pay their taxes through the PAYE system, however, if you are in receipt of any untaxed income (such as rental income) or your tax affairs are more complex, then a self-assessment return should be completed.

The company van benefit and van fuel benefit is based on a fixed amount. For 2025/26 , the van benefit is £4,020 (2026/27 : £4,170) and the van fuel benefit £769 (2026/27: £798).

In order to avoid the benefit, the van must only be available to the employee for business travel and commuting and must not be used for private purposes except to an insignificant extent.

If private use is insignificant, then there is no benefit to disclose on a P11d form, nor a van fuel benefit.

How is my P11d benefit in kind calculated for the fuel used by my car?

If your company pays for all your fuel used by your company car and you do not identify and pay back the personal mileage element, then there is a taxable fuel benefit as well as your car benefit. The car fuel benefit is fixed each year, according to the table below and is calculated by taking the appropriate car benefit percentage, as worked out for car benefit purposes and multiplying by the fixed figure. Since 6 April 2018, there is no taxable benefit when electricity is provided for an electric company car.

Calculation Example

Tax year Fixed figure (£)
2026–27 29,200
2025–26 28,200

The car fuel benefit is based on a fixed figure for the tax year (£28,200 for 2025/26 and £29,200 for 2026/27), multiplied by the Benefit in Kind (BIK) percentage for your company car.

To find your company car’s BIK percentage, use the CO2 emissions and (where applicable) electric mileage range in the schedule below.

Petrol powered and hybrid powered cars for the tax year 2025 to 2026

CO2 emissions (grams per km) Electric mileage range NEDC % WLTP %
——33
1 to 50130 and above33
1 to 5070 to 12966
1 to 5040 to 6999
1 to 5030 to 391313
1 to 50Less than 301515
51 to 54—1616
55 to 59—1717
60 to 64—1818
65 to 69—1919
70 to 74—2020
75 to 79—2121
80 to 84—2222
85 to 89—2323
90 to 94—2424
95 to 99—2525
100 to 104—2626
105 to 109—2727
110 to 114—2828
115 to 119—2929
120 to 124—3030
125 to 129—3131
130 to 134—3232
135 to 139—3333
140 to 144—3434
145 to 149—3535
150 to 154—3636
155 to 159—3737
160 to 164—3737
165 to 169—3737
170 and above—3737

Petrol powered and hybrid powered cars for the tax year 2026 to 2027


CO2 emissions (grams per km) Electric mileage range NEDC % WLTP %
——44
1 to 50130 and above44
1 to 5070 to 12977
1 to 5040 to 691010
1 to 5030 to 391414
1 to 50Less than 301616
51 to 54—1717
55 to 59—1818
60 to 64—1919
65 to 69—2020
70 to 74—2121
75 to 79—2121
80 to 84—2222
85 to 89—2323
90 to 94—2424
95 to 99—2525
100 to 104—2626
105 to 109—2727
110 to 114—2828
115 to 119—2929
120 to 124—3030
125 to 129—3131
130 to 134—3232
135 to 139—3333
140 to 144—3434
145 to 149—3535
150 to 154—3636
155 to 159—3737
160 to 164—3737
165 to 169—3737
170 and above—3737

The exact CO2 figure is always rounded down to the nearest 5 grams per km — except where noted in the table. For example, CO2 emissions of 168 grams per km are treated as 165.

For each tax year add 4% for diesel cars up to a maximum of 37%.

So in this example, for 2025/26 the car fuel benefit is £28,200 x 37% = £10,434 taxable benefit.
Therefore the director will pay personal tax on this amount, if he is higher rate tax payer, this will be £10,434 x 40% = £4,173.60.

Best practice is for the director to ONLY claim his business mileage if he wishes to avoid this taxable benefit.

Completing a P11d for a director and employees who are in receipt of company benefits or expenses is a HMRC  requirement and there are serious consequences for failing to comply including penalties and interest.

Yes. Once you are satisfied that the information on the P11d is correct, Brookson as your tax agents will submit these forms on your behalf in time for the annual 6th July deadline.

You will not require a copy of a P11d form as there are no benefits in kind to report. You company however is still obliged to confirm to HMRC that there are no benefits in kind to report and no Class 1A National Insurance to pay as part of the P11d process.

You are required to report your Plld information as benefits of employment on your self-assessment return, therefore there may be additional tax to pay.

If you believe that additional tax may be due relating to a particular expense, we suggest that you discuss with your accountant whether or not you still wish to claim the expense through the company.

By making sure that the expenses you put through your company are wholly, necessarily and exclusively for the purposes of your trade, these can be paid to you tax free.

These are expenses which the business incurs directly but have a personal benefit to you. For example, if the business has paid for your personal gym membership. These expenses will need to be reported on your form Plld.

These expenses will show in your company bank account and you will need to make your accountant aware of this by submitting an expenses form and submitting the necessary receipts, otherwise these expenses will not appear on your P11D.  

If you’re a Brookson Customer and believe there are any of these, please call us to discuss. You find more information on expenses via Brookson Connect.

A P11D(b) is the form that is sent to HMRC alongside the P11D showing any Class 1A National Insurance due on the expenses and benefits. 

Where no benefits have been paid during the tax year and a form P11D(b) or P11D(b) reminder is received, employers can either:

o    Submit a ‘nil’ return

o    Complete the annual ‘Employer – No return of Class 1A’ form, to advise that they have no P11D to submit and no Class 1A return to make.

Some employee benefits are exempt from tax and not considered benefits in kind. The most common include company mobile phones, pension contributions and ‘trivial’ benefits valued at less than £50.

While many employer benefits are taxable based on their cash value, HMRC have identified a list of exemptions and concessions on certain things.

  • Mobile phones/smart phones – An exemption is available up to one phone for each employee.
  • Trivial benefits – This generally covers any benefit that costs less than £50, as long as it’s not in the form of cash or a cash voucher and is not given in recognition of work done by you. If you are a director, there’s an annual cap of £300 on trivial benefits.
  • Employers pension contributions – Any contributions your employer makes to your pension are not taxable, as long as you don’t go above your annual allowance or your lifetime allowance.
  • Medical treatment abroad – If you fall ill overseas whilst performing your duties, any medical treatment paid by your employer is exempt.
  • Health screening and medical check-ups – Your employer can provide one health screening assessment and one medical check-up in any year tax-free.
  • Incidental overnight expenses – These are HMRC agreed payments that your employer may reimburse, if your work requires you to stay away from home overnight. The amount is set at £5 per night if working away in the UK and £10 per night if working overseas and covers things such as newspapers, laundry and phoning home.

These are some other exemptions, although all are subject to certain conditions:

  • Long service awards
  • Suggestion schemes
  • Car, motorcycle and bicycle parking
  • Electricity provided for electric company cars and vans
  • Christmas or other annual party
  • Sports facilities
  • Counselling
  • Welfare counselling
  • Bicycles and cycling safety equipment
  • Removal expenses
  • Goods provided at a discount
  • Mileage allowances
  • Home working allowance
  • Work to home travel provided when you work late or when sharing arrangements are disrupted

No. There is a set list of certain benefits or expenses, which are not considered benefits in kind.

Not all benefits and expenses are considered a benefit in kind by HMRC. They therefore don’t need to be reported on a P11d form, and consequently there is no personal tax to pay on these benefits. Some of the key examples of this include contributions your employer makes into your pension, receiving a company mobile phone, trivial benefits and office car parking.

You read the full list here.

The deadline for Class 1A National Insurance payments is 19th July by post, and 22nd July if paying electronically.

All employers are required to pay the Class 1A National Insurance liability, but there are two different deadlines, depending on how they pay. Employers have until 19th July if paying by post, but this is extended to 22nd July if they are paying by electronic bank transfer.

The personal impact of a P11d depends on what is itemised. If you have received a benefit in kind, you may have to pay tax on the cash value.

Generally, if you have received a Plld, your company has recorded a benefit in kind on the form which is identified at its cash equivalent value. This ‘cash value’ will be used to calculate any tax you need to pay on the benefit and is determined by the type of benefit that your employer has provided.

For expenses, the cash equivalent is the amount paid by your employer. For some  benefits in kind, the cash equivalent is based on specific calculations. For example, a car benefit is based on a company car’s CO2 emissions x percentage of the car’s list price.

P11d forms should be provided annually by your employer on or before 6th July, following the relevant tax year.

A benefit in kind occurs when your company incurs costs or provides assets for the private use of the director or employee. Additional tax is payable personally and potential Class 1A National Insurance is payable by the company. For example, an expense which is not wholly and exclusively for the business and provides a perk/ benefit to the Director/ Employee.

‘Benefits in kind’ – commonly referred to as perks or fringe benefits – come in all shapes and sizes. They can range from specific financial benefits like loans, or personal benefits like health insurance, to company cars, or even assets that employees can enjoy for personal use – such as properties.

A P11d is a form given to employees and HMRC to show all expenses and benefits paid to directors and employees in a financial year.

As well as issuing a P60 every year, to show all payments and deductions, employers are required to provide a P11d to report any expenses and benefits that have been paid to directors and employees during the tax year ended 5th April.

If you have received employee benefits, your employer is required to provide you with a form that details what they were. It essentially covers anything that your company has paid for, from which you have derived personal enjoyment including personal use of a company asset. If your company only reimburses you for wholly business-related expenses, you don’t have to report these on the form and you don’t require a P11d.

If your P60 information is incorrect, then your employer can issue you a new P60.

Occasionally, a payroll department may make a mistake and issue a P60 with mistakes in it. If you spot that any of the information in your P60 is incorrect, get in touch with your employer so they can issue you a new, amended one.

Any reissued P60s should be marked as a ‘replacement’ and can be provided in either a paper or electronic format. Alternatively, the employer can provide you with a letter confirming the change.

Your employer should provide you with a P60 on or before 31st May each year.

A P60 is a form issued at the end of the financial year, summarising an employee’s total pay and deductions for that year.

All employers operating a PAYE payroll are required to provide employees with a P60 by 31st May. The P60 summarises all the pay and deductions they have had throughout that financial year, but not employee benefits. These are provided separately in a PIId where required.

Yes, you need to provide them with a P60.

Once you’ve completed your year end payroll process, you need to provide all your employees with a P60. This needs to happen by 31st May. The P60 summarises the employee’s total pay and deductions for that year. Some of your employees may also require a Plld form, which outlines any employee benefits and expenses. If so, this should be provided by 6th July.

All limited companies that pays employees through PAYE must complete certain tasks at the end of the financial year.

As an employer with a PAYE scheme, there are certain processes that HMRC require you to complete before the end of the current tax year (5th April). These are often referred to as the ‘payroll year end process’ and include:

  • Sending your final payroll report of the year – this needs to be done on or before your employees’ last payday before 5th April
  • Updating your records – from 6th April, you need to update your employee payroll records (ensuring the correct tax code is used in the new tax year) and ensure your software has been updated for the new year

At some point, you may consider making charitable donations, either personally or through your company. Charitable giving has benefits both for the individual and businesses in the UK. To make a gift aid donation, follow these steps.

To qualify for Gift Aid, follow these steps:

  1. Declare that you want your gift treated as a Gift Aid donation.
  2. Ensure you’ve paid sufficient UK tax for the year to cover the Basic Rate Tax the charity will reclaim.
  3. Include your full name and address (or at least your house number and postcode) in the declaration.

Notifying HMRC of Gift Aid:

If you complete a self-assessment tax return:

  • Include the gross total of all Gift Aid donations in the year or ask your accountant to do so.
  • Offset Higher Rate Tax relief against your tax due for the current tax year or carry it back to the previous year.

If you pay Higher Rate Tax but don’t complete a self-assessment return:

  • You can claim the additional relief by writing to the tax office with details of your total Gift Aid donation.

Gift to Charities Made by Companies:

  • Companies can make donations to charities before tax is deducted from their gross profit.
  • If the donation is an allowable expense, it reduces the company corporation tax due.
  • From 15TH March 2023, the definitions of a charity for tax purposes have been changed so that only UK charities are eligible for charitable tax reliefs. This impacts EU and EEA charities particularly. If a company makes a donation to a non-UK charity after 15 March 2023, UK tax reliefs are only available if the charity has ‘asserted their UK charitable status’ previously with HMRC under transitional provisions which last until 1st April 2024. After April 2024, companies will not be eligible for UK tax relief on donations to EU or EEA charities.
  • Keep documentation from the charity to support the payment made.
  • Donations can’t be used to create a loss for Corporation Tax purposes.

For 2026/27, Scotland has income tax rates of 19%, 20%, 21%, 42%,45% and 48%. Those paying 19% are treated in the same way as 20% taxpayers – but may need to take extra care that they have paid enough tax to cover the Gift Aid claim. Those paying 21%, 42%, 45% or 48% can claim extra relief in the same way as those in the rest of the UK.

If you pay Higher Rate Tax (40%), you can claim back the difference between the higher and basic rate of tax on all gross Gift Aid donations. For instance, if you gift £10, you effectively make a gross gift of £12.50 and can claim £2.50.

If you’re 65 or older, your gross Gift aid donations are deducted from your taxable income, which can impact your age-related allowance positively, additionally, you can include Gift Aid donations on your tax credit application potentially leading to more tax credits.

From 15th March 2023, the definitions of a charity for tax purposes have been changed so that only UK charities are eligible for charitable tax reliefs. This impacts EU and EEA charities particularly. If an individual makes a donation to a non-UK charity after 15 March 2023, UK tax reliefs (such as Gift Aid) are only available if the charity has ‘asserted their UK charitable status’ previously with HMRC under transitional provisions which last until 5 April 2024 for individuals. After April 2024, taxpayers will not be eligible for UK tax relief on donations to EU or EEA charities.

Individuals in the UK can make Gift Aid donations, which allow charities to reclaim Basic Rate Tax on their contribution directly from HMRC. This means your gift is worth more to the charity at no extra cost to you. These rules also apply if you operate as a sole trader or a partnership. And if you’re a higher or additional rate taxpayer, you can claim back the difference through your Self Assessment, adding an extra charitable donation tax deduction to your return.

Certain benefits attract additional National Insurance Contributions, known as Class 1A NIC. This is cost to your company but does not count towards your contributions for state benefits.

The Class 1A is payable to HMRC by 22nd July annually if paid electronically, however if you wish to pay using a different method, see HMRC website.

YEARPERCENTAGE CLASS 1A
2026/202715%

No – you do not include those expenses which are wholly business expenses that you incur personally.

There are two forms that should be considered when reporting benefits in kind with HMRC: Form Plld and Form Plld(b).

From 6th April 2027, benefits in kind and taxable employment expenses are to be reported through payroll software.

Form Plld

As your accountant we will take care of this for you by reporting any expenses and benefits paid to directors and employees that have not been subject to PAYE tax on a form P11D (return of benefits and expenses) after 5th April each year and file this with HMRC. You should retain a copy of your Plld as you will need to add these amounts onto the employment section of your self-assessment return.

Form Plld(b)

A P11D (b) will also be sent in along with the P11D, this will show the amount of additional Class 1A National Insurance due on the benefits. If there are no benefits or additional tax to report, then you are still obliged to confirm this with HMRC, if you are asked to complete a form P11D.  The value of any taxable benefit is also reported on your personal tax return to ensure you pay the correct amount.

The Rent a Room scheme is available to those who rent part of their only home to a lodger. A lodger is someone who pays to live in your home, sometimes with meals provided, and who often shares the family rooms.

The Rent a Room scheme simplifies declaring your rental income as, rather than declaring each individual expense, you would receive a set allowance of up to £7,500 and only pay tax on any rental income over this value.

The tax exemption is automatic if you earn less than £7,500- you do not need to do anything.

If you earn more than £7,500, you need to complete a self-assessment return.

If your expenses are greater than £7,500, it would be more cost effective for you not to use this scheme and to instead claim the individual expenses.

You would not be able to use the scheme in the following circumstances:

  • Your home is converted into separate flats.
  • You let unfurnished accommodation in your home.
  • You have gone abroad and are renting your home in your absence.
  • You are occupying job-related accommodation and letting your former home.

If you charge your lodger for any additional services such as meals, laundry, or telephone costs, you will need to include these in your self-assessment return as part of the rental income received.

Before renting a room in your own home, we would always recommend checking the terms and conditions of your home insurance, mortgage agreement or lease.

When purchasing a buy to let property, the Stamp Duty will be higher than when purchasing your own home. The rates for a second property are based on the purchase price of the property and are calculated as follows:

The higher rates from 1 April 2025

Property or lease premium or transfer value

SDLT rate

Up to £125,000

5%

The next £125,000 (the portion from £125,001 to £250,000)

7%

The next £675,000 (the portion from £250,001 to £925,000)

10%

The next £575,000 (the portion from £925,001 to £1.5 million)

15%

The remaining amount (the portion above £1.5 million)

17%

Any improvement costs to the property or replacement of integrated appliances i.e. kitchen and bathroom refitting, would not be treated as an expense against your rental income. This is because these are deemed to add value to the property. Instead, you would be able to claim these at the point that you sell the property to reduce the tax on the amount that you make from the sale.

When declaring your rental income on a Self-Assessment, you can claim the costs in managing and maintaining the property, reducing the tax you will pay. The most common expenses are:

Common Expenses

  • Estate Agent fees
  • Property Management fees
  • Landlord insurance
  • Gas and electricity safety checks

If the property is empty while you are securing a tenant, then you will also be able to claim:

  • Council tax
  • Utility bills
  • Advertising costs

You can claim for repairs to the property or for the repair or replacement of furniture items including:

  • Furnishings
  • Appliances
  • kitchenware

NOTE: This only applies to the repair or replacement of these items. The initial purchase of the items would not be included.

No – since April 2020, you’re no longer able to deduct any of your mortgage expenses from your rental income to reduce your tax bill.

Instead, you now receive a tax-credit, based on 20% of your mortgage interest payments.

This is less generous than the old system for higher-rate taxpayers, who formerly received 40% tax relief on mortgage payments.

The new system has been phased in gradually since 2017.

Yes – when you have rental income from properties in the UK or abroad remember that you need to declare the income on your self-assessment, if you are a UK resident. If you are not a UK resident then you must include your UK sourced rental income in a UK self-assessment return.

This includes:

  • Rental property
  • Second property
  • Portfolio of properties

If you are a landlord receiving rental property income, HMRC may amend your tax code. HMRC do this as a way of collecting the tax due on the rental property through your PAYE earnings i.e., earnings in a staff role. This does not remove your requirement to complete a Self-Assessment, however.

If you do not wish for the tax to be deducted in this way, you are able to call HMRC on 0300 200 33 00 and advise them that you would prefer to pay the tax annually following the preparation of your Self-Assessment.

What records do I need to keep?

It is important to keep a record of the following relating to the properties:

  • All rents received in the relevant tax-year
  • Any outgoings or expenses incurred in the letting of the property/properties.

NOTE: If your property is jointly owned, then the income you receive will be split equally between each of the owners.

Yes – if you are UK resident you may be liable to Capital Gains Tax on disposals of assets located anywhere in the world, (not just in the UK).

Non residency:

If you are non-resident, you may also be liable to Capital Gains Tax on the disposal of UK land and property:

Disposals of other UK land and property from 6 April 2019

If you owned the non-residential land or property before 6 April 2019, then broadly you will only be liable to the part of the gain which has accrued from 6 April 2019.

If you purchased the property after 6 April 2019, then the whole gain will be chargeable.

You must report the disposal within 60 days of completion using HMRC’s Report and pay CGT on UK property service on GOV.UK. 

If you receive a tax return you have to complete it, even if you are an employee and pay all your tax through PAYE.

A self-assessment return is sometimes required for other reasons, for example, to check the correct tax has been paid overall. If you are sent a self-assessment return you must fill it in and send it back even if you believe that you have no extra tax to pay. Failure to do this by the deadline of 31 January following the end of the tax year (for online filing) will result in a penalty of £100 (which could increase if the tax return remains outstanding).

You must notify HMRC within 6 months following the end of the tax year (5 October) that you need to complete a tax return. This is to ensure that HMRC has enough time to issue a tax return to you and for you to complete and submit it to HMRC. Failure to notify the HMRC by this date will result in a £100 penalty.

Tax Returns are issued directly to your home address on 6 April of each year. HMRC can also issue tax returns part way through the year where they become aware that one is required.

If your previous tax return was submitted online, then you will not receive the actual tax return. HMRC will send you a Notice to Complete a Return (SA316). If you have not previously completed a tax return you should contact your local HMRC office and advise them that you need to be registered under self-assessment explaining why.

If you have a Student Loan, your employer is legally obliged to make a repayment every month from your salary.

All employers – including umbrella companies – have to make deductions from your earnings to help repay your student loan. The amount deducted is forwarded to the government for credit to your Student Loan account. Each plan has a threshold for your weekly or monthly income. So you don’t make a payment if your earnings are under the threshold. If they are over the threshold, the repayment is calculated on the difference between the two. So if you earn above the threshold for Plan 1, 2 , 4 and 5 your repayment will be 9% of the amount you earn above it.

You only repay 6% of the amount you earn over the threshold for the Postgraduate Loan.

Thresholds for 26/27

Plan 1
£26,900 (previously £26,065 for 25/26)

Plan 2
£29,385 (previously £28,470 for 25/26)

Plan 4
£33,795 (previously £32,745 for 25/26)

Plan 5
£25,000 (first year in operation)

Postgraduate Loan

£21,000 (unchanged)

Self-assessment is a method of collecting tax with the idea being that you are responsible for completing a tax return each year if you need to and for paying any tax due for that tax year. It is your responsibility to tell HM Revenue & Customs (HMRC) if you think you need to complete a tax return.

Under self-assessment, certain taxpayers must complete a self-assessment return (also known as a form SA100) where they need to show all their income and capital gains as well as claim any applicable allowances and reliefs.

As a legal document, it’s important that you don’t omit any sources of income from the return and also to include any tax has been deducted at source.

Most employees pay their taxes through the PAYE system, however, if you are in receipt of any untaxed income (such as rental income) or your tax affairs are more complex, then a self-assessment return should be completed.

You are required to report your Plld information as benefits of employment on your self-assessment return, therefore there may be additional tax to pay.

If you believe that additional tax may be due relating to a particular expense, we suggest that you discuss with your accountant whether or not you still wish to claim the expense through the company.

By making sure that the expenses you put through your company are wholly, necessarily and exclusively for the purposes of your trade, these can be paid to you tax free.

Possibly. You should complete the statutory residency test questions to check your residency status and make sure.

If you are UK resident, then you pay tax on your worldwide income. If you are abroad for less than one complete tax year or on a casual basis, you would generally expect to be UK resident. However, to be 100% sure you should complete the SRT questions to make sure. Your self-assessment should record your foreign employment income and you will be given credit for any foreign tax you’ve had to pay.

There are three elements to the SRT: the ‘automatic overseas tests’, the ‘automatic UK tests’ and the ‘sufficient ties tests’.

The Statutory Residence Tests was introduced to clarify an individual’s residency status- by completing the tests sequentially, you will then have clarity with regards your tax residency status. There are three key components.

Automatic Overseas Tests

The first is the ‘automatic overseas tests’. If you meet the automatic overseas tests criteria then you are automatically deemed non-resident for that tax year. This is irrespective of whether or not you satisfy any of the automatic UK tests or the sufficient ties tests.

Automatic UK Tests

The second component is the ‘automatic UK tests’. If you meet any of the automatic UK tests criteria (and do not meet any of the ‘automatic overseas tests’), then you are automatically resident in the UK for that tax year.

Sufficient Ties Test

Finally, there are the ‘sufficient ties tests’. If you do not meet the automatic overseas tests or any of the automatic UK tests, you must then use the sufficient ties tests to determine your tax residence status. This test requires you to look at a table that details both the number of days spent in the UK and the number of ties you have to the UK. The ties are:

– Family tie

– Accommodation tie

– 90-day tie

– Work tie

– Country tie

The specific questions are quite detailed, so if you would like to know more about the SRT visit HMRC’s website

Your residency position is worked out using the ‘statutory residency’ tests devised by HMRC.

Check your residence position by completing the HMRC statutory residence test

Under the SRT you are likely to be treated as UK tax resident if you:

– Spend 183 days or more in the UK during a tax year; or

– Have a home in the UK, and do not have a home overseas; or

– Work full-time in the UK over a period of 365 days (this does not need to coincide with the tax year).

However, it is important to know that you could also be treated as UK resident even if you do not meet any of these conditions. This will be determined by how much time you spend in the UK in a tax year (or over a number of years) and the number of ‘ties’ you have to the UK.

Your UK residency is adhesive in that the more time you spend in the UK, the fewer ties you need to have be UK resident for tax purposes, and therefore subject to UK tax on your foreign income and gains. For more information on this, refer the HMRC website GOV.UK.

In working out your tax liability, residency applies to both you personally and your company.

Because the UK taxes its residents on their worldwide income and gains, your personal tax residency helps determine the scope of your personal tax liability. Your company has separate legal status, so if your company is registered in the UK – either in England and Wales, Scotland and Northern Ireland – it will be taxed on its worldwide income. However, if you control and manage your company outside the UK, then your company will have tax residence in the UK and another country – meaning it would be subject to double taxation.

The UK taxes its residents on their worldwide income and gains, so your ‘tax residence’ is critical in determining how much UK tax you must pay.

One of the critical factors in determining the scope of your UK tax liability is your ‘tax residency’. If you are a non-resident – i.e. you don’t live permanently in the UK – then you are typically liable to tax on your UK-sourced income only. Tax residency is self-assessed for each tax year. Your entitlement to UK income tax and capital gains tax allowances and exemptions is directly affected by your residency.

Your agency must raise self-billed invoices for all transactions with your PSC named on the document for a period of up to twelve months (or the duration of the contract).

The agency will need to complete self-billed documents showing the PSC name, address and VAT registration number, together with all the other details that make up a full VAT invoice. The PSC should retain all these details and be able to produce them for inspection to HMRC VAT if required.

The tax point of supplies covered by self-billed invoices follows the normal rules, except that a self-billed invoice is only effective to create a tax point when issued within 14 days of the basic tax point.

The time of supply is normally determined by the date of despatch of goods or performance of services (basic tax point), unless this is overridden by the date of payment. In any event, the client must show the tax point on the invoice.

If one of your customers wants to set up a self-billing arrangement with you, they’ll ask you to agree to this in writing. If you agree, they’ll give you a self -billing arrangement to sign.

The terms of the agreement are a matter between you and your client , but there are certain conditions you’ll both have to meet to make sure you comply with VAT regulations.

For VAT purposes you’ll have to do all of the following:

  • sign and keep a copy of the self-billing agreement.
  • agree not to issue any sales invoices to your customer for any transaction during the period of the agreement.
  • agree to accept the self-billing invoices that your customer issues.
  • tell your customer at once if you change your VAT registration number or  cancel your VAT registration.

It’s an administrative time saver. As a supplier, you do not need to produce invoices, as these are being generated by your client, saving you time.

It improves accounting accuracy. As the self-bill invoices are generated from approved timesheets, they will always have accurate rates, dates and days worked, in addition to the correct legally required information for each invoice.

It should facilitate quicker payments. As soon as your timesheet is approved, the invoice is generally raised.

Self-billing is an arrangement between a supplier (your PSC) and a customer (your agency or client). Both customer and supplier must be VAT registered.

The customer prepares the supplier’s invoice and forwards a copy to the supplier with the payment.

If you want to put a self-billing arrangement in place you do not have to tell HMRC or get approval from them, but you do have to:

– get your supplier or customer to agree to the arrangement

– meet certain conditions

Generally they are in place for 12 months and should be reviewed annually to ensure there are no changes that would warrant a revised agreement. 

If you are UK non-resident you may still be able to get a personal allowance in certain situations.

Your personal allowance is the amount of income you can earn before you pay tax. The current level of personal allowance is £12,570 for 2025/26 and also for 2026/27. If you are tax resident in the UK you will normally get a personal allowance. If not, you might still be able to get a personal allowance in some circumstances, namely:

– you’re a citizen of a European Economic Area (EEA) country - including British passport-holders.

– you’ve worked for the UK government at any time during that tax year.

You might also get it if it’s included in the double-taxation agreement between the UK and the country you live in.

HMRC’s international manual INTM334580 clarifies this further.

If your client is based overseas with no presence in the UK, then the IR35 rules don’t apply. If they are based overseas but do have a connection to the UK, then they have to assess your IR35 status.

If your client is a medium sized/large sized non-public sector company based overseas and they have no UK connection (i.e. no branch, office or subsidiary here) then the IR35 rules don’t apply. If you are working for them through your PSC, you can continue to self-assess your IR35 status.

However, if your client is based overseas and does have a connection here, then they need to assess you for IR35 and provide you and your agency with a status determination statement.

Your client must do this if you are subject to UK tax – if you are UK resident and/or you perform your duties in the UK. If you are UK resident and perform your duties overseas, then you are still subject to UK tax, and the engagement is still within IR35 rules for you and your agency. If you are UK non-resident and perform your services overseas, then the IR35 legislation won’t apply because you are outside the scope of UK tax.

Possibly. You should complete the statutory residency test questions to check your residency status and make sure.

If you are UK resident, then you pay tax on your worldwide income. If you are abroad for less than one complete tax year or on a casual basis, you would generally expect to be UK resident. However, to be 100% sure you should complete the SRT questions to make sure. Your self-assessment should record your foreign employment income and you will be given credit for any foreign tax you’ve had to pay.

You are only eligible for split-year treatment for a tax year if you are UK resident under the SRT for that tax year and you arrive (or depart) from the UK in that year.

Whilst it is possible to split your tax between UK and overseas residency within a tax year, you can only do it once.

There are five broad sets of circumstances in which split-year treatment may apply to you in the year that you arrive. In each of the following cases, there are other conditions that you will need to meet when:

– You start to work full-time in the UK

– You start to have a home in the UK

– You start to have a home exclusively in the UK

– You stop working full-time overseas and return to the UK

– You are the partner of someone who stops full-time work overseas and returns to the UK

Similar rules apply to years in which you depart from the UK to work overseas.

The specific questions around split years can be quite detailed – you can find more information on HMRC’s website.

If you arrive in the UK, or leave the UK during the tax year, special rules apply. These are known as ‘split year rules’.

Normally you are tax resident (or not) in the UK for a complete tax year. However, sometimes your residence and work may crossover and the year is split into a UK part and an overseas part.

There are certain rules that apply if you arrive in the UK during the tax year, or if you leave the UK in the tax year. If the special rules apply, you pay UK income tax as a UK resident for income earned in the ‘UK part’ of the year only. Broadly, this means that the non-UK income earned in the overseas part of the year is outside the scope of UK income tax.

A P85 is a form completed by anyone who plans to leave the UK to work abroad full-time for at least one complete tax year. It helps to ensure that your UK tax position is correct.

If you have lived or worked in the UK and are leaving the UK to work abroad full-time, you may need to complete a P85. The only reason you might not need to is if you don’t intend to work away for a complete tax year, or if you will have income from a UK source whilst overseas.  

In order to ensure that your UK tax position is correct, the P85 will ask for details about:

o    Your reasons for leaving the UK

o    What you will be doing while you are abroad

o    Any assets or income you will leave in the UK

You only need to tell HMRC about living/working abroad if you expect to break your UK tax residence.

The key things to consider when working abroad is whether or not you complete a self-assessment return and whether or not you need to file a form P85. You should normally complete a self-assessment return if you are UK tax resident. This should be done in the year you work abroad and/or if you have any UK sourced income that will be taxable while you are overseas. If you work abroad, cease to be UK resident and you don’t expect to have any source of income which is taxable in the UK, you should consider completing a form P85 as you might receive a refund.

Because there may be specific local tax implications and restrictions in operating through your company (or individually) overseas, we recommend that you seek advice from an overseas specialist before making a decision.

Getting the opportunity to work overseas should be exciting but the tax implications may be quite complicated. Depending on whether you work as an individual or a limited company, you may find the local tax implications to be quite different and if you don’t formally register in that location there may be penalties for non-compliance.

There are all kinds of company tax implications in managing and controlling your company abroad. As well as paying UK corporation tax on your worldwide income, you could be liable for that country’s corporation tax, if they consider that you have a taxable presence. There may also be requirements to set up a local payroll. By speaking to an overseas tax specialist, you should be able to get the best advice around the pitfalls of working overseas via your limited company. For instance, they may suggest working through an overseas umbrella company as the best option.

There are three elements to the SRT: the ‘automatic overseas tests’, the ‘automatic UK tests’ and the ‘sufficient ties tests’.

The Statutory Residence Tests was introduced to clarify an individual’s residency status- by completing the tests sequentially, you will then have clarity with regards your tax residency status. There are three key components.

Automatic Overseas Tests

The first is the ‘automatic overseas tests’. If you meet the automatic overseas tests criteria then you are automatically deemed non-resident for that tax year. This is irrespective of whether or not you satisfy any of the automatic UK tests or the sufficient ties tests.

Automatic UK Tests

The second component is the ‘automatic UK tests’. If you meet any of the automatic UK tests criteria (and do not meet any of the ‘automatic overseas tests’), then you are automatically resident in the UK for that tax year.

Sufficient Ties Test

Finally, there are the ‘sufficient ties tests’. If you do not meet the automatic overseas tests or any of the automatic UK tests, you must then use the sufficient ties tests to determine your tax residence status. This test requires you to look at a table that details both the number of days spent in the UK and the number of ties you have to the UK. The ties are:

– Family tie

– Accommodation tie

– 90-day tie

– Work tie

– Country tie

The specific questions are quite detailed, so if you would like to know more about the SRT visit HMRC’s website

Your residency position is worked out using the ‘statutory residency’ tests devised by HMRC.

Check your residence position by completing the HMRC statutory residence test

Under the SRT you are likely to be treated as UK tax resident if you:

– Spend 183 days or more in the UK during a tax year; or

– Have a home in the UK, and do not have a home overseas; or

– Work full-time in the UK over a period of 365 days (this does not need to coincide with the tax year).

However, it is important to know that you could also be treated as UK resident even if you do not meet any of these conditions. This will be determined by how much time you spend in the UK in a tax year (or over a number of years) and the number of ‘ties’ you have to the UK.

Your UK residency is adhesive in that the more time you spend in the UK, the fewer ties you need to have be UK resident for tax purposes, and therefore subject to UK tax on your foreign income and gains. For more information on this, refer the HMRC website GOV.UK.

In working out your tax liability, residency applies to both you personally and your company.

Because the UK taxes its residents on their worldwide income and gains, your personal tax residency helps determine the scope of your personal tax liability. Your company has separate legal status, so if your company is registered in the UK – either in England and Wales, Scotland and Northern Ireland – it will be taxed on its worldwide income. However, if you control and manage your company outside the UK, then your company will have tax residence in the UK and another country – meaning it would be subject to double taxation.

The location of your domicile is important if you are UK resident and not domiciled in the UK and have overseas income.

If you are both a resident in the UK and your domicile is the UK, then you pay UK tax on all your worldwide income and gains as they arise. However, if you are UK resident and not domiciled in the UK, you also pay UK tax on your UK sourced income and gains on the arising basis.

However, you also have the option of choosing to pay UK tax on your foreign income and foreign gains either as they arise or on the remittance basis (i.e. you are taxed on the funds only when you bring them into the UK). If you wish to be taxed on a remittance basis, you need to opt for this with HMRC and there may be a charge.

‘Domicile’ is a legal word generally used to define the place where you have your permanent home. It is therefore used more to define your long-term habitation, as opposed to your residency, which is more short-term.

The word ‘domicile’ doesn’t have a set meaning, but is typically used to try and establish the country that you call home. Many people have more than one residence, but the domicile will be the place where they have a residence and the intention to live long term.

Often, your domicile is deemed the same as your father (or your mother if unmarried), but this can be displaced if you settle permanently in another country. You can also acquire a UK domicile if you have been resident in the UK for at least 15 of the last 20 years.

The UK taxes its residents on their worldwide income and gains, so your ‘tax residence’ is critical in determining how much UK tax you must pay.

One of the critical factors in determining the scope of your UK tax liability is your ‘tax residency’. If you are a non-resident – i.e. you don’t live permanently in the UK – then you are typically liable to tax on your UK-sourced income only. Tax residency is self-assessed for each tax year. Your entitlement to UK income tax and capital gains tax allowances and exemptions is directly affected by your residency.