Christmas parties and annual events

With the festive season approaching, it’s a good time to check whether your staff event qualifies for HMRC’s annual event exemption.

An annual staff event such as a Christmas party is usually tax-free if:

• It is open to all employees, and
• The total cost of all annual events in the tax year does not exceed £150 per head.

Note: The £150 is not an allowance. If the total goes over, the whole amount becomes taxable.

This applies to in-person and virtual events, and to one large event or multiple smaller ones. If you’re planning a festive celebration, keep this exemption in mind to avoid unexpected tax bills.

Trivial benefits

Small gifts can be a simple and tax-efficient end-of-year thank-you.

A gift qualifies as a trivial benefit if all the following apply:

• It costs £50 or less
• It is not cash or a cash voucher
• It is not a reward for work done
• It is not contractual

Examples include a Christmas hamper, flowers, chocolate, or a non-cash gift card.
Directors of close companies can also use this exemption, but with a £300 annual cap.

Understanding simple assessments

If you owe income tax that cannot be collected automatically via PAYE, such as tax on bank interest or the state pension, HMRC may send you a simple assessment notice.

This letter shows how much tax HMRC believe you owe based on information they hold. It is important to check the figures against your own records, including bank statements and letters from the Department for Work and Pensions.

If you normally complete a self assessment tax return you should not also receive a simple assessment. If you do, HMRC must withdraw it. You have 60 days from the date on the notice to challenge the figures or request withdrawal. We can help you with this.

Most people will receive only one notice, but it is possible to get more than one for the same tax year. For example a taxpayer who has already received a letter for 2024-25 that did not include their bank and building society interest may receive a second letter taking that information into account. The updated notice will show the total tax due for the year, even if some has already been paid. Make sure you deduct any tax paid following the first letter from the tax shown as due in the second letter before paying the remaining balance.

The payment deadline depends on when the notice is issued. If it is dated before 31 October, the tax must be paid by 31 January the following year. For notices dated on or after 31 October, you have three months from the date of issue to pay the tax. If you cannot pay in full, HMRC’s new self-serve Time to Pay system allows you to set up an instalment plan online.

Simple assessment letters are now being issued for income earned in the 2024-25 tax year. Contact us if you have received a letter and you are not sure whether the calculation is correct.

Electric vehicle excise duty

If you drive an electric or plug-in hybrid car you will have to pay a new mileage-based charge from April 2028

The electric vehicle excise duty (eVED) will be charged on top of the current vehicle excise duty charge paid by all vehicles. The charge will equal 3p per mile for fully electric cars and 1.5p per mile for plug-in hybrids from 1.4.28. The average electric car driver covering 8,000 miles is expected to be charged £240 a year, roughly half the rate of fuel duty tax paid by petrol and diesel drivers.

How the scheme will work is subject to a consultation. Under the current proposal motorists will be required to estimate their mileage for the year ahead; pay a charge upfront (or split into smaller monthly payments); and submit their actual mileage at the end of the year. This will trigger a balancing payment if the estimate was too low, or a credit towards next year’s liability if the actual mileage was lower than estimated.

Mileage checks will be performed annually by an accredited provider during the car’s MOT or, for new cars that do not yet require an MOT, around their first and second registration anniversaries.

Other vehicle types such as vans, buses, coaches, motorcycles and HGVs as well as hybrid cars that use petrol or diesel as their sole external power source (ie those that do not plug in to charge) will be out of scope for the eVED.

Pay the high income child benefit charge via PAYE

Taxpayers can use HMRC’s new online service to register for the high income child benefit charge to be collected automatically from their payslip

Since the high income child benefit charge (HICBC) was introduced, taxpayers have had to choose between opting out of child benefit payments or registering for self assessment to pay the charge. In some cases, where the total amount due was less than £2,000 HMRC could collect the HICBC through a later PAYE tax code, but there was no way to pay the charge in real time.

A new service launched in September allows employees to pay the HICBC directly through their PAYE tax code without completing a self assessment tax return, provided they have no other reason to file one.

Taxpayers with income from other sources such as property or self-employment income will still be required to file a self assessment tax return and will not be able to use the new HICBC service.

Individuals have until 31 January after the end of the tax year to notify HMRC via the new online service that they wish to settle the HICBC through PAYE. If you previously filed self assessment returns you must deregister before joining the new service. If you have not yet filed your 2024-25 tax return, you can use the new service to settle both your 2024-25 and 2025-26 HICBC through your PAYE code in 2025-26.

From 2026-27 onwards the HICBC will revert to being collected in the tax year to which it relates.

When you register, HMRC will check that you have deregistered from self assessment and ask questions to confirm whether you or your partner has the higher adjusted net income. Where your partner receives child benefit, HMRC will use their national insurance number to verify the exact amount of child benefit payments made to them.

After confirming the details, your PAYE code should be updated within 48 hours. Future changes to your child benefit entitlement, such as a new child or a child turning 16, will normally update automatically. However any change of circumstances such as a new partner must still be reported to HMRC.

If you have income above £60,000 and you or your partner receive child benefit payments, we can help you determine whether you need to pay the HICBC and how best to settle your liability.

Salary sacrifice pensions

Many employers offer salary sacrifice schemes enabling employees to give up some of their salary in exchange for an equivalent employer’s contribution into their pension

If you sacrifice some of your salary to your pension, the amount you give up is not counted as taxable income so you do not pay tax on it. This can be mutually beneficial for employees and employers due to the national insurance contributions (NICs) and income tax saved.

There is currently no limit on the amount that can be sacrificed and avoid NICs, but income tax relief is subject to an annual allowance of £60,000 (tapered for high earners to a minimum of £10,000) after which contributions are charged at the individual’s highest marginal tax rate.

The Chancellor has announced that from April 2029 annual contributions above £2,000 will attract employer’s NI (currently 15%) and employee’s NI at standard rates (currently 8% or 2% depending on earnings).

Where employers choose to pass on employer’s NI savings by topping up the employee’s pension contributions these arrangements will need to be reviewed. Employers who deal with payroll in-house will need to ensure that their software is updated to apply the new cap accurately across salary sacrifice arrangements.

If you currently choose to sacrifice some of your salary in order to qualify for tax free childcare or child benefit you may be better off continuing to do so, even if it results in higher NICs.

No other changes were announced to the taxation of pensions, including the tax-free lump sum allowance which remains at £268,275.

Speak to an independent financial advisor before making any changes to your pension contributions.

Income tax increases

The Chancellor will add two percentage points to the rates of tax paid on income received from dividends, savings and property

If you receive dividends; interest and other savings; or income from a property you rent out as a sole trader landlord you will see an increase in the amount of tax you have to pay on these sources of income.

Dividends will be taxed at 10.75% basic rate; and 35.75% higher rate (currently 8.75%; and 33.75%). The additional rate for dividends will remain unchanged at 39.35%. Property and savings income will be taxed at 22% basic rate; 42% higher rate; and 47% additional rate (currently 20%; 40%; and 45%). The hike on dividend tax will be effective from 6th April 2026 while taxpayers with savings and/or property income have an extra year’s reprieve until April 2027.

The Chancellor also announced a freezing of the personal tax thresholds for a further three years. The personal allowance (the amount you can earn before paying any income tax) will remain at £12,570, with the higher rate and additional rate thresholds fixed at £50,270 and £125,140 respectively until April 2031. This means that as income from dividends, property and savings increases as a result of inflation, more people will be drawn into paying these increased taxes.

Directors and business owners should review their salary and dividend arrangements to ensure they are extracting profits from their company in the most tax efficient way. We can help you run the numbers.

ISA  allowance

Currently you are allowed to invest up to £20,000 per year in an individual savings account (ISA) and any interest you receive is tax free. From 6th April 2027 the ISA allowance will be amended so that while the maximum investment will remain at £20,000, £8,000 of this must be invested in non-cash ISAs such as stocks and shares ISAs. This effectively reduces the maximum annual amount that can be put into cash ISAs to £12,000.

Taxpayers over 65 will still be able to invest up to £20,000 in cash ISAs.

Speak to an independent financial advisor if you are considering making any changes to your investments.

High value council tax surcharge

From April 2028 residential properties valued at £2m or more will attract a new high value council tax surcharge

Announced in the Autumn Budget, eligible owners (rather than occupiers) of properties identified as being valued £2m or more by the Valuation Office will pay this recurring annual surcharge on top of their existing council tax.

The surcharge will work on a sliding scale as follows for 2028-29, depending on the value of the property based on 2026 valuations:

Exemptions and reliefs will be available in due course, as well as separate rules for more complex ownership structures including where residential property is owned by companies, funds, trusts or partnerships or where a person is required to live in a property as a condition of their job. We will update our clients when more details are available.

Loan charge settlement opportunity

The Chancellor has announced significant and welcome changes for individuals facing tax bills under the loan charge

The loan charge was introduced in 2019 to tackle ‘disguised remuneration’ schemes, where workers were paid through loans instead of salary to avoid paying income tax and national insurance. If these loans remained unpaid by 5.4.19 they were caught by the loan charge and treated as taxable earnings as a lump sum in 2018-19 meaning that individuals had to declare them and pay the tax through self assessment.

Many affected individuals entered into the schemes in good faith, having been advised by accountants, employment agencies or umbrella companies. Because all outstanding loans were taxed in a single year many people were pushed into higher tax bands, dramatically increasing the amount they owed. For those who had already spent or invested the funds this often meant facing a tax bill far beyond their current income, putting them at risk of bankruptcy, severe debt or even losing their homes.

In January 2025 the government ordered an independent review of the loan charge to address these long-standing issues and offer a fair, affordable route to closure after years of uncertainty. Following its recommendations new legislation will be introduced to create a fairer ‘settlement opportunity’ for individuals and a small number of employers to resolve their liabilities on more manageable terms.

Those that decide to settle should see their loan charge bills cut by at least 50% with around 30% paying nothing at all. The tax due will be recalculated based on the years in which the income was earned; the new amount will be reduced to account for promoter fees; late-payment interest and penalties will be removed; and the first £5,000 of each person’s liability will be written off. Individuals can also spread payments over five years. For those with larger bills, reductions could reach up to the maximum under the settlement of £70,000.

Changes to capital allowances

The writing-down allowance (WDA) for capital assets will be lowered from April 2026 and a new first year allowance is introduced

Currently, companies can claim full expensing to deduct 100% of the cost of new and unused qualifying assets from their taxable profits. The annual investment allowance (AIA) also provides 100% tax relief on up to £1m per year of qualifying expenditure for companies and unincorporated businesses.

Certain assets do not qualify for the reliefs, for example full expensing cannot be claimed on second-hand or leased assets, while cars are excluded from both full expensing and the AIA.

Where neither relief is available businesses can claim a WDA to deduct a percentage of the cost of plant and machinery from their taxable profit each year. From 1.4.26 for companies and 6.4.26 for unincorporated businesses the WDA for assets in the main pool will be reduced from 18% to 14% (reducing balance). Some assets attract a lower rate of capital allowances if they are long lasting or integral to the building. These should be recorded in the special pool where the WDA will remain unchanged at 6%.

For businesses with a year end that does not coincide with the change a hybrid rate will need to be calculated and applied to assets purchased in the 2026-27 tax year.

To offset the reduced WDA a new permanent first year allowance (FYA) will allow businesses to deduct 40% of the cost of qualifying main pool assets, including assets bought for leasing, from 1.1.26. Cars, second-hand assets and assets for leasing overseas will not be eligible for the FYA.

Qualifying expenditure on zero-emission electric cars and electric vehicle charge points attracts a separate 100% first year allowance. This was due to expire in 2026 but has been extended to 31.3.27 for companies and 5.4.27 for individuals.

If you are planning to purchase assets for use in your business, or there is a significant balance in your main pool, contact us to discuss what these changes will mean for your business.

Homeworking relief – important update

Under the 2025 Budget, the tax relief that allowed employees to claim for additional household costs when working from home will be removed from 6 April 2026. GOV.UK

From that date, only employer-reimbursed expenses will remain tax-free – provided the employer meets HMRC’s conditions.

If you or your staff currently claim home-working expenses personally, this is an important date to note. And if you run a business that has employees working from home, you might want to consider whether it makes sense to reimburse certain costs directly as a benefit.

📣 Removal of Micro-Entity Accounts – Important Change from April 2027

From April 2027, the option to file micro-entity accounts will be removed as part of the continued rollout of the Economic Crime and Corporate Transparency Act reforms.

This means that the smallest limited companies – those that currently qualify to file the simplest, most minimal form of accounts – will need to prepare more detailed financial statements instead.

Under the new rules:

• The micro-entity regime will be abolished
• Very small companies will instead need to file small company accounts
• More information will need to be disclosed on the public record
• Filing will move to a digital-only format in line with Companies House reforms
• An affordability and compliance impact is expected for many small companies

If you currently use the micro-entity format, this change will mean increased disclosure requirements and potentially higher preparation costs, so it’s worth planning ahead before the 2027 deadline.

I will continue to update clients as more technical guidance is released by Companies House.

When you’re operating a trading business, it’s sensible to think about business insurance.

Whatever kind of business you’re running, there’s always going to be a certain element of risk. What if a client sues you? What if an employee injures themselves on your premises? What if your workshop catches fire? The list of potential risks is long and, on the whole, it’s very difficult to predict when a challenging situation is likely to rear its ugly head.

Because of this inherent risk level, the sensible thing to do is to take out some business insurance. These insurance policies cover you for different eventualities, and will mean that you’re covered financially if disaster does strike.

But a quick glance at any business insurance website will reveal a wealth of different kinds of insurance to choose from. So, which insurance does your business actually need?

Choosing the right insurance for your sector and business

Business insurance is a complex area to navigate. There are plenty of insurance options to choose from and many of them can be highly specialised. There are, however, certain basic insurance policies that most business owners will need.

So, what are the main insurance types to consider?

• Public liability insurance ’ as a business, you have a duty to keep your customers (and the general public at large) safe while carrying out your operations. If a customer or member of the public is hurt, or their property is damaged, by a representative of your business then they may well take legal action to sue you. Public liability insurance covers the legal costs and compensation payments if your business is held responsible for the injury, or for any damage to the person’s property.
• Employer liability insurance ’ if one of your employees sustains an injury, or gets sick because of your company’s working conditions, they may well make a claim against you. Employer liability insurance protects your business against legal and compensation expenses when an employee makes a claim. If you employ staff, it’s compulsory to have an employer liability policy in place (unless you solely employ close family members). This policy is there to safeguard the business, to protect your employees and to cover the significant costs of settling an employee’s claim.
• Professional indemnity insurance ’ if you deliver your service or advice to your end customer and they’re unhappy with the end result, this can lead to problems. There’s always the chance that your disgruntled customer will make a claim for compensation. Professional indemnity insurance protects your business (if you’re a limited company) or you (if you’re a sole trader or contractor) against a claim from an unhappy client. It will usually cover legal fees and compensation up to a certain amount.
• Product liability insurance ’ this is similar to professional indemnity insurance, but covers you for legal costs and compensation if a customer is injured by a faulty product (rather than a service) that your business has designed, built or supplied.
• Commercial property insurance ’ when you own or lease your own business premises, you’ll definitely need to think about insuring your business property. There are two main types of commercial property insurance: 1) building insurance and 2) contents insurance. Building insurance protects your premises against fire, flood, weather damage or other threats to the fabric of the building. It will usually cover the costs of repairs and/or rebuilding. Contents insurance covers your business-related assets that are inside the building. This could be your stock, your office furniture, your computing equipment or any other items covered by the policy.
• Home-working insurance ’ over the pandemic, far more people have become either permanent or part-time homeworkers. And if your employees are working from their own home, rather than your premises, it’s important to check if they’re covered by your current insurance. Your employer liability insurance should cover homeworking, but make sure this is actually specified in the policy. It may also be that your employees are not fully covered by their own home insurance if they’re now working permanently from home. It’s a good idea to inform their insurance provider and to check whether they need to extend their home insurance policy to cover home-working and remote working.
• Travel insurance ’ we may have seen far less overseas and national travel over the pandemic, but travel is starting to bounce back as the world has opened up again. If you or your employees are going on work-related trips, you should look carefully at getting the right travel insurance for the trip. Your policy should cover illness, medical fees, cover for your business equipment and the costs of any alternative travel arrangements (if your planned flights/trains/transport is cancelled etc.)

By signing up for the main types of business insurance, you can be confident of trading with all the most likely risks covered and accounted for.

It’s worth noting that many insurers will also offer tailored, industry specific insurance for different sectors and business types. So there will be specific insurance policies for freelancers, construction businesses, hospitality companies or creative agencies etc. Talking to an insurer that specialises in your industry is a good way to cover all your bases quickly, with policies that are customised to fit your exact circumstances as a business.

Talk to us about finding the right insurance adviser

None of us know exactly what lies around the corner when it comes to running a business. So, making sure you’re fully insured takes away some of the worry and reduces the main risks.

If you want to make sure you’re using the best possible insurance, please come and talk to us.

Holiday breaks are a chance to recharge for the year ahead especially after the year we have had. We look forward to warmer weather and finally setting up an out-of-office email for the break. However, for business owners, this time is a stressful without careful cash-flow planning.

Even if you do continue to operate through the holiday season, your customers’ financial behaviour may not remain the same.

The strategies and tips shared below are generalised, however, we are here if you need to budget and prepare a cash-flow forecast. We can also help if you need assistance in applying for short term finance to get you through the break.

Why is cash-flow planning particularly important at this time of year?

Staff leave needs to be covered in addition to your normal fixed overheads like rent, creditors and tax compliance. The budget and forecasting process ensures you know your numbers and are prepared. If you are closing the doors for a bit, you won’t be driving revenue during this period and sales may take time to get started again in the new year.

Here are some simple strategies that can help

• Decide your holiday break dates ’ confirm these with staff, customers and suppliers.
• Budget and plan for annual leave ’ You may need to factor in temp staff.
• Decide – if you are going to pay out leave in full at the beginning of the break or continue to pay as usual throughout the break.
• Review your work in progress (WIP) – plan to complete jobs or services that can be invoiced and paid (remember if you don’t invoice and get paid before the break, you may not see the money for another month).
• Capacity planning – There is often a rush to get everything done before summer holidays, whether it’s the kitchen benchtop installed or the beauty treatment before the break, so make sure you have the capacity to maximise on this.
• Stock-take – Do you need to order in goods now to be able to complete work in progress? Check that there is stock on hand available.
• Making an arrangement with the Tax Office – if you find you can not make payments, it is possible to apply for an instalment arrangement. There are costs associated with this, however it may provide a solution that gets you through the holiday period. Talk to us, we can help.

Need financial support?

If you can’t make ends meet, now is the time to organise short term financial relief. Please let us know if you need any help with cash-flow forecasting, budgeting or finance applications.

If the rules around social functions are followed, staff events like your end-of-year party, or your summer barbecue are tax-deductible for you, as the employer, and tax-free for your staff.

This means you can claim back some of the expenses you incur when putting on a social event for your team, while also helping to build better team bonds.

Whether your party is taking place in the office, at a local restaurant or via Zoom for your remote-working teams, you can be confident that you can recoup some of these expenses by making the relevant claim – The HM Revenue & Customs (HMRC) rules apply equally to any online staff events and remote parties.

Meeting the rules for tax-exempt staff functions

The annual function exemption means that your company can deduct costs for tax when holding an eligible annual staff social event. It also means that your employees don’t pay tax or national insurance contributions (NIC) on costs relating to these social events.

This all sounds like good news for the company bank balance, but how does the exemption actually work? And what are the specific rules that you need to know about?

• How do I know if my event is eligible? ’ for your event to be eligible, it must be company-wide and meet the requirements of a structured social event; i.e. where food, drink and possibly entertainment are provided. As long as all staff are covered somewhere, there can be separate functions for branches, departments, or other office locations etc.
• What records do I need to keep? ’ as a company, you’ll need to keep records of who was invited to the social event, and who actually attended. You’ll also need to record the costs of putting on the event, including all associated travel and accommodation.
• What’s the expenses limit per person? ’ there’s a limit per attendee (including partners invited as guests) of £150 including VAT. This total can be split over multiple functions ’ e.g. over your Christmas party, plus an Easter party and a summer event. NOTE: this can’t be disguised client entertaining. Guests must be employees or their partners and not clients or suppliers etc.
• What happens if this limit is exceeded? ’ If the total cost per person is exceeded, the costs are still deductible for the company. However, if the cost of one or more individuals exceeds the £150 p/person limit, this would be seen as a taxable benefit for the employee (including the amount for their guests.)
• How does this work in practice? ’ if you hold three annual functions costing £70/£60/£40 per head, your choice may be to apply the exemption to the £70 and £60 functions (Total cost of £130 per head). The balance of £20 (from the £150 limit) is lost and the £40 is taxable and NI’able. Functions covered by the £150 exemption do not have to be reported on form P11Ds.

The annual exemption is a great benefit for your company and staff. And it’s worth noting that if you’re a one-person company, that you could equally apply the benefit to taking your spouse out for a social event.

Talk to us about claiming expenses for your staff events

If you’re looking to run a staff function in the near future, talk to us. We can help you ascertain if your planned function meets the annual exemption requirements, and how you can claim back your party costs as a tax-exempt expense.

Get in touch, if you want to discuss this further, or if you want to arrange to cover any tax and NI for your employees through a PAYE settlement agreement.

Christmas is nearly here, and it’s a great time to let your customers and team members know how much you appreciate them. But after another unsettled year ’ it’s not easy to know how much to spend or whether to throw a party.

Gifts, cards and donations

The traditional professional Christmas gift tends to be food-related: hams; hampers; bottles of wine or spirits. Those can be ordered online and sent out, although it’s best to avoid anything that will spoil considering current delivery delays and people who may not be working in the office.

For customers or clients who you know really well, something tailored to their personal interests can show you’ve been paying attention. And for both customers and staff, a handwritten card is a lovely touch and costs very little.

Another option is a donation on behalf. Many people really appreciate an email or card that lets them know you’ve donated money to a charity on their behalf, particularly if you can include details like, ’The local foodbank will use this donation to feed families on Christmas Day.â?

A coffee or lunch for higher value clients is an excellent way to build stronger relationships as well as making the most of the Christmas season. You might spend more this way, but for your best clients this can be far more memorable than a gift.

For your team, a hamper is probably a less popular choice. A Christmas bonus might be appreciated, but do run the numbers first. A supermarket voucher retains its full value, while a cash bonus must be taxed. Talk to your team ’ they may prefer a paid day off rather than any gift.

How much should you spend?

You might like to create categories based on how much your clients spend with you and how valuable they are to you. The top customers might all receive a larger gift, while the smaller customers might get a something more modest.

Christmas budgeting

Wondering how much each client or customer has spent? Not sure what you can afford to budget for Christmas gifts? We can help.

Get in touch and we’ll run the numbers to give you the insights you need.