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    Tag: HMRC

    HMRC to introduce new penalty points system in 2026

    Posted on by Rebecca Campbell

    From 2026, HMRC is replacing the longstanding automatic fines for late tax filings with a penalty points system as part of its Making Tax Digital (MTD) reforms. The aim is to make late-filing sanctions more proportionate and fairer by distinguishing between occasional ‘slip-ups’ and persistent non-compliance.

    What’s changing

    Under the current regime, missing the 31 January Self Assessment deadline triggers an automatic £100 fine, which can escalate quickly with daily and longer-term penalties.

    Under the new system:

    • Each missed deadline earns a penalty point
    • A £200 fine is charged for each late submission once a set points threshold is reached
    • Points accumulate against each filing obligation and can expire after 24 months or reset after a period of good compliance

    This is designed to penalise repeated late filing rather than isolated errors and give taxpayers a clearer path to correct behaviour.

    Points thresholds

    The number of points required before a fine is charged depends on how often you file:

    • Annual returns: penalty at 2 points
    • Quarterly updates (MTD): penalty at 4 points
    • Monthly returns: penalty at 5 points

    For example, missing two annual obligations within two years would trigger a £200 penalty under the new regime.

    Rollout timeline

    • Pilot phase (early 2026): HMRC is already trialling the points system with a group of taxpayers as part of MTD voluntary testing.
    • First rollout from 6 April 2026: Applies initially to sole traders and landlords with income over £50,000 who must join MTD for Income Tax.
    • Full rollout from 6 April 2027:  The system extends to all self-assessment taxpayers

    Importantly, HMRC will provide a soft landing in the first year: penalty points will not be charged for late quarterly updates for the initial year of MTD for Income Tax implementation, giving taxpayers time to adjust.

    What this means for taxpayers

    If you are self-employed, a landlord, or otherwise subject to Self-Assessment:

    • One occasional late submission won’t necessarily hit you with immediate fines
    • Repeated late filings still lead to penalties – and a £200 fine will be incurred for each late submission once the points thresholds are reached
    • Good digital record-keeping and calendar discipline will be even more important

    Filing regularly using MTD-compatible software and meeting deadlines remains the most effective way to avoid penalty points altogether.

    Stay prepared

    From 2026, late filing penalties will be based on accumulated points rather than automatic fines. While this makes the system fairer for occasional slip-ups, repeated missed deadlines can still trigger financial penalties.

    Now is the time to review your filing processes, ensure your records are MTD-compliant, and put a plan in place to avoid points building up.

    Our team can help. Whether it’s assessing your current compliance, setting up effective digital record-keeping, or providing ongoing support, we can guide you through the changes and help you stay penalty-free. Get in touch to arrange a 1-1 discussion by emailing enquiries@pmm.co.uk.

     

    1 million people missed the Self Assessment tax return deadline

    Posted on by Rebecca Campbell

    According to HMRC, 1 million taxpayers missed the 31 January 2026 deadline for submitting their 2024/25 income tax Self Assessment.

    If you’re one of those who has yet to submit your tax return, don’t delay! We recommend submitting your Self Assessment as soon as possible. Here’s what you need to know:

    Penalties for late filing

    • Immediate penalty: £100 fixed penalty, even if no tax is owed
    • 3 months late: £10 per day (up to a maximum of £900)
    • 6 months late: Additional penalty of 5% of tax due or £300 (whichever is greater)
    • 12 months late: Another 5% penalty on tax still owed

    If you can’t pay your tax bill

    If you’re unable to pay your tax bill, engaging with HMRC and a trusted tax adviser as early as possible is crucial – early engagement gives you the best chance of mitigating any financial penalties. Options such as ‘time to pay’ arrangements may help you avoid additional penalties, although late payment interest will still accrue.

    Take action now

    If you’ve yet to submit your 2024/25 tax return and need help or advice to minimise penalties, please speak with your usual PM+M adviser or email us at enquiries@pmm.co.uk.

     

    Protect yourself or your business with Tax Enquiry Fee Protection

    Posted on by Rebecca Campbell

    This year, our Tax Enquiry Fee Protection Service will be mailed to eligible clients by post during the month of February 2026. Be sure to look out for it – this could save you significant stress, time, and money.

    HMRC enquiries are becoming more frequent, and while this isn’t unexpected, it can be both challenging and costly to deal with. Even if no extra tax is due, the professional fees to resolve an enquiry can still add up quickly. That’s where our service steps in.

    With our Tax Enquiry Fee Protection Service, you’ll benefit from:
        •    Expert representation from trusted professionals when HMRC comes calling
        •    Peace of mind that professional fees of up to £100,000 are covered
    •    Complimentary access to My Business Hub – a digital business toolkit and HR advice service

    This is more than protection — it’s a safeguard for you and/or your business, your finances, and your peace of mind.

    Keep an eye out for the full details arriving in the post shortly. Don’t miss this chance to protect you and/or your business from the unexpected.

    In the meantime, you can find more information here, or contact us by emailing feeproreplies@pmm.co.uk

    APR and BPR thresholds rise to £2.5m – what it means for family businesses

    Posted on by Rebecca Campbell

    The threshold for 100% relief under Business Property Relief (BPR) and Agricultural Property Relief (APR), which the government had previously announced would be £1 million per estate, is to now be set at £2.5 million per estate, effective from 6 April 2026. This change was quietly announced by HMRC through a press release on their website on 23 December 2025. This represents another awkward U-turn for the government in terms of its strategy around tax policy, but one which will be welcomed by business owners and farmers alike.

    For family-owned businesses and estates, this change offers greater protection from Inheritance Tax (IHT) than was originally anticipated, following the October 2024 Budget. However, the announcements may frustrate those families who have already set plans in place to deal with their succession planning, in the expectation of a £1m allowance being introduced.

    What the change means in practice

    From 6 April 2026, the first £2.5 million of BPR and APR qualifying assets should receive full IHT relief, with any value above that eligible for 50% relief. Spouses and civil partners can combine their allowances, meaning a couple could pass up to £5 million of qualifying assets free of IHT, on top of the usual nil-rate bands.

    There are also set to be provisions where the death of one party to a marriage occurred before 6 April 2026. In those circumstances, it is envisaged that the survivor’s estate will be able to benefit from a “transferable” allowance of £2.5m – effectively meaning that widowers are no worse off in terms of the allowance they would be entitled to compared to a married couple where both parties are still alive.

    The £2.5m allowance also applies to assets held in trusts for the purposes of calculating the 10 year anniversary charges. For business/agricultural assets held in trusts, the value of which is over £2.5 million, 50% relief will apply and IHT will be due on the excess at rates of up to 6%.

    Who benefits most

    This increase is particularly relevant for family-owned businesses where:

    • Business assets make up a significant proportion of the estate
    • Multiple generations are involved in ownership or management
    • The estate has grown over time and is likely to exceed the previous £1 million cap

    Why planning is still crucial

    Even with the higher allowance, estates above £2.5 million may still face some exposure. Now is an ideal time to:

    • Review business and family asset structures
    • Consider whether lifetime gifting or intergenerational transfers are still appropriate given the increase in headroom – is it better to hold on to assets and benefit from a tax free CGT uplift on death, for example?
    • Factor future business growth and succession plans into estate planning

    Planning ahead ensures family businesses can pass on wealth efficiently while maintaining control and continuity.

    Key takeaway

    The higher APR and BPR thresholds present a welcome change to what the government were originally proposing.

    Whilst many estates may will now be fully covered by IHT reliefs (in the context of business/agricultural assets), careful planning remains important for higher-value businesses, businesses which are likely to increase in value, or complex family arrangements to make the most of the relief and protect family wealth.

    For guidance on how these changes affect your family business or estate, contact Roger Phillips to review your succession and estate planning ahead of April 2026.

    Getting a mortgage in a changing rate market: how to improve your chances

    Posted on by Georgia Flatley

    With the constantly evolving interest rate landscape, getting a mortgage can sometimes be difficult, especially as lenders adjust their criteria and affordability checks to reflect market uncertainty.

    In this short blog, we’ll look at some of the best ways to improve your chances of securing a mortgage. We’ll also share practical tips to help you navigate the process with confidence.

    Get your documents ready

    Ensure you have your latest payslips, self-employed income, bank statements, proof of ID, and any relevant credit reports to hand. Having these prepared in advance can speed up the mortgage application process and help lenders assess your affordability more efficiently.

    Amend any credit issues early

    When it comes to mortgage applications, credit score is a key element that lenders will look at. Before your lender looks at your credit report, have a look yourself and amend any issues that could hinder your chances of being accepted for a mortgage. Some things to look for include outstanding credit card balances, any loans such as car finance or student loan, and other credit commitments that could affect your score.

    Consider your employment status

    Are you self-employed? If you are, make sure your latest set of accounts and personal tax returns are all filed correctly with HMRC and up to date. You may be required to provide more documentation such as company bank accounts, so be prepared in advance.

    Know what you can afford

    Buying a house is a huge financial step, so knowing your affordability will help assist you in the preparation process. Start by reviewing your income, expenses, and savings goals. Tools like mortgage calculators and stamp duty estimators can help you build a realistic picture of how much you’ll need to save. Knowing your limits early on will help you focus your search and approach lenders with confidence.

    Sign up to the electoral register

    Registering on the electoral can in fact boost your credit score and assist in your chances of getting a mortgage. It is as simple as visiting this site Register to vote – GOV.UK and filling out your details.

    Budget or reduce spending

    Lenders will look at your spending patterns on bank statements and more, so it is important to demonstrate financial discipline. Consider using apps such as Monzo to help you budget and track your monthly spending, so that you can assist in building a decent deposit.

    Look at closing any inactive accounts

    You should always look at closing any inactive/ joint accounts that are associated with you. Closing unused accounts helps protect your credit profile and reduces the risk of fraudulent activity. It also ensures that any negative credit history associated to those accounts doesn’t fall on your credit profile.

    Speak to a mortgage adviser

    Speaking to a mortgage adviser is a crucial step in the mortgage journey. They’ll take the time to understand your financial situation, assess your affordability, and help you build a clear plan tailored to your needs and goals.

    At PM+M, our expert mortgage director, Mark Chadwick, is here to help you from your first conversation, all the way to purchasing stage. With access to a wide range of lenders and market knowledge, Mark can offer informed recommendations and help you make confident, well-informed decisions about your future home.

    Contact Mark using the button below.

    PM&M Mortgages Ltd is an Appointed Representative of The Right Mortgage Ltd, which is authorised and regulated by the Financial Conduct Authority.

    YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

    First Making Tax Digital for Income Tax mandation letters issued by HMRC

    Posted on by Rebecca Campbell

    Sole traders and landlords who submitted their 2024/25 Self Assessment tax return by the end of August 2025 will soon receive the first notifications from HMRC, confirming that they must comply with Making Tax Digital (MTD) for Income Tax from April 2026.

    Who needs to comply with MTD for Income Tax?

    You’ll be required to join MTD for Income Tax from April 2026 if your 2024/25 tax return shows gross income from self-employment and/or property exceeding £50,000.

    HMRC will be sending out official mandation letters to those taxpayers to inform them that they must follow the new digital reporting rules.

    Understanding your responsibilities

    Even though HMRC is issuing mandation letters, it remains your responsibility to:

    • Check whether you fall within the scope of MTD for Income Tax from April 2026
    • Sign up for MTD for Income Tax when required

    If you believe you meet the criteria but haven’t received a letter, you should still register for MTD.
    If you’re unsure, our team of MTD experts can help you determine whether you fall under the requirements.

    When are the letters being sent?

    • November 2025: The first batch of mandation letters is now being issued to those who filed their 2024/25 tax return by 31 August 2025.
    • February–March 2026: HMRC will send letters to those who file their returns between September 2025 and January 2026.

    Towards the end of November 2025, HMRC will also send “prompt letters” to unrepresented taxpayers who haven’t yet filed their 2024/25 tax return. These letters act as a reminder of the upcoming April 2026 start date, based on information from 2023/24 tax returns.

    What the letters include

    Both mandation and prompt letters explain:

    • What’s required under MTD for Income Tax
    • Who needs to comply from April 2026
    • How to prepare and sign up

    Each letter also contains a QR code linking to further guidance and resources from HMRC.

    Get in touch

    If you fall under the scope of Making Tax Digital and aren’t sure where to start – or haven’t yet ensured you’ll be compliant from April 2026 – get in touch with our MTD experts.

    We’ll talk you through your options and next steps.
    📧 Email: enquiries@pmm.co.uk

    Be prepared: payroll and bank holiday guidance for the festive season

    Posted on by Rebecca Campbell

    With the festive season on the horizon, it’s the perfect time to start planning for the impact of bank holidays and ensure payroll processes remain accurate and compliant. Early preparation helps avoid disruption, supports employees and ensures smooth operations over the holiday period.

    Bank holidays

    • Christmas Day – Thursday, 25 December 2025
    • Boxing Day – Friday, 26 December 2025
    • New Year’s Day – Thursday, 1 January 2026

    As all three holidays fall on weekdays, no substitute days are required this year, making scheduling more straightforward for businesses.

    Holiday pay – what employers and employees should know

    Under the Working Time Regulations, employers are not legally required to provide paid leave specifically for bank holidays. However, these days may be included within the statutory 5.6 weeks (up to 28 days) of annual leave.

    For irregular hours workers, holiday pay depends on the system used:

    • Accrual-based: Holiday entitlement is based on hours worked. Taking time off over Christmas uses accrued leave.
    • Rolled-up holiday pay: Holiday pay is included in regular wages, so no additional payment is due for bank holidays.

    Some employers offer enhanced contractual terms, such as extra pay for working on Christmas Day or New Year’s Day. Employees should check their contracts and clarify arrangements with their employer well in advance.

    Early payroll? RTI reporting is crucial

    If your business plans to pay staff earlier in December due to festive closures, it’s essential to follow HMRC’s Real Time Information (RTI) guidance:

    • Always report the contractual payment date, not the early payment date, on your Full Payment Submission (FPS). Example: If you pay on 20 December but the usual payday is 31 December, report 31 December as the payment date.

    This is especially important for employees receiving Universal Credit, as benefit assessments are based on reported earnings. Incorrect reporting can lead to reduced or missed payments, causing financial hardship.

    Key actions for employers – get ahead now

    • Review payroll schedules and confirm payment dates.
    • Communicate holiday pay policies clearly, especially for irregular hours workers.
    • Ensure RTI submissions reflect the correct contractual payment dates.
    • Consult HMRC guidance to stay compliant and avoid penalties.

    Get in touch

    Planning ahead ensures a smooth and stress-free festive period for everyone involved. If you wish to discuss any of the above in further detail, please get in touch with Julie Mason, director of payroll at PM+M using the button below.

    Important changes to how HMRC handles tax on bank and building society interest

    Posted on by Rebecca Campbell

    From October 2025, HMRC will issue Simple Assessment letters for any tax owed on interest earned from banks and building societies between April 2024 and April 2025.

    In our latest blog, tax manager, Julie Walsh, explains how these changes could affect you and how to ensure your tax position remains accurate and compliant.

    What’s changing?

    If you receive bank or building society interest during the 2024–25 tax year, HMRC may send you a Simple Assessment letter showing how much tax you owe.

    Some individuals may already have received a Simple Assessment for 2024–25 that did not include interest income. If HMRC later receives updated information from your bank or building society, they may send a second Simple Assessment for the same year to include this interest.

    The second letter will show your total tax owed for the year, including any amount from the first letter. If you’ve already made a payment, deduct the amount paid from the new total to calculate what remains due.

    Paying tax on savings interest

    If you owe tax on savings interest, your Simple Assessment letter will:

    • Explain how much tax you owe and why
    • Provide details on how to pay

    If you’re unsure or would like assistance reviewing your letter, we can help verify your figures and ensure any payments are properly recorded.

    Why the figures may differ

    You may notice that your tax code or bank statements don’t match the figures shown on your Simple Assessment. This can happen because:

    • Some interest is tax-free under your personal savings allowance
    • Only taxable interest is included in tax codes
    • HMRC may use estimates based on previous data when preparing assessments

    Key points to consider

    • Automatic reporting – Banks and building societies report the interest you earn to HMRC each year. This may appear on your Simple Assessment even if you didn’t declare it.
    • Tax-free allowances: Most people can earn a certain amount of interest without paying tax (personal allowance and personal savings allowance)
    • Using your personal allowance: If you haven’t used all of your personal allowance on wages, pensions, or other income, you can apply it to make some, or all, of your interest income tax-free.
    • Personal savings allowance: Your allowance depends on your tax band:
      • Basic-rate taxpayers: up to £1,000 tax-free
      • Higher-rate taxpayers: up to £500 tax-free
      • Additional-rate taxpayers: no allowance
    • Estimate your tax: HMRC provides an online calculator so you can check roughly how much tax you may owe on your savings interest before paying.

    What to do if you disagree with your assessment

    If you believe your Simple Assessment is incorrect, contact HMRC within 60 days of the date on the letter to formally dispute it.

    If you’re already registered for Self Assessment for that tax year, should contact HMRC to withdraw the Simple Assessment.

    How we can help

    At PM+M, we can:

    • Review your Simple Assessment for accuracy
    • Ensure your interest income has been reported correctly
    • Calculate any overpayments or underpayments of tax
    • Handle communication with HMRC on your behalf
    • Prepare or adjust your Self Assessment tax return to reflect the correct figures

    If you receive a Simple Assessment letter or have any questions about how these changes affect your savings or tax position, please get in touch with tax manager, Julie Walsh, by clicking the button below.

    Five tips to get ahead with your 2024/25 Self Assessment tax return

    Posted on by Rebecca Campbell

    The deadline for filing your 2024/25 Self Assessment tax return may feel far away, but starting early can save you time, stress, and potentially money. At PM+M, we know from experience that a proactive approach makes the process much smoother and more efficient.

    Here are our five top tips to help you get ahead:

    1. Know your key deadlines

    The 2024/25 tax year runs from 6 April 2024 to 5 April 2025. For this period, the following dates apply:

    • 5 October 2025 – Register with HMRC if this is your first return
    • 31 October 2025 – Deadline for paper tax returns
    • 30 December 2025 – Deadline for online filing if you want HMRC to collect any tax you owe (under £3,000) automatically through your tax code for the 2026–2027 tax year. You must already be paying tax through PAYE
    • 31 January 2026 – Deadline for online tax returns and payment of any tax due

    Mark these dates in your diary early to avoid late filing penalties and interest charges.

    1. Get organised early

    Don’t wait until January to gather your paperwork. HMRC requires details of your income, pensions, dividends, rental income, expenses, and any other earnings for the year ending 5 April 2025. Keeping everything together, whether digitally or in a dedicated folder, will make completing your return quicker and easier.

    Make sure you keep track of:

    • Income records: Payslips, self-employment accounts, dividends, and ‘side hustle’ earnings
    • Expenses: Office supplies, mileage, and other allowable deductions
    • Financial records: Bank interest, pensions, investment statements, and charitable donations
    1. Track your expenses as you go

    If you’re self-employed or receive rental income, recording expenses in real time prevents the January scramble through old bank statements. Tools such as accounting apps, spreadsheets, or cloud-based software can help you stay organised – and ensure you don’t miss out on valuable deductions.

    1. Make the most of allowances and reliefs

    Understanding the reliefs and allowances available to you can reduce your tax bill. For example:

    • Pension contributions
    • Gift Aid donations
    • The personal savings allowance
    • Business-related costs such as office and travel expenses, professional fees, and subscriptions
    • Landlord expenses including maintenance and letting agent fees

    Taking advantage of these can significantly cut the amount of tax you pay.

    1. Plan for payments on account

    If your tax bill is over £1,000, HMRC may ask you to make “payments on account” towards the following year. These fall due on 31 January 2026 and 31 July 2026. Factoring this into your cash flow early will help you budget effectively and avoid unwelcome surprises.

    Start early, stress less

    The earlier you begin preparing your Self Assessment, the more time you’ll have to understand your position, make use of available reliefs, and spread the cost of any payments due. By starting now, you’ll avoid last-minute pressure and gain greater control over your tax planning.

    At PM+M, we’re here to support you throughout the process and beyond. If you’d like to discuss your 2024/25 Self Assessment or wider tax planning, please get in touch with our team by emailing enquiries@pmm.co.uk.

    Nearly 3 million taxpayers to join Making Tax Digital – are you ready?

    Posted on by Rebecca Campbell

    HMRC’s latest figures reveal that nearly 3 million individuals with self-employment or property income will be required to comply with Making Tax Digital for Income Tax (MTD for ITSA) between April 2026 and April 2028.

    At PM+M, we understand that MTD can feel daunting for businesses and landlords alike. With deadlines approaching, now is the time to prepare — and we’re here to make the transition seamless.

    The phased rollout of MTD

    HMRC is introducing MTD gradually, based on income levels:

    • From April 2026 – Anyone with self-employment or property income above £50,000 must keep digital records and submit quarterly updates. This affects around 864,000 taxpayers.
    • From April 2027 – Those with income between £30,000 and £50,000 join the scheme, bringing in an additional 1,077,000 taxpayers.
    • From April 2028 – The final group, with income between £20,000 and £30,000, will be included, adding 975,000 more taxpayers.

    By the end of the rollout, around 2.9 million individuals will be within the scope of MTD ITSA.

    Who will be affected?

    HMRC data shows that large numbers of people will be drawn into MTD as thresholds lower:

    • More than 600,000 self-employed individuals and 260,000 landlords have income between £20,000 and £30,000 – they will join in 2028
    • Around 800,000 self-employed individuals and 182,000 landlords fall within the £30,000 to £50,000 band – they will be required to comply from 2027
    • Over 600,000 self-employed individuals, 118,000 landlords, and 141,000 people with mixed income already earn above £50,000 – meaning they are first in line from 2026

    This illustrates the scale of the change: it’s not just high earners, but also smaller businesses and landlords who will be affected.

    The digital readiness gap

    One of the biggest challenges is that many taxpayers are still unprepared for digital tax reporting:

    • 65% of those in scope currently use an authorised agent (such as an accountant)
    • Among taxpayers without an agent, 83% do not use software to submit returns
    • By contrast, most represented clients already use software – meaning those without professional support are the least prepared

    Why you should act now

    With nearly three million people moving to MTD, waiting until the deadline could put you at risk of non-compliance, unnecessary penalties, or administrative headaches. Transitioning early gives you time to:

    • Get comfortable with digital record-keeping
    • Adopt MTD-compliant software
    • Ensure you’re submitting updates correctly and on time

    How PM+M can help

    We provide tailored solutions to make your MTD journey stress-free:

    • Software setup + training – we’ll recommend and implement the right digital tools for your business
    • Quarterly submissions – we can manage updates directly with HMRC, keeping you compliant
    • Ongoing support – from troubleshooting software to tax planning, our expert team is here year-round

    Whether you’re a sole trader, landlord, or running a small business, we’ll ensure you stay ahead of the curve.

    Join us at our MTD drop-in days

    To help you prepare, we’re hosting two free drop-in days where you can speak directly with one of our MTD specialists about any queries you may have – no appointment needed.

    Thursday 25 September – Blackburn office (New Century House, Greenbank Technology Park, Challenge Way, Blackburn, BB1 5QB)

    Tuesday 30 September – Bury office (First Floor, Sandringham House, Hollins Brook Park, Pilsworth Road, Bury, BL9 8RN)

    Both sessions run from 10am to 4pm. Throughout the day, our team will be on hand to answer your questions on how MTD for ITSA will affect you, what digital records you’ll need to keep, the software options available, and how to make the transition to cloud accounting as smooth as possible.

    These events are open to everyone – whether you’re a sole trader, landlord, or part of a finance team – so feel free to drop in for a brew and a chat.

    Don’t leave MTD until the last minute

    The shift to digital tax reporting is one of the biggest changes in decades. With phased deadlines already set, the sooner you act, the smoother the process will be.

    Contact PM+M’s MTD experts today to discuss how we can help you transition to Making Tax Digital with confidence. Email enquiries@pmm.co.uk for more information.

     

    HMRC to issue 1.4 million letters for unpaid tax

    Posted on by Rebecca Campbell

    HMRC is set to send around 1.4 million letters over the coming months as part of its annual compliance exercise to recover unpaid income tax for the 2024/25 tax year.

    The letters, known as Simple Assessments, are issued when HMRC identifies income that hasn’t been fully taxed through the Pay As You Earn (PAYE) system or Self Assessment. These assessments typically relate to income exceeding the individual’s personal allowance, where additional tax is owed.

    Who will receive these letters?

    The letters are being sent to individuals whose financial records suggest underpaid tax due to:

    • Interest from savings or dividends
    • Income from second jobs or freelance work
    • Overclaimed tax-free allowances
    • Pensions that were not fully taxed

    HMRC uses data from employers, banks, building societies, financial institutions, and the Department for Work and Pensions (DWP) to determine whether extra tax is due.

    Most letters are expected to be issued during July and August, in line with HMRC’s usual summer compliance schedule. However, additional letters may continue to be sent into the Autumn, depending on when new data becomes available.

    What should taxpayers do?

    If you receive a Simple Assessment letter, it’s important to review it carefully. You’ll have until 31 January 2026 to:

    • Pay the full amount owed, or
    • Agree a payment plan with HMRC

    Payments can be made through GOV.UK, by bank transfer, or cheque.

    If you believe your assessment is incorrect, you can:

    • Query it within 60 days of receipt. If HMRC agrees, a revised notice will be issued.
    • If the query is rejected, you still have the right to appeal online within 30 days.

    Why is HMRC using Simple Assessments?

    Simple Assessments are part of HMRC’s ongoing effort to reduce the administrative burden for taxpayers with relatively straightforward tax affairs. The system allows HMRC to collect unpaid tax without requiring a full Self Assessment return, streamlining the process for both individuals and the tax authority.

    Don’t ignore the letter

    While these notices are routine, HMRC stresses that failure to act could result in penalties, interest charges or even enforcement action.

    Get in touch

    If you’re unsure whether your notice is accurate or need help understanding your tax position, get in touch with a member of the tax team by emailing enquiries@pmm.co.uk.

    HMRC issues tax warning letters to savers

    Posted on by Rebecca Campbell

    If you’ve earned interest on your savings recently, you may receive a letter from HMRC about a potential tax bill. With high interest rates and frozen personal savings allowances, it’s estimated that over a million additional savers could now be caught in the tax net.

    Will I receive a letter from HMRC?

    Each year, HMRC reviews savings data reported by banks and building societies. If your savings interest exceeds your tax-free Personal Savings Allowance (PSA) — £1,000 for basic rate taxpayers, £500 for higher rate, and £0 for additional rate taxpayers — you may receive a tax calculation letter.

    These letters are not sent at random. They’re part of HMRC’s routine checks to ensure individuals are paying the correct amount of tax. However, it’s important to note – even if you don’t receive a letter, you are still responsible for any tax owed — and HMRC encourages you to get in touch if you think something may have been missed to avoid potential penalties.

    I’ve received a letter from HMRC – what should I do?

    1. Don’t panic – A letter doesn’t necessarily mean a large bill, but it does require attention.
    2. Check the details – Review how much interest you earned and compare it to your allowance.
    3. Respond promptly – If you disagree with the figures or need to make corrections, contact HMRC as soon as possible.
    4. Plan for tax deductions – If you’re employed, HMRC may adjust your tax code to recover the amount through PAYE, affecting your monthly take-home pay.

    Why is this happening now?

    Interest rates on some savings accounts have reached 5–6%, making it much easier to exceed the PSA. As a result, many savers who’ve previously not had to worry about tax on their interest income are now facing unexpected bills — especially those not in the Self Assessment system.

    Looking ahead

    Forecasts suggest over 2 million people could face a savings tax bill from HMRC in the 2024–25 tax year — a significant rise from previous years. It’s more important than ever to be aware of how much interest you’re earning and understand your potential tax liability.

    Get in touch

    If you’ve received a letter from HMRC and are unsure of next steps — or simply want to understand how this could affect you — we’re here to help. Get in touch at enquiries@pmm.co.uk to discuss your situation in more detail.

     

    MTD for ITSA is coming—key details from HMRC’s latest update

    Posted on by Georgia Flatley

    HMRC will launch a campaign this month to inform taxpayers about Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA).

    Initially, HMRC is contacting sole traders and landlords with earnings over £50,000, informing them of the upcoming MTD for ITSA requirements. Partnerships and limited companies will be included in the MTD for ITSA initiative at a later date.

    What is MTD for ITSA?

    Under MTD for ITSA, affected taxpayers will need to meet additional reporting obligations alongside the traditional Self Assessment tax return. Businesses and landlords will be required to:

    • Keep digital records of income and expenses using MTD-compatible software
    • Submit quarterly updates to HMRC detailing their earnings
    • File an end-of-year declaration to confirm final tax calculations

    What information is included in HMRC’s MTD for ITSA letter?

    If your 2023/24 Self Assessment tax return indicates total income of £50,000 or more, you should receive a letter from HMRC. This letter outlines:

    • The new MTD for ITSA requirements
    • The process for year-end submissions
    • Available support and resources
    • Potential penalties for non-compliance

    What software will you need to prepare for MTD?

    To comply with MTD for ITSA, you’ll need software compatible with HMRC’s systems. There are already several options available, including free software. It’s important to select a solution that fits your business needs. You can find a list of compatible software on the Gov.uk website.

    How can you prepare?

    1. Choose MTD-compatible software that suits your business
    2. Understand your quarterly reporting obligations
    3. Start keeping digital records now
    4. Review your business structure
    5. Seek professional advice

    For more details, check out our recent blog on preparing for MTD for ITSA.

    How can PM+M help?

    If you’ve received a letter from HMRC—don’t worry! Our MTD specialists can guide you through the changes, from selecting the right software to ensuring compliance with digital reporting.

    Get in touch with us at enquiries@pmm.co.uk to ensure you’re fully prepared.

    HMRC delays Real-Time Information (RTI) hours reporting changes until 2026

    Posted on by Georgia Flatley

    In an email to software developers, it has been confirmed that HMRC’s planned changes to Real-Time information (RTI) hours reporting will be delayed until 2026 at the earliest. Originally set to be introduced from April 2025, the changes have now been pushed back to give employers and payroll professionals additional time to adapt to the new requirements.

    The email reads:

    Employees’ hours data – requirement delayed

    Due to delays owing to the General Election and the lead-in time required to upgrade software and processes to prepare for implementation, employers will now not be required to start providing more detailed employees’ hours data through PAYE Real Time Information returns from April 2025. This requirement will not apply until April 2026 at the earliest. Final decisions on whether to go ahead with the regulations and any timelines will remain subject to decisions by the new government.

     

    Understanding RTI and the planned changes

    RTI was introduced in 2013 as a means for employers to report payroll information to HMRC in real-time, every time their employees are paid. This system was designed to improve the accuracy of tax and benefits calculations and to ensure that information on earnings is up to date. However, one area that has seen persistent challenges is the reporting of employees’ working hours, which has a direct impact on the calculation of entitlements such as Universal Credit.

    HMRC’s planned changes to RTI aimed to standardise the way working hours are reported, ensuring greater consistency and accuracy in the data provided by employers. Under the new system, employers would have been required to report the actual number of hours worked by each employee rather than providing a broad estimate. This change was intended to help HMRC better assess income levels for benefits purposes, ensuring that individuals receive the correct entitlements based on their actual working hours.

     

    Implications for employers

    For employers, the delay offers a temporary reprieve from the additional reporting requirements, but it also extends the period of uncertainty. While the extra time may be welcomed by those who were concerned about the immediate impact of the changes, it also means that businesses must continue to operate under the existing system for another year. This could create challenges for employers who were already gearing up for the changes and now need to adjust their plans accordingly.

    The delay may also have implications for employees, particularly those on variable hours contracts who rely on accurate reporting for their benefits. Without the changes to RTI, there is a risk that discrepancies in reported hours could continue to affect benefit calculations, potentially leading to under- or overpayments.

     

    Preparing for the future

    Despite the delay, it is important for employers to start preparing for the eventual implementation of the RTI changes. This includes reviewing existing payroll processes, ensuring that systems are capable of accurately tracking and reporting hours worked, and staying informed about any further updates from HMRC.

    While the delay in the RTI hours reporting changes provides short-term relief for businesses, employers must use this time wisely to prepare for the future, ensuring they are ready to comply with the new requirements when they come into effect in 2026.

    Get in touch

    If you have any questions about HMRC’s latest guidance and the delay to the implementation of RTI hours reporting, or would like to speak to our team of experts to discuss how you can prepare now for the changes due to come into force in 2026, get in touch by emailing enquiries@pmm.co.uk.

     

     

    Basis period reform – how could it affect me?

    Posted on by Rebecca Campbell

    What is the Basis Period Reform?

    The basis period reform is a significant change in the way unincorporated businesses report their profits to HMRC via self-assessment.  The changes will affect businesses who do not currently draw up accounts to 31 March or 5 April each year.  Those businesses will start to pay tax on the profit between 6 April and 5 April each year, instead of the profit from the accounting period ending in the tax year.

    There is a transitional period, which is the 2023/24 tax year where additional profits will have to be taxed to bring individuals in line with the tax year.  From the 2024/25 tax year, all unincorporated businesses will report profit between 6 April to 5 April each year, regardless of their accounting year end.

    You may wish to change your accounting year end to align to the tax year to avoid apportioning profits from two accounting periods each year.

    Why is the Basis Period Reform being introduced?

    HMRC are introducing the rules to align more accounting year ends with the tax year in a move towards a digital tax system.  The reform aims to simplify and standardise the reporting of trading income for unincorporated businesses via self-assessment.

    Who will be affected?

    The reform will affect:

    • Sole traders, partnerships and LLPs who do not currently have a 31 March to 5 April accounting period.
    • Trading trusts and estates
    • Businesses starting on or after 6 April 2024, as their profits will be taxed on a tax year basis each year

    Sole traders and partnerships with a 31 March to 5 April accounting year-end will not be affected unless they have unused overlap relief.

    The rules do not apply to limited companies.

    How will businesses be affected?

    For the 2023/24 transitional year, all unincorporated businesses will need to report the profit of their normal accounting year end, plus the profit to the 31 March 2024 or 5 April 2024.

    The impact of this means extra profits could be taxable and due for payment to HMRC by 31 January 2025.

    To help with cash flow, there are reliefs available to spread this extra profit (known as transitional profit) over 5 years after deducting any overlap relief available to you.

    Overlap relief

    Overlap profits can arise in the first few years of trading or following a change in accounting date, which are essentially profits which have been taxed twice.  The overlap profits, known as overlap relief, must be offset during the 2023/24 transition year or they will be lost.

    Transition period and key dates

    • 2023/24 tax year: transition period for adjusting to the new rules
    • 2024/25 tax year: new rules fully in effect, requiring all businesses to align their reporting with the tax year

    Get in touch

    If you have any questions on how to report overlap relief in your 2023/24 tax return, or have any questions about basis period reform, get in touch with the PM+M tax team by emailing enquiries@pmm.co.uk.