Big changes are on the horizon for landlords and self-employed individuals earning more than £50,000 a year. From April 2026, HMRC will require you to follow the Making Tax Digital (MTD) rules for Income Tax Self-Assessment (ITSA) – transforming how you report your income and keep your records.

What Is MTD for Income Tax?

MTD is part of HMRC’s plan to modernise the UK tax system by replacing the traditional once-a-year tax return with a fully digital approach. If you’re affected, you’ll need to:

✔️ Keep digital records
✔️ Submit quarterly updates to HMRC using MTD-approved software
✔️ Submit an end-of-period statement and a final declaration annually

Who Will Be Affected?

From 6 April 2026, MTD for Income Tax will apply to:

• Landlords with gross rental income over £50,000 a year (including both UK and overseas property); and
• Sole traders and partnerships with annual business income above £50,000.

👉 Important: The £50,000 threshold refers to income before expenses, not your profit.

From April 2027, the system will also extend to those earning between £30,000 and £50,000. So, if you’re just over that £50,000 mark in the 2024–25 tax year, you’ll be brought into the system in the first wave.

What You Should Be Doing Now

2026 may seem far off, but preparing now will save you hassle later. Here’s how to get ahead:

🔹 Go digital – Start using software to track income and expenses
🔹 Talk to us – We can recommend MTD compliant tools and support your transition
🔹 Stay informed – We’ll keep you up to date as HMRC releases more details

Please also see: https://www.gov.uk/government/collections/making-tax-digital-for-income-tax

Why It Matters

This isn’t just about ticking boxes for HMRC. Getting it wrong could mean penalties, missed deadlines or poor record-keeping, all of which can hurt your business.

At An Accounting Gem, we’re here to help you stay ahead of the curve. Whether you’re a seasoned landlord or just starting your self-employment journey, we can guide you through what MTD means for you and how to get ready with confidence.

Got questions? We’ve got answers.
📞 Give us a call or pop into the office – let’s chat about your next steps.

Please see another An Accounting Gem blog:  https://www.aag-accountants.co.uk/big-tax-changes-for-uk-businesses-what-you-need-to-know-from-hmrcs-spring-2025-update/

If you’re registered for Self-Assessment in the UK, this is an important alert about your payment on account that’s due by 31 July 2025.

Understanding how payments on account work — and when you can reduce them — could help you manage your cashflow and avoid paying too much tax too soon.

What Are Payments on Account?

Payments on account are advance payments towards your income tax and Class 4 National Insurance for the current tax year (2024-25).

HMRC usually asks you to make payments on account if your last Self-Assessment tax bill (for 2023-24) was more than £1,000.

You normally pay in two chunks:

• First payment: by 31 January 2025
• Second payment: by 31 July 2025

Each payment is about 50% of your previous year’s tax bill.

Example:
If your 2023-24 tax bill was £6,000, your payments on account for 2024-25 would be two instalments of £3,000 each.

The July 2025 Payment

Your second payment on account for the 2024-25 tax year is due by 31 July 2025.

It’s really important to make sure you have enough money set aside. If you miss it, HMRC can charge interest and penalties.

What If Your Income Has Dropped?

If you think your income for 2024-25 will be lower than it was in 2023-24, you might not need to pay as much.

You can ask HMRC to reduce your payments on account.
But you’ll need to give them a sensible estimate of your new, lower income.

⚠️ Warning:
If you guess too low, you might have to make a bigger balancing payment later — and HMRC could add penalties.

Please also see:  https://www.gov.uk/guidance/claim-to-reduce-payments-on-account

How to Reduce Your Payments on Account

You have two ways to apply:

1. Online:
   Log in to your HMRC online account using your Government Gateway ID and password.
2. By post:
   Complete a form SA303 and send it to HMRC.

It’s a good idea to apply early — well before the 31 July 2025 deadline — to give HMRC time to sort it out.

Example:

Suppose your 2023-24 tax bill was £6,000.
Your two payments on account for 2024-25 would each be £3,000.

But now you expect your 2024-25 bill to only be £3,000.
You could ask HMRC to cut each instalment down to £1,500 instead.

What You Should Do Now

✅ Review your income:
Estimate what you’ll earn and owe for 2024-25.

✅ Compare:
Check if it’s lower than your 2023-24 figures.

✅ Apply to reduce:
If needed, send your request to HMRC online or using form SA303.

✅ Keep records:
Track your income and expenses carefully — you might need to prove your estimate was reasonable.

Need Help?

We can help you check your figures, estimate your tax and handle the reduction request for you.

Contact us today to avoid overpaying and stay ahead of your July 2025 Self-Assessment deadline!

Sources:

• HMRC: Payments on account
• HMRC: Form SA303 – Reduce payments on account

Please see another An Accounting Gem blog: https://www.aag-accountants.co.uk/what-is-an-overdrawn-directors-loan-account-and-why-does-it-matter/

If your bank balance feels more unpredictable than the British weather, you’re not alone. Energy bills are still high, food costs keep creeping up and rent or mortgage payments can feel like a second full-time job.

But this blog isn’t about doom and gloom. It’s about what you can do. Whether you’re working, retired, self-employed or somewhere in between, here are practical, no-nonsense ways to ease the pressure.

1. Review Your Regular Spending

Let’s start with the stuff that drains your account each month without you even realising.

• TV, streaming and media – Netflix, Prime, Disney+, Sky… do you really need them all?

• Mobile contracts – Out of contract? A SIM-only deal could slash your monthly costs.

• Insurances – From car to pet cover, shopping around or using a broker can save you hundreds.

💡 Quick tip: Go through last month’s bank statement. Highlight anything that goes out regularly and ask: Do I still need this?

2. Take Control of Energy Bills

Yes, they’re still high – but don’t just cross your fingers and hope for the best.

• Smart meters help track your usage.

• Fixed tariffs are slowly returning – compare what’s out there.

• Government support – Visit gov.uk to check if there are grants or discounts available.

💡 Quick tip: Struggling to pay? Your supplier has a duty to work with you on a manageable payment plan.

3. Cut Food Costs Without Living on Beans

Food bills are one of the biggest squeezes. But it’s not about eating less – it’s about shopping smarter.

• Switch to own brands – often just as good, for much less.

• Plan your meals to reduce waste and avoid last-minute shops.

• Buy in bulk and batch cook for meals you can freeze.

💡 Quick tip: Never shop when you’re hungry. Make a list and stick to it.

4. Deal with Debt Sooner, Not Later

With interest rates up, debt gets expensive fast. Don’t ignore it – tackle it head-on.

• Pay off high-interest debts first – like credit cards or overdrafts.

• Balance transfer cards can buy you time with 0% interest offers.

• Speak to lenders – many offer flexible repayment options.

💡 Quick tip: Need help? Contact StepChange or National Debtline for free, confidential advice.

5. Boost Your Income (Even Just a Bit)

Sometimes cutting costs isn’t enough. Earning a bit extra can take the pressure off.

• Side gigs – Tutoring, freelance work, dog walking or selling online.

• Rent out a spare room – You can earn up to £7,500 a year tax-free under the Rent a Room Scheme.

• Check your entitlements – Use the Turn2us or Entitledto calculators.

6. Don’t Miss Out on Tax Reliefs

Many people overlook simple tax allowances that could boost their income.

• Marriage Allowance – Could save you up to £252 a year.

• Work from home relief – Still available to some employees.

• Self-employed? – Make sure you’ve claimed all allowable expenses and the £1,000 trading allowance if applicable.

💡 Quick tip: Don’t wait until tax return season. Keep records now, and get ahead.

7. Use Budgeting Tools That Actually Work for You

If you don’t know where your money’s going each month, you’re not alone.

• Apps like Emma, Plum or Snoop connect to your bank account and break down your spending.

• Spreadsheets – Old-school but effective.

• Cash envelope method – Helps curb contactless overspending.

💡 Quick tip: Set aside 10 minutes each week to check in with your budget.

8. Start Saving – Even Just a Tenner

Saving might feel impossible, but even small amounts help build a buffer.

• Emergency fund – Aim for at least one month of expenses.

• Regular saver accounts – Some pay decent interest if you save monthly.

• Round-up apps – Automatically save spare change from your purchases.

💡 Quick tip: Automate a small amount into savings each month – you won’t miss it as much as you think.

Final Thoughts: You Don’t Have to Do It All at Once

We get it – everything’s getting more expensive, and your income might not be keeping up. But the good news is that small changes really do add up.

Start with one or two things. Maybe it’s cancelling that unused subscription. Maybe it’s checking if you’re entitled to extra support. Just keep moving forward, one step at a time.

Want more money-saving tips or tax advice that makes sense?

We’re here to help. Get in touch if you’d like tailored support for your situation.

Please see another An Accounting Gem blog:  https://www.aag-accountants.co.uk/nmw-and-nlw-update/

Paying Yourself Tax-Efficiently as a Director (2025/26)

If you run your own company, you’ll need to take money out of it to use personally. One of the most tax-friendly ways to do this is to take a small salary and top it up with dividends.

This also helps you build up your National Insurance record, which counts towards your State Pension.

Important Dates and Salary Levels for 2025/26

To get a full State Pension, you need 35 qualifying years. If you have at least 10 years, you’ll get a partial pension.

To make 2025/26 count as a qualifying year, your salary needs to be at least £6,500. That’s based on earning £125 a week for 52 weeks – the lower earnings limit for National Insurance.

If your salary is between £6,500 and £12,570, you don’t pay any employee National Insurance, but it still counts as a qualifying year.

Please see:  https://www.gov.uk/running-a-limited-company/taking-money-out-of-a-limited-company

What About Employer National Insurance?

The Employment Allowance helps businesses cover their employer (secondary) National Insurance bills. But:

• If your company only has one employee who’s also a director, you can’t claim it.
• If your company has at least two employees, paid at least £96 a week, you can claim it (up to £10,500 in 2025/26).

For companies that can’t claim the Employment Allowance, paying a director £6,500 will mean an employer’s NI cost of £225.

If the allowance is available, this cost is covered so you can pay £6,500 without any employer NI to pay.

What’s the Best Salary to Pay?

If you want to be tax-efficient:

• With Employment Allowance: You can pay a salary up to the tax-free personal allowance of £12,570 with no tax or NI.
• Without Employment Allowance: You’ll still save tax by paying £12,570, even though you’ll pay 15% NI on income above £5,000.

It’s usually not worth paying more than £12,570 unless you get a higher personal allowance (e.g. through Marriage Allowance).

Please see another An Accounting Gem blog:  https://www.aag-accountants.co.uk/march-2025-the-end-is-nigh-5-april-2025/

 

Late Payment Penalties for UK Taxes

If you or your business fail to pay tax on time, HMRC will impose penalties and interest. Below is a breakdown of the current penalties for Income Tax, VAT, PAYE and Corporation Tax.

Please see: https://www.gov.uk/government/publications/penalties-for-late-payment-and-interest-harmonisation/penalties-for-late-payment-and-interest-harmonisation

Income Tax (Including Self-Assessment) – Late Payment Penalties

If you miss the 31 January deadline for paying your Self-Assessment tax bill, the following penalties apply:

• 30 days late – 5% of the outstanding tax
• 6 months late – A further 5% of the unpaid tax
• 12 months late – Another 5% of the outstanding amount

Interest is also charged on unpaid amounts, including penalties.

VAT – Late Payment Penalties (New System from 2023)

From 1 January 2023, HMRC introduced a new penalty system for late VAT payments:

• Up to 15 days late – No penalty if paid or a payment plan is agreed
• 16-30 days late – 2% penalty of the outstanding VAT
• Payments more than 31 days overdue –
  • The first late payment penalty is calculated at 2% of what was outstanding at day 15 plus 2% of what is still outstanding at day 30
  • The second late payment penalty is calculated at a daily rate of 4% per year on the outstanding balance. This is charged every day from day 31 until the outstanding balance is paid in full or just before the end of the two-year assessment time limit
• Persistent non-payment – Further penalties apply, including daily charges after 31 days

Interest is charged from the due date at the Bank of England base rate + 2.5%.

PAYE (Pay As You Earn) – Late Payment Penalties

If you don’t pay PAYE on time (usually the 22nd of each month for electronic payments), penalties are charged based on the number of late payments in a tax year:

• 1 late payment – No penalty (unless over six months late)
• 2 to 4 late payments – 1% of the late amount
• 5 to 7 late payments – 2%
• 8 to 10 late payments – 3%
• 11+ late payments – 4%

If PAYE is over six months late, a further 5% penalty applies, plus another 5% if still unpaid after 12 months.

Corporation Tax – Late Payment Penalties

Corporation Tax is due 9 months and 1 day after the end of your accounting period. If you pay late:

• Interest is charged at Bank of England base rate + 2.5%
• If tax is still unpaid after 6 months, HMRC may issue a 10% surcharge

Time to Pay Arrangements

Always pay your taxes on time to avoid unnecessary penalties and interest. If struggling, contact HMRC early to set up a Time to Pay arrangement.

Please see another An Accounting Gem blog: https://www.aag-accountants.co.uk/payroll-reporting-deadlines-key-dates-for-the-2024-25-tax-year/