Don't Miss the 31 July Deadline: What Self-Employed People Need to Know About Payments on Account

7 min read · KBL Accounts

If you’re self-employed, a sole trader, or run a partnership in the UK, there’s a date circled on every accountant’s calendar right now: 31 July. It’s the deadline for your second Payment on Account, and missing it means HMRC interest charges land on top of an already painful bill.

At KBL Accounts, we’re helping clients across Suffolk and beyond navigate this deadline with confidence. Here’s everything you need to know.

What Is a Payment on Account?

HMRC’s Payments on Account system is designed to help you pay your Self Assessment tax bill in instalments rather than all at once. Instead of settling the full amount by 31 January, you make two advance payments, one in January and one in July, each based on 50% of your previous year’s tax bill.

The idea is that your tax payments track your earnings more closely. In practice, though, many business owners are caught off guard by the July bill, especially if cashflow is tight mid-summer or they’ve forgotten the January payment was only the first instalment.

If you earn self-employed income over £1,000 per year and your tax bill was more than £1,000 last year, you’re almost certainly in scope.

What Happens If You Miss the 31 July Deadline?

Missing the deadline doesn’t result in an immediate penalty, but HMRC does charge interest from 1 August on any unpaid balance. As of 2026, that rate is sitting above 7%, so it adds up quickly, particularly on larger tax bills.

Interest is calculated daily, so the sooner you pay, the better. If you genuinely cannot pay, it’s far better to contact HMRC proactively (or ask your accountant to help) and set up a Time to Pay arrangement than to simply ignore the bill and hope for the best.

There’s also a knock-on effect for your January 2027 bill. Any outstanding July balance, plus interest, gets added to your third payment, which can create a much larger-than-expected demand at the start of the new year.

Can You Reduce Your Payment on Account?

Yes, and this is where working with a good small business accountant in the UK really pays off.

If your earnings this tax year are significantly lower than last year (perhaps you’ve had a quieter period, taken parental leave, or made losses in part of your business), you can apply to reduce your Payments on Account to better reflect your actual expected liability.

This is done via a claim on your Self Assessment return or by completing a SA303 form. It’s a legitimate and commonly used option, but it requires you to have a realistic view of this year’s income and tax position. Reducing your payments too aggressively can leave you with a surprise underpayment in January, plus interest.

Your accountant can model this for you quickly. If you’re a KBL Accounts client and you think your income has changed materially this year, get in touch now, before 31 July.

Practical Steps to Take This Week

Whether you’re managing your tax affairs yourself or working with an accountant Suffolk-based or beyond, here’s what to do right now:

Check your bill. Log in to your HMRC Personal Tax Account online to confirm the amount due and the payment reference.
Pay before midnight on 31 July. Most payment methods (bank transfer, online banking, Direct Debit) are processed the same day. Avoid cutting it too fine.
Set up a reminder for January. Your next Self Assessment deadline (including your third payment and any balancing payment) falls on 31 January 2027. Put it in the diary now.
Review this year’s income. If things have changed (new clients, a quieter quarter, business restructuring), now is the time to flag it to your accountant so they can advise on a reduction.
Don’t ignore it if you can’t pay. HMRC’s Time to Pay arrangements are available and often straightforward to set up. The worst thing you can do is ignore the bill; interest and enforcement action follow quickly.

Talk to KBL Accounts Before the Deadline

If you’re unsure what you owe, whether a reduction might apply, or how to set up a payment plan, we’re here to help. KBL Accounts works with hundreds of self-employed clients, sole traders, and owner-managed businesses across Suffolk and the wider UK, helping them stay on top of HMRC obligations without the stress.

Don’t leave it to the last minute. Give us a call or drop us a message and we’ll get you sorted before the deadline passes.

KBL Accounts is a Suffolk-based accountancy practice offering bookkeeping, payroll, VAT, self assessment, corporation tax, and Fractional CFO support to small and medium-sized businesses across the UK.

This is a general guide, not personal advice — please check with us about your own situation.

Talk to KBL Before the 31 July Deadline

← All articlesBudget

A New PM, A New Chancellor — What Does It Mean for Your Business?

8 min read · KBL Accounts

This week, the UK got a new Prime Minister. Andy Burnham — the former Mayor of Greater Manchester — walked into Number 10 on Monday 20 July 2026, following Keir Starmer’s resignation last month. And in a move that surprised most of Westminster, he appointed John Healey as Chancellor, passing over several better-known names to hand the Treasury to his former colleague from the Blair years.

For business owners, sole traders, landlords and the self-employed, a change of Prime Minister always raises the same question: what does this mean for me? Will taxes go up? Will anything get simpler? Is now the time to make that big business decision, or should I wait and see?

The honest answer right now is: some things are already clearer than others. We know what’s been ruled out. We know one confirmed benefit is already on its way. And we know the big moment — an Autumn Budget billed as “ambitious” and “one-off” — is just a few months away. Here’s what you need to know as a business owner or self-employed person in Suffolk and beyond.

Who Are Burnham and Healey?

Andy Burnham is probably best known to most people as the Mayor of Greater Manchester — a role he’s held since 2017 — where he built a reputation as a pragmatic, pro-business operator who got things done. He introduced the UK’s first city-wide bus network, drove major investment into the region, and repeatedly made the case for devolving power away from Whitehall. His pitch for the top job centred on doing the same thing nationally: giving local areas more control over their own economic futures.

John Healey is the bigger surprise. The new Chancellor previously served as Defence Secretary and, before that, spent five years in the Blair-era Treasury as Economic Secretary and then Financial Secretary — so he does know his way around a spending review. His appointment was unexpected but his Treasury background means the markets haven’t panicked. He now faces the challenge of working within tight fiscal rules while delivering on Burnham’s ambitious agenda.

What Has Already Been Confirmed?

In the hours since the new Cabinet was announced, a handful of things have already been made clear:

No increases to income tax main rates, employee National Insurance, or VAT. Burnham has explicitly pledged to honour Labour’s existing manifesto commitments on these three. Whatever else the Autumn Budget might contain, your income tax rate, your employee NI deductions and the standard VAT rate are not going up.
Corporation tax will stay at 25%. The manifesto committed to capping it there, and Burnham has confirmed this continues. If you run a limited company, your tax rate isn’t changing.
VAT is being removed from household energy bills from 1 October 2026. This is a confirmed policy — the 5% VAT on domestic energy will go. If your home is your primary workplace, or you run a business from home, this is a small but real saving.

So three taxes that will not go up, and one confirmed saving on energy. That’s actually a fairly solid platform of certainty for the next few months.

The Personal Allowance: Could the Freeze Finally Thaw?

Here’s one of the most interesting signals to come out of the leadership transition. The income tax personal allowance — the amount you can earn before paying any income tax — has been stuck at £12,570 since the 2022/23 tax year. Under the previous government, that freeze was extended all the way to 2030/31.

When pay rises but the threshold doesn’t, more of your income gets pulled into the tax net automatically. It’s sometimes called “fiscal drag” — a stealth tax increase by another name. Over the past few years, a significant number of people have been dragged into the basic-rate or higher-rate bands simply because the frozen threshold hasn’t kept pace with wages.

Burnham has said he wants to “look at this” and has pointed to lower earners being particularly affected by the freeze. An increase to the personal allowance — even a modest one — would benefit employed people, self-employed sole traders, landlords, and anyone earning below the higher-rate threshold. It’s not a done deal, but it’s firmly on the table for the Autumn Budget.

Employer National Insurance: Relief for Small Business Employers?

This is the one that will matter most to small business owners who have staff. In April 2025, employers’ National Insurance went up — the rate rose from 13.8% to 15%, and the threshold at which employers start paying was lowered. For many small businesses, that was a painful double hit: paying more on every employee and paying it sooner.

Burnham has been remarkably direct about this. He said the weight of that employers’ NI increase “wasn’t the right decision.” He’s unlikely to simply reverse it — that would cost billions — but there is genuine speculation that the Autumn Budget will contain some relief: whether that’s raising the threshold, adjusting the rate, or targeting support at the smallest employers.

Imagine you run a small café in Ipswich with five members of staff. The April 2025 employers’ NI increase added hundreds of pounds a month to your wage bill. Any rollback, even partial, would make a real difference to whether you can afford to take on an extra pair of hands.

Business Rates: Better News for the High Street?

Business rates reform has been a long-running saga — every government promises to sort it, few actually do. Burnham seems genuinely motivated here, partly because of what he’s seen in Greater Manchester, where high street decline has been a major issue.

His specific pledges on business rates include:

A 20% reduction for pubs, clubs, and music venues (going beyond the previous government’s planned 15% relief)
Raising the threshold for small business rate relief, so more independent shops, cafés, and retailers pay nothing or less
Higher levies on large out-of-town warehouses and online distribution centres to fund the high-street relief

If you run a retail shop, pub, restaurant or leisure business in a town centre, these changes could translate into real savings on one of your biggest fixed costs. The detail hasn’t been fully worked out yet, but the direction of travel is clear: relief for the high street, funded in part by the big logistics operators.

What About the Self-Employed?

If you’re a sole trader — whether you’re a builder, a freelancer, a hairdresser, or a consultant — the most directly relevant near-term change is likely to be the personal allowance question. An unfreeze or increase would reduce the amount of your profits that are taxed at 20%, which is money back in your pocket.

Beyond that, Burnham has broadly signalled that self-employment and entrepreneurship matter. His “Good Growth Funds” concept — modelled on what he did in Greater Manchester — would see regional investment funds better targeted at start-ups and growing businesses. It’s still more of a direction than a policy, but the intent is to make capital more accessible outside London.

One thing self-employed people are raising loudly: the VAT registration threshold. At £90,000 turnover, crossing it means charging VAT on your sales overnight — a 20% jump in the effective price of your services. Many sole traders deliberately keep their turnover below this level, which caps their growth. There has been no specific announcement on this, but it’s a reform that business groups are pushing hard for, and the new government has talked about simplifying systems and supporting growth.

Landlords: What Might Change?

If you own rental property, the picture is more mixed — and more speculative at this stage. Here are the things worth watching:

Capital Gains Tax: There is ongoing speculation that CGT rates could be reviewed — potentially bringing them closer to income tax rates. Nothing is confirmed, but if you’re considering selling a rental property, it’s worth having a conversation with your accountant about timing before any Budget announcement.
Agricultural Property Relief: The April 2026 changes that capped APR at £2.5 million may be reconsidered. Burnham has said he’d look again at the impact on genuine family farms, distinguishing them from larger commercial operations.
Property tax reform: Burnham has long been an advocate of council tax reform and has expressed interest in alternatives like a Land Value Tax. This is longer-term territory — nothing imminent — but worth being aware of as a direction.
Pension changes and IHT from April 2027: Regardless of the change in leadership, the previously announced changes bringing unspent pension pots into Inheritance Tax are still proceeding. If estate planning is relevant to you, this one needs attention now.

What Is Definitely NOT Changing?

It’s worth being clear about what is staying put, because it’s easy to feel uncertain in the weeks after a change of government:

Income tax main rates — staying as they are
Employee National Insurance — not going up
VAT rate — 20% standard rate is not changing
Corporation tax — capped at 25%
Making Tax Digital — the rollout continues regardless of who is in Number 10. If you’re a landlord or sole trader earning over £50,000, you are already mandated and your first quarterly deadline is 7 August (see our recent post on this). If you earn over £30,000, April 2027 remains your date.

The Autumn Budget: Mark Your Calendar

The big moment is coming. Burnham has described his first Budget as a “big, one-off” event and an “ambitious overhaul” — language that suggests it will be more than a routine fiscal statement.

When will it happen? Parliament is about to go into summer recess. After it returns in September, the Office for Budget Responsibility (OBR) needs at least ten weeks’ notice to prepare its independent forecasts. That points to October or November 2026 as the most likely timing.

For businesses and self-employed people, the Budget is the moment when speculation becomes policy. It’s when we’ll know what the personal allowance will actually do, what happens to employer NI, how business rates reform will be structured, and whether any other tax changes are coming. Between now and then, the advice is straightforward: don’t make major financial decisions based on rumour or speculation — but do make sure you’re talking to your accountant so you’re ready to act quickly once the detail lands.

What This Means for You

A new Prime Minister and a new Chancellor always bring a mixture of uncertainty and opportunity. Here’s our plain-English summary of where things stand right now:

The big three — income tax, VAT and employee NI — are not going up. That’s confirmed.
Corporation tax stays at 25% for limited companies.
Energy bills will be cheaper from October with VAT removed from domestic energy.
The personal allowance freeze may ease — potentially good news for sole traders and employees alike.
Employer NI relief could be on the way for small businesses with staff — watch the Budget.
Business rates reform looks genuine and could benefit hospitality, retail and leisure businesses on the high street.
Landlords should keep an eye on CGT and the pension IHT changes already scheduled for April 2027.
Making Tax Digital is proceeding — no new government changes that timetable.

The most important thing you can do right now is stay informed and stay in touch with your accountant. When the Budget lands in the autumn, decisions may need to be made quickly — on timing of asset sales, salary and dividend strategies, pension contributions, business investment. Being prepared means you’re able to act, not just react.

This is a general guide, not personal advice — please check with us about your own situation.

Talk to us ahead of the Budget

← All articlesSelf Assessment

HMRC Raises the Mileage Rate to 55p — First Increase in 15 Years

8 min read · KBL Accounts

If you use your own car for work — to visit clients, travel between sites, or collect supplies — there’s genuinely good news from HMRC this year. The approved mileage rate has gone up for the first time in 15 years.

From 6 April 2026, the rate increased from 45p per mile to 55p per mile for the first 10,000 business miles you drive each tax year. It might not sound like a huge jump, but when you add it up over a full year, it makes a real difference — and there are steps you may need to take to make sure you’re claiming everything you’re entitled to.

A Long Time Coming

The Approved Mileage Allowance Payment (AMAP) rate has been frozen at 45p per mile since 2011. That is not a typo. While fuel prices have risen, cars have become more expensive to run, and general living costs have climbed, the rate you could claim — or pay your staff — tax-free for using a personal vehicle for business travel stayed completely unchanged for a decade and a half.

Imagine you run a plumbing business in Ipswich and your engineer drives their own van to jobs around Suffolk every day. For 15 years, you could reimburse them at 45p per mile without either of you paying tax on it. Meanwhile, the real cost of running that van — fuel, servicing, tyres, insurance — kept rising. The AMAP rate simply did not keep pace.

The government announced the increase in Spring 2026 as part of a package of measures to reflect the reality of rising motoring costs. The new 55p rate applies from 6 April 2026 — the start of the current 2026/27 tax year.

What Are the New Rates?

Here are the updated AMAP rates from 6 April 2026:

Cars and vans: 55p per mile for the first 10,000 business miles in the tax year; 25p per mile for anything above that threshold
Motorcycles: 24p per mile (unchanged)
Bicycles: 20p per mile (unchanged)
Passengers: If you carry a colleague in your car on a business journey, you can claim an additional 5p per passenger per mile (unchanged)

The 25p rate above 10,000 miles has not changed, which is worth bearing in mind if you or your staff drive very high mileage for work.

What Does This Mean in Pounds and Pence?

Let’s put some numbers on it. Say you drive 8,000 business miles in the 2026/27 tax year. At the old 45p rate, the maximum tax-free amount was £3,600. At the new 55p rate, it is £4,400. That’s an extra £800 that can be paid or claimed completely free of income tax and National Insurance.

Drive a full 10,000 business miles and the difference compared with last year is £1,000. For a basic-rate taxpayer claiming Mileage Allowance Relief on unreimbursed mileage, that extra £1,000 in relief could translate to around £200 back in their pocket. A higher-rate taxpayer could save £400. These are not trivial sums — especially if you have been under-claiming since the new tax year began in April.

If You Are Self-Employed

If you run a business as a sole trader or a partnership, you can use the flat mileage rate rather than calculating actual running costs such as fuel, oil, servicing, depreciation, and insurance. This is called the simplified mileage method, and it follows the same AMAP figures.

So if you’re a self-employed electrician in Woodbridge, a mobile hairdresser in Stowmarket, a freelance consultant who drives to client meetings in Ipswich, or a landlord driving to your rental properties across Suffolk — from 6 April 2026, you can claim 55p per mile for your first 10,000 business miles each tax year.

Here’s an example. Imagine you run a small events catering business in Bury St Edmunds and drive 12,000 miles a year visiting venues, meeting suppliers, and delivering equipment. Under the old rate, your mileage claim was £4,500 on the first 10,000 miles, plus £500 for the remaining 2,000 — a total of £5,000. From April 2026, that first 10,000 miles earns you a deduction of £5,500. That’s an extra £500 in allowable expenses, reducing your taxable profit — and your tax bill — directly.

One important point to bear in mind: once you have chosen the simplified mileage method for a particular vehicle, you generally have to stick with it for the life of that vehicle in your business. You cannot swap between claiming actual costs and the flat rate from year to year, so it is worth thinking about which approach is right for you when you first start using a vehicle for business purposes. If you’re unsure which method will save you more, we can help you work it out.

If You Are an Employer

If you reimburse employees or directors who use their own vehicles for business travel, the new 55p rate is the maximum you can pay them completely free of tax and National Insurance. You can choose to pay less — but any amount up to 55p per mile (for the first 10,000 business miles in the year) is exempt for both parties. Anything above 55p becomes a taxable benefit.

Here is what you should consider doing right now:

Check your expenses policy. If it still says 45p, update it to 55p. While you are not legally required to pay the full rate, doing so is a tax-efficient way of reflecting the real cost of employees using their own vehicles for your business.
Look back to 6 April. If you have been reimbursing staff at 45p since the start of the 2026/27 tax year, consider whether to pay a top-up for journeys already made. For an employee who has done 3,000 business miles since April, the difference is £300. It is better to address this now than to leave it until year end.
Update your payroll and expenses system. Make sure your software or internal process reflects the new rate so that all claims from April 2026 onwards are processed correctly.
Review your fleet arrangements. If some staff use company cars and others use personal vehicles, the rules can differ. Talk to us if you are not sure how the updated rates apply across your workforce.

If You Are an Employee

If your employer reimburses you at the full 55p rate, you do not need to take any further action. But what if your employer pays you less than 55p per mile — or does not reimburse you at all? In that case, you can claim the shortfall as Mileage Allowance Relief (MAR) from HMRC.

Here is how the maths works. Say your employer pays you 40p per mile and you do 6,000 business miles in the 2026/27 tax year:

Maximum tax-free amount at the approved rate: 6,000 × 55p = £3,300
Amount actually received from your employer: 6,000 × 40p = £2,400
Mileage Allowance Relief you can claim from HMRC: £900

You can make this claim through your Self Assessment tax return if you complete one, or through HMRC’s form P87 if you do not normally file a Self Assessment return. HMRC will then adjust your tax code or send you a refund. This is one of those reliefs that many employees simply do not know exists — and if your employer has been reimbursing you below the approved rate for years, you may have been missing out for some time.

What Counts as a Business Journey?

This is one of the questions we are asked most often. The short answer: your regular commute from home to your normal place of work does not qualify. Business mileage is travel you carry out as part of your work — not travel to get to work.

Journeys that generally do qualify include:

Visiting a customer or client at their premises
Travelling between different work locations or sites
Attending a supplier, trade event, or business meeting away from your usual workplace
A landlord driving to a rental property to carry out an inspection, manage repairs, or meet a tenant

Journeys that generally do not qualify include your regular daily commute and personal journeys, even if you happen to take a work call on the way. If you work from home, the rules around what counts as a qualifying business journey can be a little more flexible — but it is always worth checking your specific circumstances with us before making a claim, to make sure you are on solid ground.

Keep Good Records

Whether you are self-employed or an employee claiming Mileage Allowance Relief, HMRC expects you to keep records of your business mileage to support any claim. A simple mileage log is all you need — a spreadsheet, a notebook, or one of many free apps available on your phone. Each entry should record:

The date of the journey
The purpose (client name, job address, type of visit, etc.)
The start and end locations, or the number of miles driven

HMRC can ask to see your records if they have a question about your expenses, so keep them somewhere safe and try to update them regularly — it is much easier than trying to reconstruct a year’s worth of journeys from memory later.

Making Tax Digital and Your Mileage Claims

If you are a sole trader or landlord who moved onto Making Tax Digital for Income Tax this year — April 2026 was the start date for those with turnover or rental income over £50,000 — your mileage expenses will form part of the quarterly digital updates you submit to HMRC.

Now is a good moment to check that your accounting software has been updated to reflect the new 55p rate rather than the old 45p figure. If you use QuickBooks, Xero, FreeAgent, or another MTD-compatible tool, check the mileage settings. If you are not sure whether your software is capturing things correctly, we can take a look with you.

What This Means for You

Here is a quick summary of the actions to consider:

Sole traders: Update your records and accounting software to use 55p per mile from 6 April 2026. Review any submissions you have made since then and correct them if needed.
Landlords: If you drive to your rental properties for legitimate business purposes, make sure you are claiming the full new 55p rate.
Employers: Review your expenses policy, consider a top-up for staff mileage payments made since April at the old rate, and update your payroll and expense systems.
Employees: If your employer reimburses you at less than 55p per mile, claim Mileage Allowance Relief via Self Assessment or HMRC form P87.

The change applies from 6 April 2026, the start of the 2026/27 tax year. If you have been using the old 45p rate since then — whether in your own self-employed accounts or in your business’s staff expense policy — now is the time to put it right, while the year is still early enough to make a clean correction.

This is a general guide, not personal advice — please check with us about your own situation.

Talk to KBL About Your Mileage Claims

← All articlesMaking Tax Digital

Making Tax Digital Is Live — Your First Deadline Is 7 August 2026

9 min read · KBL Accounts

If you are a sole trader or landlord earning more than £50,000 a year, Making Tax Digital for Income Tax is no longer something coming down the track. It arrived on 6 April 2026 — which means you are already inside the new system, whether you have taken action or not.

And there is a date you need to know right now: 7 August 2026. That is the deadline for your very first quarterly update to HMRC, covering the period from 6 April to 5 July 2026. If that is news to you, do not panic — but do read on.

What Is Making Tax Digital for Income Tax?

Making Tax Digital (MTD) is the government’s long-running programme to bring the UK tax system fully online. Most VAT-registered businesses have been living with MTD for VAT for several years now. The bigger change — MTD for Income Tax Self Assessment, often shortened to MTD ITSA or MTD for IT — has now arrived for the first wave of taxpayers.

In plain English, it changes two things about how you manage your tax affairs:

Digital record-keeping: You must keep your income and expenses records digitally, using HMRC-recognised software. Paper books and manually updated spreadsheets are no longer sufficient on their own.
Quarterly updates to HMRC: Instead of one annual Self Assessment return, you send HMRC a summary of your income and expenses four times a year, plus a final declaration at the end of the tax year.

It is not just a new form. It is a fundamentally different rhythm for managing your tax affairs throughout the year.

Who Must Sign Up Right Now?

From 6 April 2026, MTD for Income Tax is mandatory for sole traders and landlords whose combined qualifying income from self-employment and property exceeds £50,000 a year. That qualifying income is based on your gross income — before expenses — from a recent tax year. So if you are a builder in Ipswich with £55,000 in annual turnover, or a landlord in Suffolk with rental receipts of £52,000, you are in scope.

The following groups are not yet in scope:

Those with qualifying income below £50,000
People whose only income is from employment under PAYE — no self-employment or property income
Limited companies (separate rules apply)
Certain exempt groups, including those with a genuine inability to use digital tools

If you have a mix of income types — some employed income, some freelance work, and a rental property, for example — the calculation can get complicated. That is exactly the kind of situation where a quick conversation with us is worth having before you assume you are in or out of scope.

Your Quarterly Deadlines for 2026/27

Here is how the tax year breaks down into quarters. There are four quarterly updates to make, plus a final declaration at year-end:

Quarter 1: 6 April to 5 July 2026 — deadline 7 August 2026
Quarter 2: 6 July to 5 October 2026 — deadline 7 November 2026
Quarter 3: 6 October 2026 to 5 January 2027 — deadline 7 February 2027
Quarter 4: 6 January to 5 April 2027 — deadline 7 May 2027
Final Declaration (full 2026/27 tax year) — deadline 31 January 2028

The quarterly updates are summaries of your income and expenses for each three-month period, submitted directly to HMRC through your software. You are not paying your tax bill four times a year — the updates give HMRC a running picture of your income, and you settle up through the final declaration and payment in the usual way. What does change is how much HMRC knows about your finances throughout the year.

The 2026/27 Soft Landing — What It Actually Means

HMRC has confirmed a “soft landing” for the first year of MTD ITSA: during 2026/27, you will not receive a penalty point for a late quarterly update. This is an acknowledgement that switching to a new system takes time. Businesses need to find software, learn new processes, and get properly set up.

But the soft landing has important limits. Here is what it does not protect you from:

You still need to sign up to MTD ITSA. If you are in scope and have not registered yet, that needs to happen now — not next year.
The final declaration rules are unchanged. Fail to submit by 31 January 2028 and the standard Self Assessment late-filing penalties apply.
Late payment penalties still apply. If you underpay tax, HMRC will charge interest regardless of the soft landing.
Good habits matter now. The soft landing is a grace period to help you find your feet — not a reason to ignore the system entirely.

Imagine you run a small holiday letting in the Suffolk countryside. You have been filing your Self Assessment return every January for years — a bit of a scramble to pull the figures together each time. Under MTD, instead of one annual crunch, you will be doing a short quarterly check-in throughout the year. This first year, if you are a couple of weeks late on the August deadline while you get set up, there is no penalty point. But the habit you form now is the one that carries you through 2027 and beyond.

What Software Do You Need?

HMRC does not provide software for MTD for Income Tax. You will need to use a third-party product from HMRC’s approved list. Prices and features vary widely, so it is worth choosing something that fits your situation rather than going with the first name you recognise.

Some of the most widely used options include:

QuickBooks — popular across small businesses, with a strong mobile app and good bank feed integration
Xero — well established, particularly suited to those who want their accountant to access their records directly
FreeAgent — designed with freelancers and sole traders in mind; often bundled free with certain business bank accounts
Sage Accounting — a long-established name, particularly among slightly larger or more traditional businesses
Hammock — built specifically for landlords managing property income

Before committing, check that your chosen software appears on HMRC’s official MTD for Income Tax approved list — not all accounting software qualifies. Your accountant can help you choose something that works for your situation and that they can access to support you, which saves time and duplication.

What You Will Do Each Quarter

Once you are properly set up, here is what the quarterly routine looks like:

Keep records up to date throughout the quarter. Log income as it comes in, record expenses as you incur them. The further you let this slip, the harder it becomes to catch up before the deadline.
Categorise your transactions. Your software will prompt you to assign income and costs to the right categories — business mileage, materials, rental income, professional fees, and so on.
Submit your quarterly update. This is a few clicks from within your software, sending a summary directly to HMRC. It is not a full tax return.
Review HMRC’s running estimate. After each submission, HMRC will display an estimated tax liability based on what you have sent so far. This is genuinely useful for planning your cash flow — no more January surprises.
File your final declaration by 31 January 2028. At year-end, you review and confirm all your figures, add any additional income, claim remaining reliefs, and submit. This replaces the traditional Self Assessment return.

What About Penalties?

HMRC has replaced the old penalty system with a points-based model for quarterly submissions. Each missed quarterly deadline earns one penalty point. Once you accumulate four penalty points, you receive an automatic £200 fine. Every further late submission adds another £200. Points can be cleared by filing on time for a sustained period.

Four missed deadlines — an entire year of ignoring the system — and you are in financial difficulty very quickly. As noted above, penalty points for quarterly submissions are suspended during the 2026/27 soft landing year. But forming the habit of filing on time now, while there is no real consequence for being a little late, means the full system in 2027/28 will feel effortless.

Lower Thresholds Are Coming — Who Joins Next?

MTD for Income Tax does not stop at £50,000. HMRC has confirmed a phased expansion:

April 2027: Those with qualifying income above £30,000 must join
April 2028: Those with qualifying income above £20,000 must join

If your income sits between £30,000 and £50,000, April 2027 is less than a year away. If you are between £20,000 and £30,000, April 2028 is your deadline. Neither date is so far away that you can ignore this indefinitely — and starting to get your digital records in order early is always better than a last-minute scramble.

What About Spreadsheets and Paper Records?

Many well-run businesses across Ipswich and Suffolk have managed their finances perfectly well for years with a spreadsheet and a folder of receipts. Under the old system, that worked fine.

Under MTD for Income Tax, your records need to be in a format that feeds directly into HMRC-compliant software and can be submitted digitally. A standard Excel spreadsheet does not do that on its own, though some “bridging software” can act as a go-between. Bridging software is a short-term fix — it adds an extra moving part and is less reliable than using proper accounting software from the start. If you are still on paper or a spreadsheet system, now is the year to make the move.

What This Means for You

Depending on where you stand, here is what to do next:

Income over £50,000 and not yet signed up: Act now. The first deadline is 7 August 2026. Contact us and we will help you register with HMRC, choose the right software, and get your first submission sorted before the deadline.
Already signed up and using compatible software: Make sure your Q1 records (April to July 2026) are complete and that your software is connected to your HMRC account, ready to submit by 7 August.
Income between £30,000 and £50,000: Not mandatory yet, but April 2027 is on the horizon. Start thinking about digital record-keeping and software now so you are ready in good time.
Income between £20,000 and £30,000: April 2028 is your deadline. You have time, but MTD is heading your way — adapting early is far less stressful than a last-minute rush.

This is a general guide, not personal advice — please check with us about your own situation.

Making Tax Digital for Income Tax is one of the biggest changes to everyday tax administration in a generation. At KBL Accounts, we are already helping sole traders and landlords across Ipswich and Suffolk navigate the new system — from signing up with HMRC and choosing the right software, to making sure those first quarterly submissions go in without a hitch. If you are not sure where you stand, or worried you have missed something, get in touch. The 7 August deadline is closer than it looks.

Talk to us about MTD

← All articles Making Tax Digital

Making Tax Digital is coming — and this time it's for landlords too

10 min read · KBL Accounts

Picture this. It's a wet Tuesday in late January, the self assessment deadline is three days away, and you're at the kitchen table surrounded by a year's worth of receipts — half of them faded to blank, the other half stuck together with what you hope is coffee. Sound familiar? For millions of sole traders and landlords, that once-a-year scramble has been a fact of life for as long as anyone can remember. Making Tax Digital (MTD) is HMRC's plan to consign it to history — and whether you welcome that or dread it, it's heading your way.

MTD has been rumbling along for years. It already applies to VAT-registered businesses, who have been keeping digital records and filing online for a while now. The next, much bigger phase is MTD for Income Tax, and this is the one that pulls in the self-employed and — for the first time — landlords. So let's walk through what's actually changing, when it affects you, what it means in practice, and what you can do now to make it painless rather than panic-inducing.

What is Making Tax Digital, really?

Strip away the jargon and MTD comes down to two things: keeping your records digitally, and updating HMRC more often than once a year. That's genuinely it. Instead of a shoebox of paper and a frantic annual return, you keep your income and expenses in software throughout the year, send HMRC a short summary every quarter, and then do a final declaration after the year ends to confirm everything and claim your reliefs.

From HMRC's point of view, the goal is fewer mistakes and less tax lost to last-minute guesswork. From your point of view, once it's set up, it means you always have a rough idea of what you owe — no more nasty surprises in January, and no more discovering in week one of the new year that you should have been putting money aside since April.

When does it actually start?

This is the part everyone wants pinned down, so here are the dates straight from HMRC. The rollout is staged by income level, and "income" here means your total gross income from self-employment and property combined — your turnover, not your profit. That distinction matters: a landlord with £55,000 of rent but only £8,000 of profit is judged on the £55,000.

From 6 April 2026 — you're in if your combined self-employment and property income is more than £50,000.
From 6 April 2027 — the threshold drops to £30,000.
From 6 April 2028 — it falls again to £20,000.

So if you're a landlord bringing in £55,000 of rent, or a sole trader turning over more than £50,000, April 2026 is your starting line. If you're under £20,000, you're outside it for now — though HMRC has made no secret of wanting to bring smaller businesses in eventually, so it's worth getting comfortable with the idea either way.

What changes day to day?

Three practical things change once you're inside MTD for Income Tax:

Digital records. You'll need to keep your business records in software, not on paper and not in a standalone spreadsheet that doesn't talk to HMRC. Cloud tools such as Xero, QuickBooks and FreeAgent are built for exactly this.
Quarterly updates. Four times a year you'll send HMRC a running summary of your income and expenses for the period. These are estimates, not a full return, and they're quick to do if your records are current.
A final declaration. After the tax year ends, you confirm the full picture, add anything else (savings interest, dividends, other income and reliefs), and that replaces the old self assessment return.

Notice the theme running through all of that: if your bookkeeping is up to date, each quarterly update takes minutes. The pain only appears if you let things slide and then try to reconstruct nine months of records in a single weekend.

A real-world example

Imagine you let out two flats in Ipswich and bring in £42,000 a year in rent. Under the old system you'd gather your figures once a year and file a return by 31 January. From April 2027 — because you're over the £30,000 threshold — you'll instead log rent and costs in software as they happen, send HMRC four short updates across the year, and do a final declaration after 5 April. The total tax you pay doesn't change. What changes is the rhythm: little and often, instead of one giant heave in January, and you'll always know roughly where you stand.

The good news (yes, there is some)

It's easy to read all this and groan. But businesses that have already moved to cloud accounting tend to wonder how they ever managed without it. You can photograph a receipt on your phone the moment you're handed it and it's logged. Your bank feeds in automatically, so transactions reconcile themselves. You can glance at your numbers on the train. And the dreaded January cliff-edge simply disappears, because the work is spread evenly across the year rather than dumped into one miserable week.

There's a quieter financial benefit too. When you can watch your tax bill building up in real time, you can put money aside steadily as you go — which means the bill is already covered when it lands, and you can make smarter decisions about a big purchase, a pension contribution, or whether to take on that extra contract.

Common questions we get asked

"Do I have to send my actual receipts to HMRC every quarter?" No. The quarterly updates are summary totals of income and expenses, not copies of every invoice. You keep the underlying records in your software in case they're ever needed.

"What if my income is just under the threshold?" You're judged on gross income, and it can move year to year. If you're hovering near a threshold, it's worth getting set up anyway — it's far easier to already be in good habits than to scramble the moment you tip over.

"I only have one rental property — surely this doesn't apply to me?" It can. It's about your total income from self-employment and property combined, not the number of properties. One high-rent property can be enough.

"Can my accountant just do all of it?" Largely, yes. Many owners prefer to log the day-to-day themselves and leave the quarterly submissions and final declaration to us. Others hand over the lot. Both work.

What you should do now

The single best move is to stop waiting. Getting set up early turns MTD from a looming deadline into a non-event. In practical terms:

Get onto cloud software well before your start date, so the habit is second nature by the time it's compulsory.
Connect your business bank account so transactions flow in automatically and reconcile themselves.
Separate business and personal spending — ideally a dedicated account — so your records are clean from day one.
Keep digital copies of receipts as you go, rather than hoarding paper for a future panic.
Talk to your accountant about who does what, so there are no gaps and no surprises.

What this means for you

If you're over the relevant threshold, MTD isn't optional and the dates are fixed — but it really doesn't have to be stressful. The businesses that struggle are the ones that ignore it until the last minute. The ones that sail through treat it as a nudge to finally get organised, and come out the other side with a clearer, calmer view of their finances all year round.

At KBL we're already helping clients choose the right software, get their records into shape, and we handle the quarterly submissions on their behalf — so for them, MTD becomes our job, not their headache.

This is a general guide, not personal advice — your exact start date depends on your figures, so please check with us about your own situation.

Choosing the right software

One question we hear a lot is "which software should I actually use?" The honest answer is that the big cloud packages — Xero, QuickBooks and FreeAgent among them — are all perfectly capable of handling MTD for Income Tax. The right one for you depends on how you work, what your bank offers (some business accounts include FreeAgent free), and whether you want all the bells and whistles or just something simple that does the job. The important thing is that it's officially MTD-compatible, which all the mainstream options are. If you're not sure, we'll point you to the one that fits your business rather than the one with the flashiest advert.

Quick recap

MTD for Income Tax means digital records and quarterly updates, replacing the annual return.
It starts April 2026 for income over £50,000, April 2027 for over £30,000, and April 2028 for over £20,000.
"Income" means gross turnover and rent combined, not profit.
Set up cloud software early, connect your bank, and keep records current — that's 90% of the battle.
We can handle the submissions for you, so it becomes our job rather than yours.

Get me MTD-ready

← All articles Landlords

The holiday-let tax perk has gone: what every owner needs to know

9 min read · KBL Accounts

For the best part of two decades, owning a furnished holiday let was one of the most tax-friendly ways to own property in the UK. While ordinary buy-to-let landlords watched their reliefs get whittled away year after year, holiday-let owners kept a special status that came with perks the rest could only envy. As of April 2025, that special status is gone — and if you own a holiday home you let out, your tax position has changed in ways that are well worth understanding properly.

Let's be clear up front: this doesn't mean holiday lets are a bad investment, or that you've done anything wrong by owning one. It simply means the rules have levelled out, and several of the advantages you may have been quietly relying on no longer apply. Here's what's changed, in plain English, why it matters, and what to think about next.

A quick reminder: what was an "FHL"?

The Furnished Holiday Lettings (FHL) regime was a special set of tax rules for properties that were furnished, genuinely available to let for a good chunk of the year, and actually let to holidaymakers for a minimum number of days. If your property ticked those boxes, HMRC treated it more like a trading business than a standard rental — and that "business" treatment unlocked several valuable reliefs that ordinary landlords never got.

From April 2025, that regime has been abolished. Holiday lets are now taxed in the same way as any other residential property letting. The four big perks that have disappeared are worth taking one at a time, because each affects your numbers differently.

1. Full mortgage interest relief — gone

This is the big one. Under the old FHL rules you could deduct all of your mortgage interest from your rental income before working out your tax. Now, like every other residential landlord, you only get a 20% basic-rate tax credit on that interest instead.

For a basic-rate taxpayer the difference is modest. But if you're a higher-rate taxpayer with a sizeable mortgage, this can really sting — you may find yourself paying tax on rental "profit" that, in cash terms, you never actually see. (We explain exactly why that happens in our separate piece on mortgage interest and the Section 24 rules, and it's well worth a read if you have a mortgage.)

2. Capital allowances on furniture — gone

FHL owners could claim capital allowances on the cost of furnishing and equipping the property — sofas, beds, the kitchen, white goods, the lot. That's been replaced by the much narrower "replacement of domestic items relief", which only lets you claim when you replace an existing item, not when you buy it for the first time, and doesn't cover genuine improvements.

In practice: if you kit out a cottage from scratch today, you won't get the upfront relief you would have a couple of years ago. But when the old sofa finally gives up the ghost, you can still claim for a like-for-like replacement — so keeping good records of what you replace, and when, really matters.

3. Capital Gains Tax breaks — gone

When you eventually sell, the old regime opened the door to several Capital Gains Tax reliefs normally reserved for businesses — including Business Asset Disposal Relief, which can tax qualifying gains at just 10%, plus rollover and holdover relief. With FHL status abolished, holiday lets no longer qualify for these. A future sale will generally be taxed under the normal residential property CGT rules, which can be a meaningfully bigger bill on a property that's grown in value.

4. Pension-friendly "relevant earnings" — gone

Profits from an FHL used to count as "relevant earnings", which meant you could base tax-relieved pension contributions on them. Ordinary rental profit doesn't count this way. If you'd been using holiday-let income to support pension contributions, that particular route has closed, and it's worth reviewing the knock-on effect with us before the next contribution.

A real-world example

Imagine you own a pretty two-bedroom cottage on the Suffolk coast, with a £180,000 mortgage, and you're a higher-rate taxpayer. Two years ago you'd have deducted all your interest, claimed allowances on the furniture, and looked forward to a 10% CGT rate when you eventually sold. Today, your interest only earns a 20% credit, new furniture gives you nothing upfront, and a sale would be taxed at standard residential rates. None of that makes the cottage worthless — the holiday-let market in this part of the country is still strong — but your real, after-tax numbers have moved, and so has the question of whether holding it personally is still the best approach.

Does it still make sense to run a holiday let?

For many owners, absolutely. Holiday lets can still command far higher nightly rates than a standard tenancy, they give you personal use of a lovely property, and demand for UK staycations remains healthy. What's changed is that the tax tailwind has gone, so the underlying business needs to stand on its own two feet. That makes it more important than ever to actually know your figures — occupancy, costs, and the after-tax return — rather than assuming the old advantages are still doing the heavy lifting.

Common questions we get asked

"Has anything changed about VAT or business rates?" The income-tax FHL regime is what's been abolished. Holiday lets can still fall within business rates rather than council tax in some cases, and VAT can apply once you cross the registration threshold — both are separate questions worth checking.

"I let through Airbnb a few weekends a year — am I affected?" If you were relying on FHL treatment, yes. And remember the platforms now share information with HMRC, so it's sensible to make sure your lettings are properly declared.

"Should I move it into a company?" Possibly — companies still deduct mortgage interest in full — but incorporating brings costs, potential stamp duty and CGT on transfer, and isn't right for everyone. Please don't do it on a hunch; let's model it first.

What you should do now

Revisit your figures. Work out your real, after-tax return now the reliefs have changed — especially if you have a mortgage.
Plan for a bigger tax bill if you're a higher-rate taxpayer, and set money aside accordingly so it doesn't catch you out.
Claim replacements correctly. Keep clear records of furniture and equipment you replace, so you don't miss the relief that does still exist.
Review the ownership structure before doing anything drastic — it's a conversation worth having on real numbers.

What this means for you

If you let a holiday home, the smart move is simply to understand your new position rather than be ambushed by it at the next tax return. The reliefs that made FHLs special have gone, but with a bit of planning you can still run a profitable, well-managed holiday let — you just need your eyes open to the new rules.

We're helping holiday-let owners across the region review exactly where they stand and plan accordingly. If you'd like a clear, jargon-free look at your own position, we're very happy to help.

This is a general guide, not personal advice — every property and owner is different, so please check with us about your own situation.

Thinking of selling?

If a sale is on the horizon, the loss of the old Capital Gains Tax reliefs is worth planning around rather than discovering after the event. The timing of a sale, how the property is owned, and whether any reliefs still apply to your particular circumstances can all affect the final bill. A property that's risen substantially in value since you bought it is exactly the kind of case where a conversation before you put up the "for sale" board can pay for itself many times over.

Quick recap

The Furnished Holiday Lettings regime was abolished from April 2025.
Holiday lets are now taxed like ordinary residential rentals.
You've lost full mortgage interest relief, upfront capital allowances, business CGT reliefs, and the pension "relevant earnings" treatment.
Keep records of furniture you replace — that relief still exists.
Don't rush into a company structure without modelling it first.

Review my holiday let

← All articles Landlords

Why your mortgage no longer cuts your tax bill like it used to

9 min read · KBL Accounts

Here's a conversation we have with landlords more often than you'd believe. They sit down, look at their tax bill, and say some version of: "This can't be right. I pay a fortune in mortgage interest — so how on earth is my tax this high?" It's a completely fair question, and the answer is a rule change that quietly reshaped landlord finances a few years ago. It's usually called Section 24, and if you own rental property in your own name, it affects you — whether anyone's ever explained it or not.

The frustrating part is that nobody sends you a letter spelling it out. You just notice, one year, that your bill is bigger than your gut says it should be, and you can't quite see why. So let's pull it apart properly: what changed, why it makes your tax look higher than your real profit, who it hurts most, and what you can actually do about it.

How it used to work

Once upon a time, being a landlord worked the way most people assume any business works. You'd take your rental income, subtract your costs — including all of your mortgage interest — and pay tax on whatever was left. Collect £12,000 in rent, pay £8,000 in mortgage interest, and you were taxed on £4,000. Simple, and crucially, it matched the cash actually sitting in your pocket.

What changed

The new rules were phased in between 2017 and 2020, and they're now fully in force. Today, if you own property personally, you can no longer deduct your mortgage interest from your rental income before working out your tax. Instead, your taxable profit is calculated on the rent before any interest, and then you receive a 20% tax credit on the interest right at the end of the calculation.

For a basic-rate (20%) taxpayer, the maths roughly cancels out, so the change barely registers. But for higher-rate (40%) and additional-rate (45%) taxpayers, it's a completely different story — and that's exactly where the painful surprises come from.

Why your tax looks higher than your profit

Let's use that same example, but say you're now a higher-rate taxpayer. £12,000 rent, £8,000 interest, leaving £4,000 of genuine profit.

The old way: taxed on £4,000 profit at 40% = £1,600 of tax.
The new way: taxed on the full £12,000 at 40% = £4,800, then a 20% credit on the £8,000 of interest knocks £1,600 off. Final bill: £3,200.

Same rent, same mortgage, same real-world profit of £4,000 — but your tax has effectively doubled, from £1,600 to £3,200. You're being taxed as though that £8,000 of interest were income in your pocket, and only getting basic-rate relief back on it. That, in a nutshell, is why so many landlords feel the numbers simply don't add up.

The knock-on effects people don't expect

It gets a little more awkward, because that inflated "taxable profit" figure ripples outwards into other parts of your tax affairs:

It can push you into a higher tax band, so income you'd normally pay 20% on suddenly gets taxed at 40%.
It can trigger or increase the High Income Child Benefit Charge, because that's based on your "adjusted net income".
It can tip you over other cliff-edges — such as the £100,000 line where your personal allowance starts to disappear.

None of these announce themselves as "a Section 24 problem". They just show up as a bigger bill in unexpected places, which is precisely why the rule catches people out year after year.

So what can you actually do?

There's no magic switch, but there are genuine levers worth understanding:

Holding property through a limited company. Companies still deduct mortgage interest as a normal business cost, so Section 24 doesn't bite the same way. But a company brings extra admin and accounting costs, potential tax when you take the money back out, and possible stamp duty and CGT if you move existing properties into it. It suits some landlords brilliantly and others not at all.
Sharing ownership sensibly. If a spouse or civil partner is a lower-rate taxpayer, how the property and its income are split between you can make a real difference. Done properly, with the right paperwork, it can stand up to HMRC; done casually, it can fall over.
Reviewing your borrowing across the portfolio. The way finance is structured across several properties can affect the overall position more than people realise.

Every one of these comes with trade-offs, and the right answer depends entirely on your income, your plans, and how many properties you hold. This is one area where a single conversation before you act can save a great deal of money — and regret.

A real-world example

Imagine you and your partner own three flats. You earn a good salary and sit firmly in the higher-rate band; your partner works part-time and is a basic-rate taxpayer. Simply reviewing how the rental income is split between you — properly, with the right declarations — could meaningfully reduce the household tax bill, with no change to the properties at all and no exotic structures involved. It's exactly the kind of thing that's easy to miss if you're just filling in a return on autopilot each January.

Common questions we get asked

"Does this affect commercial property too?" No — the restriction applies to residential lettings. Commercial property interest is treated differently.

"I'm a basic-rate taxpayer — do I need to worry?" Far less so. The credit broadly matches what you'd have got as a deduction. The danger is if rising rents or other income push you into the higher-rate band, where it suddenly does bite.

"Should I just sell up?" Not necessarily. Section 24 changes the maths, but property can still work well — the key is to plan around it rather than react to it.

What this means for you

If you're a higher-rate taxpayer with mortgaged rental property, Section 24 is almost certainly inflating your tax bill compared with your real profit — and there's nothing wrong with your arithmetic. The important thing is to understand it, plan around it where you can, and never make a big structural change like incorporating without proper advice, because the wrong move can cost far more than it saves.

We help landlords model these options on their real numbers, so the decision rests on facts rather than pub wisdom. If your tax bill has been leaving you scratching your head, let's take a proper look together.

This is a general guide, not personal advice — the right approach depends on your circumstances, so please check with us before acting.

Incorporation: the fuller picture

Because a company can still deduct mortgage interest in full, "just put it in a company" is advice you'll hear a lot in landlord circles. Sometimes it's right — but it's rarely as simple as it sounds. Moving an existing property into a company usually counts as a sale at market value, which can trigger Capital Gains Tax and Stamp Duty Land Tax straight away. The company then pays Corporation Tax on its profits, and getting money back out to you personally — as salary or dividends — can be taxed again. For a landlord building a larger portfolio over many years, the long-term maths can still stack up nicely. For someone with one or two flats they plan to sell soon, it often doesn't. The only way to know is to run your actual numbers, which is exactly what we do before anyone signs anything.

Quick recap

Section 24 stops personal landlords deducting mortgage interest; you get a 20% credit instead.
Basic-rate taxpayers barely notice; higher-rate taxpayers can pay tax on profit they never see.
It can also push you into higher bands and affect child benefit and your personal allowance.
Options include incorporation and sensible ownership splits — but each has trade-offs.
Never restructure on a hunch; model it on your real figures first.

Talk through my options

← All articles Employers

Your wage bill in 2026: the NI and minimum wage changes to plan for

9 min read · KBL Accounts

If you employ even one person, the cost of doing so has crept up over the past year — and not by a trivial amount. Two separate changes, landing close together, have pushed up what it costs to put someone on the payroll. Neither made enormous headlines for small businesses, but together they're exactly the sort of thing that quietly eats into a tight margin if you don't plan for them. Let's walk through what's changed, what it means in real pounds, and how to stay comfortably on top of it.

Change one: employer National Insurance went up

From April 2025, the National Insurance you pay as an employer changed in two ways at once — and it's the combination, not either change alone, that really bites.

The employer NI rate rose to 15%, up from 13.8%.
The threshold where you start paying dropped to £5,000 per employee per year, down from £9,100.

That second change is the sneaky one. It isn't just that the rate is a bit higher — it's that you now start paying it on a much larger slice of each person's wages. Previously the first £9,100 of someone's salary was free of employer NI; now only the first £5,000 is. So even for a part-timer, you're paying employer NI on thousands of pounds more than you were.

There is a cushion, though, and it's an important one. The Employment Allowance rose to £10,500 (up from £5,000). This is a discount applied to your total employer NI bill that most smaller employers can claim, and the increase genuinely softens the blow — for a lot of small businesses it offsets a big chunk of the rise, and for the very smallest it can wipe out the employer NI bill altogether. The catch is that you have to actually claim it.

Change two: the minimum wage rose again

The National Living Wage — the legal minimum for workers aged 21 and over — increased to £12.71 an hour from April 2026, up from £12.21 the year before. There were rises for younger workers and apprentices too. If you employ people at or near the minimum, that's a direct, unavoidable increase to your hourly cost, and it stacks neatly on top of the NI change for a double hit.

What it all adds up to

Let's make it concrete. Imagine you run a small cafe in Ipswich with four part-time staff on roughly the minimum wage. The minimum wage rise alone adds 50p an hour to each of them; across four people working decent hours, that's a few thousand pounds a year before you've poured a single flat white. Layer on the lower NI threshold and you're now paying employer NI on more of their wages than before. The Employment Allowance takes a good slice of the sting out — but the underlying cost of employing your team has genuinely gone up, and if your prices haven't moved to match, that increase is coming straight out of your profit.

The hidden on-costs people forget

It's worth remembering that the headline hourly rate is only the start of what an employee actually costs. On top of wages you've got:

Auto-enrolment pension contributions for eligible staff.
Holiday pay — every hour worked builds up paid leave.
Statutory payments such as sick pay and parental pay.
Employer NI, as above.

Add it all up and the true cost of a role is comfortably more than the wage on the payslip. That's not a reason to avoid hiring — it's a reason to budget for the real number rather than the headline one.

What you should do about it

Redo your staffing budget with the current rates, so you're not quietly working off last year's figures.
Make sure you're claiming the Employment Allowance if you're eligible — it's worth up to £10,500 and is genuinely easy to overlook.
Check your hourly rates against the latest minimum wage bands, including for anyone whose birthday has nudged them into a higher band.
Build the rises into your pricing. If your costs go up 5% and your prices stay still, that 5% comes straight off the bottom line.
Think about hours and productivity, not just headcount — sometimes the answer is a smarter rota rather than fewer people.

Common questions we get asked

"Can I claim the Employment Allowance?" Most small employers can, but there are conditions — for example, a sole director with no other employees generally can't. It's worth checking rather than assuming.

"Do these changes affect what my staff take home?" The minimum wage rise increases their pay; the employer NI change is a cost to you, not a deduction from them. Different pockets, but both worth understanding.

"Is it cheaper to use subcontractors instead?" Sometimes — but employment status is an area HMRC takes seriously, and getting it wrong is expensive. Don't reclassify staff as contractors just to dodge costs without taking advice first.

A word of reassurance

If all of this sounds a bit gloomy, here's the balance. Good employers who look after their teams tend to keep them, and a stable, motivated team is worth far more than the few percent these changes add to your costs. The goal isn't to panic — it's to know your numbers, claim everything you're entitled to, and price your work so that paying people properly doesn't quietly sink your margin.

What this means for you

Employing people in 2026 costs a little more than it did, thanks to higher employer NI on a lower threshold and another minimum wage rise. The businesses that handle it well are the ones that update their budgets, claim the Employment Allowance, and adjust their pricing — rather than discovering the gap at the end of the year when it's too late to do much about it.

We run payroll for lots of local businesses and can crunch your exact numbers, make sure you're claiming everything you should, and keep you fully compliant without the headache.

This is a general guide, not personal advice — please check with us about your own payroll and eligibility.

A fuller worked example

Let's put real numbers on it. Say you employ one full-time person on £25,000 a year. Employer NI is charged at 15% on earnings above the £5,000 threshold — so on £20,000, that's £3,000 of employer NI for the year. A few years ago, with the higher £9,100 threshold and lower rate, the same salary would have cost noticeably less in NI. The good news is that if you qualify for the Employment Allowance, up to £10,500 of that employer NI bill can be wiped out across your whole payroll — which for a small team can mean the employer NI cost falls dramatically, or even to nil. That's precisely why checking your eligibility is one of the most valuable five-minute jobs you can do.

Quick recap

Employer NI is now 15%, and you start paying it at just £5,000 per employee.
The Employment Allowance rose to £10,500 — claim it if you're eligible.
The National Living Wage rose to £12.71 an hour from April 2026.
Remember pensions, holiday pay and statutory pay on top of wages.
Update your budget and pricing so the extra cost doesn't eat your margin.

Sort my payroll

← All articles Limited Companies

Companies House now wants to check your ID — here's the deal

8 min read · KBL Accounts

If you run a limited company, you may have heard rumblings about Companies House wanting to verify your identity — and quite reasonably wondered whether it's a big deal or just another bit of admin to add to the pile. The short answer: it's real, it's now compulsory, and it's genuinely simple once you know what's involved. Here's the full picture so you can tick it off and get back to running your business.

Why is this happening at all?

For years, Companies House was essentially a filing cabinet. It accepted whatever it was given without checking much at all, which made it cheap and easy to set up a UK company — but also made it cheap and easy for fraudsters to set up companies in other people's names, or hide behind directors who didn't really exist. New laws under the Economic Crime and Corporate Transparency Act set out to fix that, by requiring Companies House to check that the people behind companies are real and are who they claim to be.

Identity verification is the centrepiece of that change, and it became mandatory from 18 November 2025. This isn't a passing campaign that will quietly fade away — it's now a permanent part of running a UK company, and it's here to stay.

Who actually needs to verify?

If any of these describe you, identity verification applies:

Company directors — both current directors and anyone being newly appointed.
People with significant control (PSCs) — broadly, anyone who owns or controls more than 25% of the shares or voting rights.
LLP members, and certain other people who file at or are listed on the register.

So in a typical small company where you're both the sole director and the owner, you'll need to verify once — but you're being checked in both capacities, as the director and as the person with significant control.

How do you actually do it?

There are two routes, and you can pick whichever suits you best:

Directly with GOV.UK. You verify your identity through the GOV.UK One Login service, using a document such as your passport or driving licence. It's broadly similar to other online identity checks you've probably done before — a few minutes with your phone and an ID document.
Through an authorised agent. An accountant or other registered agent can verify your identity on your behalf. For most of our clients this is the easy button: we handle it as part of looking after the company, and you barely have to think about it.

What happens if you don't?

This really isn't one to file under "I'll get to it eventually". Failing to verify when required can lead to penalties, and — more disruptively for day-to-day life — it can block your filings. If you can't file your confirmation statement or your annual accounts because an identity check is still outstanding, that's the kind of problem that snowballs quickly: late filing penalties, a register that shows your company as overdue, and in the worst cases a company at risk of being struck off. None of that is remotely worth the hassle when the fix is so quick and straightforward.

A real-world example

Imagine you set up your consultancy as a limited company a few years ago. You're the sole director and the only shareholder. Under the new rules you need your identity verified — once as the director, and as the person with significant control. Do it directly and it's a short online check on your phone; ask us and we'll verify you as your authorised agent and make sure it's properly recorded against the company. Either way, it's done, it stays done, and your filings carry on uninterrupted.

While we're on the subject of Companies House…

The identity rules are part of a broader tightening at Companies House, which is also taking a much harder line on things like accurate registered office addresses, valid email addresses for the company, and the general quality of information on the register. The overall direction of travel is clear: more checking, and far less tolerance for sloppy, out-of-date or false information. For honest businesses that's genuinely good news — it makes the public register more trustworthy, which is something we all rely on when we check out a supplier or customer — but it does mean keeping your company details accurate and current matters more than it used to.

Common questions we get asked

"I've got several companies — do I verify for each one?" You verify your own identity once. That verified identity is then linked to the roles you hold across companies, rather than you repeating the check from scratch every time.

"What documents do I need?" A standard photo ID such as a passport or driving licence is the usual route. If you verify through us as your agent, we'll tell you exactly what we need.

"I'm a director but I don't own shares — am I still in scope?" Yes. Directors need to verify regardless of whether they own any of the company.

"Is there a deadline I've already missed?" If you're unsure whether you're compliant, don't guess — let us check the position for you. It's much easier to sort proactively than to untangle a rejected filing later.

What this means for you

If you're a director or you own a meaningful chunk of a company, identity verification is now simply part of the job. It's quick, it's a one-off, and the only real mistake you can make is ignoring it until it gums up a filing. Get it done — or let us do it for you — and you can forget all about it.

As an authorised agent, we can verify clients ourselves and keep everything in good order with Companies House. Not sure whether you've already done it, or whether it applies to you? Just ask, and we'll check.

This is a general guide, not personal advice — please check with us about your own company's obligations.

What about brand-new companies?

If you're setting up a company now, identity verification is built into the process from the start — you and any other directors or owners will need to be verified as part of getting the company off the ground. It's worth factoring in, because it's no longer the five-minute, no-questions-asked formation it once was. If we form companies for clients, we handle the verification as part of the package, so it's one less thing to think about when you're busy getting a new venture going.

Quick recap

Identity verification at Companies House became mandatory on 18 November 2025.
It applies to directors, people with significant control, and LLP members.
You can verify via GOV.UK One Login or through an authorised agent like us.
Skipping it can mean penalties and blocked filings — don't leave it.
It's a one-off check; once done, it's done.

Help me verify

← All articles Cash Flow

5 ways to keep the cash flowing (without losing sleep)

8 min read · KBL Accounts

Here's an uncomfortable truth that catches out even successful businesses: you can be profitable on paper and still run out of money. Profit and cash are not the same thing, and the gap between them is where a frightening number of otherwise healthy businesses come unstuck. Cash flow — the timing of money coming in and money going out — is the real heartbeat of any small business. The genuinely good news is that keeping it healthy isn't about clever accounting tricks; it's about a handful of sensible habits. Here are five that make the biggest difference.

First, why profit isn't the same as cash

Imagine you land a brilliant £20,000 order. On paper, the moment you raise the invoice, that's revenue — your accounts look fantastic. But if the customer pays in 60 days, and in the meantime you've had to buy materials, pay your staff, and cover the rent, your bank account can be bone dry while your profit-and-loss statement is positively glowing. That's the cash flow trap in a nutshell: profit is a story about the whole year, but cash is about what's actually in the bank today. Master the timing, and you stay firmly in control.

1. Invoice straight away, and chase without apology

The single most common cash flow killer is slow invoicing. The job's finished, everyone's pleased, and the invoice sits in your "I'll do it on Friday" pile for a fortnight — which means you get paid a fortnight later than you needed to. Invoice the moment work is done, make your payment terms crystal clear on every invoice, and don't be the least bit shy about chasing. A polite reminder the day an invoice falls due isn't rude; it's just good business, and the vast majority of customers respect a firm that runs itself properly. Remember: the money you're owed isn't really yours until it's landed in the bank.

2. Make it ridiculously easy to pay you

Every little bit of friction between your customer and paying you costs you days. Put clear, short payment terms on every invoice. Offer a way to pay online with a single click, rather than asking people to dig out their banking app and type in your sort code and reference. For bigger jobs, take a deposit up front and stage payments as the work progresses, so you're never funding an entire project out of your own pocket and praying the final invoice gets paid. The easier you make it to pay, the faster the money arrives.

3. Keep a buffer for the bumpy weeks

Every business has lumpy months — a quiet patch, a big VAT or tax bill, a reliable customer who suddenly pays late. A cash buffer is what turns those from a full-blown crisis into a mild non-event. Aim to keep one to two months of running costs tucked away in a separate account, and treat it as genuinely untouchable except for real wobbles. It's not exciting, and it won't earn you much sitting there — but the first night you don't lie awake worrying about Friday's wages, you'll understand exactly why it was worth building.

4. Look ahead, not just behind

Most business owners can tell you precisely what happened last month. Far fewer can tell you what their bank balance will look like in eight weeks' time — and that's the number that actually decides whether you sleep well. A simple rolling cash flow forecast, looking around 13 weeks ahead, lets you see a squeeze coming while you've still got time to do something about it: chase a payment early, push a non-urgent purchase back a few weeks, or have a quiet, friendly word with a supplier about timing. It doesn't need to be a work of art. A clear, honest forecast you actually look at every week beats a beautiful spreadsheet that lives forgotten in a folder.

5. Mind both ends of the pipe

Cash flow isn't only about getting paid faster — it's just as much about not paying out faster than you need to. Don't tie up precious cash in stock that won't sell for months. Negotiate sensible terms with your own suppliers, so the money going out is better matched to the money coming in. And keep a sharp eye on the slow, silent drains: the subscriptions you no longer use, the standing order for a service you forgot you'd signed up for, the "small" monthly costs that quietly add up to a meaningful number over a year. Small leaks sink big ships.

Common questions we get asked

"What's a healthy amount to keep in reserve?" A common rule of thumb is one to three months of fixed costs, but the right figure depends on how predictable your income is. Lumpy, project-based income needs a bigger buffer than steady monthly retainers.

"My customers always pay late — what can I do?" Tighten terms, ask for deposits, make paying effortless, and chase the moment payment is due. For persistent offenders, it's fair to ask whether the work is worth the cash flow pain.

"Should I use an overdraft or finance to smooth things out?" Used carefully, short-term finance can bridge a genuine timing gap — but it's a tool, not a cure. If you're constantly reaching for it, the underlying issue is usually invoicing, terms or pricing, and that's where to look first.

Putting it all together

None of these five habits is dramatic on its own. But stacked together they smooth out the bumps, give you a cushion against the unexpected, and let you plan with confidence instead of crossing your fingers at the end of each month. The businesses that sail through tough patches usually aren't the ones with the biggest profits — they're the ones who manage their cash with a bit of quiet discipline and never get caught out by timing.

What this means for you

If cash flow has ever kept you up at night, the fix usually isn't working harder — it's working a bit smarter on these few habits. Invoice fast, get paid easily, keep a buffer, look ahead, and watch what goes out. Do those consistently and the 2am panic largely melts away.

We can set you up with a simple rolling cash flow forecast tailored to your business, and check in with you regularly so cash never catches you by surprise. Sometimes a fresh pair of eyes is all it takes to spot the leak you'd stopped noticing.

This is a general guide, not personal advice — please check with us about your own business.

Building a simple 13-week forecast

A 13-week cash flow forecast sounds technical, but it's really just a calendar for your bank balance. List the weeks down one side. For each week, jot down the money you genuinely expect in (invoices due, regular income) and the money going out (wages, rent, VAT, suppliers, loan payments). Start with today's bank balance and roll it forward week by week. The moment a week dips towards zero or below, you've found a problem you can still fix — weeks before it actually happens. That's the whole trick: it's not about predicting the future perfectly, it's about spotting trouble early enough to do something about it.

Warning signs to watch for

Regularly dipping into your overdraft to make it to the end of the month.
Paying suppliers late, or juggling which bills get paid when.
A growing pile of unpaid customer invoices.
Not being able to put money aside for your next tax or VAT bill.

If any of those feel familiar, it's not a reason to panic — but it is a reason to act, and the sooner the better.

Get help with cash flow

Merry Christmas!

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