HMRC are changing the way that tax refunds are made to the majority of taxpayers who make a multi-year P800 tax refund claim. Claims must usually be made no later than four years from the end of the tax year to which the claim relates.

Employees making a claim for a multi-year tax refund will need to request their repayment using HMRC’s digital services. They will no longer receive the repayment automatically by cheque. This change brings multi-year refunds in line with the wider P800 repayment process under which taxpayers must take action in order to receive money that they are owed by HMRC.

Once a multi-year claim has been processed, the taxpayer will receive a P800 tax calculation letter which will ask them to request their repayment. The quickest way to do this is through their HMRC personal account or via the HMRC app.

However, the taxpayer does not need to be fully set up for HMRC’s online service in order to request their repayment as they can request their refund using the online service on the Gov.uk website at www.gov.uk/tax-overpayments-and-underpayments rather than signing in through the Government Gateway. To do this, they will need the unique reference number in their P800 letter and their National Insurance number.

Taxpayers who are digitally excluded or who prefer a cheque can still get one, although they will need to wait longer for their money.

The High Income Child Benefit Charge (HICBC) claws back child benefit if the recipient and/or their partner earns more than the threshold. For 2026/27, the charge applies once adjusted net income exceeds £60,000. Where both the recipient and their partner have adjusted net income of more than £60,000, the charge is levied on the one with the highest income. The person liable to pay the charge may not be the person who received the child benefit.

The charge claws back 1% of the child benefit for the tax year for every £200 by which adjusted net income exceeds £60,000. Once adjusted net income reaches £80,000, the HICBC is equal to the child benefit for the year. For 2026/27, child benefit is set at £27.05 per week for the eldest child and £17.90 per week for each additional child.

Opting not to receive the benefit

Where the HICBC will claw back all the child benefit for the tax year (which will be the case where adjusted net income is £80,000 or more), it may be preferable not to receive the child benefit rather than receiving it and paying it back. A person can opt out of receiving child benefit either by using the online service or completing the online form.

It is important to claim child benefit then opt out (rather than simply not claiming it) to benefit from the associated National Insurance credits, particularly where the claimant would not otherwise secure a qualifying year for state pension purposes.

Paying the charge through Self-Assessment

It used to be the case where a taxpayer needed to pay the HICBC, they had to register for Self-Assessment if not already registered and pay the charge through the Self-Assessment system. However, with the introduction of the PAYE service, the charge is now only payable through Self-Assessment where the person needs to send in a Self-Assessment tax return for another reason (as will be the case, for example, if they have trading, property or investment income) or if they have not paid the charge by 31 January after the end of the tax year to which it relates.

Paying the charge through PAYE

A new service was launched last year which allows taxpayers to pay the HICBC through PAYE, removing the need to register for Self-Assessment solely to pay the HICBC. The taxpayer’s tax code will be adjusted to collect the HICBC through PAYE. Taxpayers must register to use this service.

However, the charge can only be paid through PAYE if all the following apply:

• the taxpayer does not need to file a Self-Assessment return for another reason;
• they are paying the tax for the current or previous tax year onwards; and
• it is before 31 January after the end of the tax year to which the charge relates.

A person who previously paid the charge through Self-Assessment can switch to paying through PAYE by contacting HMRC to be removed from Self-Assessment and to register to pay the charge through PAYE. If a person needs to be within Self-Assessment for another reason, the charge must be paid through Self-Assessment – it cannot be paid through PAYE.

A company tax return must be filed no later than 12 months after the end of the accounting period to which it relates. However, the corporation tax for that period is due earlier and must be paid by nine months and one day after the end of the accounting period.

So, if a company’s accounting period is the year to 31 March 2026, they will need to file their company tax return by 31 March 2027. However, the corporation tax for the period is due by 1 January 2027.

As the corporation tax due date is before the company tax return filing date, most companies will file the return on time as it will make sense to do the return before the corporation tax is paid.

However, there are consequences if the return is filed late or the tax is paid late.

Late filing penalties

Penalties are charged if the company tax return is as little as one day late. Further penalties are charged if the return remains outstanding three months, six months and 12 months after the due date.

The penalties charged are shown in the table below.

Period after deadline	Penalty
1 day	£200
3 months	A further £200
6 months	A further penalty of 10% of the amount of tax which HMRC estimate to be outstanding
12 months	A further penalty of 10% of any unpaid tax

Persistent late offenders are fined more heavily – if the company tax return is late three times in a row, the £200 penalties are each increased to £1,000.

Taxpayers with a reasonable excuse (in HMRC’s eyes) for filing their return late can appeal against any late filing penalties charged. However, they must have filed the return before appealing.

Where the company tax return has not been filed six months after the due date, HMRC will decide how much corporation tax the company must pay. This is known as a tax determination. A company cannot appeal against this. However, once they have filed their company tax return and paid the tax due, HMRC will recalculate the penalties and interest based on the actual liability.

Late paid corporation tax

There are no penalties for paying corporation tax late. However, interest is charged at a rate of 4% higher than the Bank of England base rate from the due date until the date on which payment is made.

Over the summer, HMRC consulted on proposals for the timelier payment of income tax due under Self-Assessment (ITSA).

Currently, taxpayers within Self-Assessment must pay their income tax and any Class 4 National Insurance by midnight on 31 January after the end of the tax year to which it relates. This means that income tax and Class 4 National Insurance for 2025/26 must be paid in full by midnight on 31 January 2027.

If the tax and Class 4 National Insurance bill for the previous tax year was £1,000 or more, unless 80% of the amount due for the year was collected at source, such as under PAYE, the taxpayer must make payments on account of the current year’s liability on 31 January in the tax year and on 31 July after the end of the tax year. Each payment on account is 50% of the previous year’s tax and Class 4 National Insurance liability. Any balance due must be paid by 31 January after the end of the tax year.

Taxpayers with PAYE income

Taxpayers who are within Self-Assessment and who have a PAYE source of income will make in-year payments on account of their Self-Assessment tax bill through PAYE from 6 April 2029 (2029/30 tax year).

Other taxpayers

Where a taxpayer has no or insufficient PAYE income for tax and Class 4 NIC that they owe through Self-Assessment to be collected in year through PAYE, HMRC are exploring increasing the frequency of payments on account and advancing them so that all payments on account are made in the same tax year as the income to which they relate. Under this proposal, the payments would be based on the taxpayer’s forecasted liability which in turn would be based on past returns. Once the taxpayer had reported their liability for the year, the amounts paid and owed would be reconciled, with the taxpayer making a balancing payment or receiving a refund as necessary.

Transition year

Moving to in-year payment will mean that in the transition year taxpayers may be paying tax for more than one tax year. Although the actual tax paid will not change, moving the payment dates in year may cause cashflow difficulties for taxpayers. HMRC are considering options to support taxpayers during the transition, such as spreading payments for previous years over a longer time frame.

When a sole trader transfers their business to a limited company, a chargeable gain may arise on the assets transferred. As the connected person rules apply, the gain is calculated by reference to the market value at the date of transfer rather than the sale proceeds, if any. However, where rollover relief on the transfer of a business – generally referred to as ‘incorporation relief’ – is claimed, some or all of the gain can be deferred, reducing or eliminating the immediate capital gains tax bill.

Incorporation relief is a capital gains tax rollover relief that can be claimed where a business is transferred to a limited company wholly or partly in return for shares.

Full relief is available where the consideration is wholly in shares. Here, claiming incorporation relief allows the full gain to be rolled over, reducing the base cost of the shares.

Example 1

Peter incorporates his business, transferring all the assets from his sole trader business to the new limited company, P Ltd, in return for 1,000 ordinary shares in the company.

On incorporation, the business was worth £50,000 (£50 per share).In the absence of  incorporation relief, a capital gain of £30,000 will be chargeable immediately.

Peter claims incorporation relief. The gain is rolled over, reducing the base cost of the shares to £20,000 (£20 per share).

If the consideration is received partly in shares in the new company and partly in cash, incorporation relief is only available for so much of the gain as is attributable to the shares. The part of the gain which is attributable to the cash is immediately chargeable.

Example 2

The facts are as in example 1, except that he receives 1,000 ordinary shares in P Ltd and £10,000 in cash. On incorporation, the company was worth £50,000. In the absence of incorporation relief, a capital gain of £30,000 will be chargeable immediately.

Peter claims incorporation relief. In this instance, only the gain attributable to the shares of £24,000 (£30,000 x £40,000/£50,000) can be rolled over, reducing the base cost of the shares to £16,000 (i.e. from £40 per share to £16 per share). The remaining gain of £6,000 attributable to the cash is immediately chargeable.

Claiming the relief

A claim to incorporation relief will not always be beneficial – if the transfer of the business gives rise to a capital loss, which may be the case if the assets have depreciated since they were acquired, or if any gain is sheltered by losses and/or the annual exempt amount, there is no point in claiming the relief. However, where incorporation relief is worthwhile, it must now be claimed; prior to 6 April 2026, it was given automatically. Where the transfer of the business takes place on or after 6 April 2026, the relief must be claimed on or before the first anniversary of the 31 January following the end of the tax year in which the transfer of the business took place. This can be done in the Self-Assessment tax return.

Many people are taking on a side hustle to make ends meet. This can take various forms, such as selling items online, providing services or creating content.

You may need to tell HMRC about your income if your trading income (from all sources including any other self-employments) is more than £1,000. The £1,000 limit is for all trading income – not for each source. You may also need to sell an item and make a capital gain. Normal tax rules apply – there are no special rules for side hustles.

Tax will be payable if your total taxable income from all sources exceeds your personal allowance (set at £12,570 for 2026/27, abating once income reaches £100,000).

Here we look at some popular side hustles and see whether you need to tell HMRC about them.

Selling clothes on Vinted

Where a person simply sells their old clothes on Vinted for less than they paid for them, they do not need to tell HMRC about the income.

However, if they buy second-hand clothes with a view to selling them for a profit, they will need to tell HMRC once their total trading income from all sources exceeds £1,000. Remember, this is income before deducting expenses.

If the income is less than £1,000, it is covered by the trading allowance, and there is no need to tell HMRC.

Tax will be payable on the profit. If expenses are less than £1,000, the trading allowance can be deducted instead.

Providing services

A person may earn extra money by providing services, such as tutoring or gardening services.

Here, HMRC must be told once the income from providing the services reaches £1,000. Tax is payable on the profit after deducting expenses or the £1,000 trading allowance if this is more beneficial.

Selling household items

Normally, it will not be necessary to tell HMRC if you make money from selling unwanted furniture and household items. However, if an item such as a painting or an antique is sold for more than £6,000, you may need to tell HMRC and pay capital gains tax if you have made a gain. Special rules apply which cap the chargeable gain.

These rules do not apply to private cars and assets with an expected lifespan of less than 50 years.

Content creation

Content creators may earn money from reviewing items online. They may also be gifted items to promote a brand. When working out the total income from content creation, it is not enough to only include cash payments – the value of gifted items must also be taken into account.

Where the total income (before deducting expenses) exceeds £1,000, HMRC must be told. The profit is taxable. When calculating the profit, the £1,000 trading allowance can be deducted instead of actual expenses where this gives a better result.

More than one side hustle

If you have more than one side hustle, you will need to add together the income from each source to see if it exceeds the £1,000 trading allowance. Remember to include income from any self-employments too.

Remember, digital platforms provide income details to HMRC.

Fill in a tax return

If you need to tell HMRC about your side hustle, you will need to register for Self-Assessment if you are not already registered and file the return online by midnight on 31 January after the end of the tax year to which it relates.

Employer’s Class 1 National Insurance is a significant cost for employers, being charged at 15% on earnings over the relevant threshold. However, there are some steps that employers can take to reduce their bill.

Claim the Employment Allowance

The Employment Allowance is a valuable allowance which reduces an employer’s secondary Class 1 bill by up to £10,500 a year. The allowance is capped at the employer’s secondary Class 1 liability for the year where this is less than £10,500.

The allowance is not given automatically and for eligible employers to be able to benefit from it, they need to claim it. This can be done through their payroll software.

The allowance is not available to companies where the sole employee paid above the secondary threshold is also a director, rendering many personal companies ineligible. However, consideration could be given to perhaps changing the director to a spouse or civil partner or taking on a second employee and paying them above the secondary threshold (set at £96 per week).

Employ part-time workers

Employers pay secondary Class 1 National Insurance on employees’ earnings above the secondary threshold. By employing more part-time workers and less full-time workers, the employer is able to benefit from additional secondary thresholds, reducing their overall bill.

Example

An employer employs a full-time worker who is paid £4,000 a month. None of the higher secondary thresholds apply. The employer pays secondary Class 1 National Insurance of £537.45 a month (15% (£4,000 – £417)).

If instead the employer employed two part-time workers, paying them each £2,000 a month, the employer would pay secondary Class 1 National insurance of £237.45 a month for each employee (15% (£2,000 – £417)) – a total monthly bill of £474.90. By employing two part-time workers rather than one full-time worker, the employer saves £62.55 a month (15% of the monthly secondary threshold of £417). This is an annual saving of £750.60.

Employ workers under the age of 21

A higher secondary threshold – the upper secondary threshold for under 21s – applies where the worker is under 21. For 2026/27, it is set at £967 per week, £4,189 per month and £50,270 per year. Employer contributions (at 15%) are only payable on earnings in excess of the threshold. Employing a worker under 21 rather than one over 21 can reduce the employer’s secondary Class 1 bill by up to £6,790.50 a year.

Employ apprentices

A higher secondary threshold also applies in respect of the earnings of apprentices under the age of 25. The apprentice upper secondary threshold (AUST) is set at £967 per week, £4,189 per month and £50,270 a year for 2026/27. Taking on apprentices can be beneficial for the business and reduce the employer’s National Insurance bill. However, the apprentice must meet the statutory definition in the National Insurance legislation for the AUST to be available.

Employ armed service veterans

Taking on an armed forces veteran can also pay. A higher secondary threshold, the veterans upper secondary threshold, applies to the earnings of an armed forces veteran in the first 12 months of employment since leaving the armed forces. It is available for 2026/27 and is set at £967 per week, £4,189 per month and £50,270 a year.

Relocate to a Freeport or an Investment Zone

Employers whose businesses are located in a Freeport or an Investment Zone benefit from a range of tax incentives. These include a higher secondary threshold for new employees in their first three years of employment in a Special Tax Site. The threshold is set at £481 per week, £2,083 per month and £25,000 a year.

It should also be noted that employers can deduct secondary Class 1 contributions in calculating their taxable profits.

Businesses which give away free gifts or samples need to be aware of the VAT implications to ensure that they account for VAT correctly.

Gifts

Where a business makes a free gift, they do not receive any consideration in return.

If input tax has been incurred in relation to that gift which can be recovered, the business must account for VAT on the cost value of the gift unless the gift is a business gift.

Business gifts

A gift is a business gift if it is made in the course of promoting the business and the business is entitled to reclaim the VAT charged as input tax. The range of items that may count as a business gift is wide, including brochures and posters to expensive executive gifts. The definition also includes long service awards and retirement gifts, items given to trade customers, thank-you gifts given to customers and prizes in free lotteries or competitions or dispensed from gaming machines.

A business does not need to account for VAT on business gifts as long as the total cost of business gifts made to the same person does not exceed £50 in any 12-month period. However, where the total cost of business gifts to the same person exceeds this limit and the business is entitled to recover the VAT incurred on the purchase as input tax, they must account for VAT on the total cost value of the gifts.

Where a gift is used for business purposes by the recipient and VAT is accounted for, as a VAT invoice cannot be issued, the business must issue a tax certificate which must contain the words ‘No payment is necessary for these goods. Output tax of £X has been accounted for on the supply.’

Samples

A sample is defined for VAT purposes as ‘a specimen of a product which is intended to promote the sales of that product and which allows the characteristics  and qualities of that product to be assessed without resulting in final consumption, other than where final consumption is inherent in such promotional transactions’.

Free samples are not liable to VAT.

However, it should be noted that a finished item from a discontinued line does not count as a sample. Further, an item is not regarded as a sample where it is provided in greater quantities than necessary to assess its characteristics and qualities. For example, if a wine importer provided a client with a bottle of wine, HMRC would accept that it was a sample. However, the provision of a case of 12 bottles would suggest more than a sample.

Mandatory payrolling was due to come into effect from 6 April 2027. However, it has now been announced that the introduction will be phased in, with mandatory payrolling only applying to benefits in kind in phase one from 6 April 2027, with all remaining benefits in kind (with the exception of taxable cheap loans and living accommodation benefits) being brought within mandatory payrolling from 6 April 2028. From the same date, employers will be able to opt to payroll taxable cheap loans and living accommodation benefits if they register to do so before the start of the 2027/28 tax year. These benefits are to be brought within mandatory payrolling from a later date.

Nature of payrolling

Under payrolling, the taxable amount of a benefit in kind is treated like extra pay which is paid to the employee with the same frequency as their cash pay. For example, if a monthly paid employee receives medical insurance with a cash equivalent value of £600, the employee’s gross pay for PAYE purposes each month would include £50 in respect of the medical insurance benefit. Tax is worked out on the total gross pay in the pay period and deducted from the employee’s cash pay.

As most benefits in kind are within Class 1A National Insurance, rather than Class 1, the payrolled benefit is not included in gross pay for National Insurance purposes.

Phase one

Mandatory payrolling is phased in from 6 April 2027. From that date it will apply to:

• company cars;
• car fuel;
• company vans;
• van fuel; and
• medical benefits.

Employers must payroll these benefits from that date. For 2027/28, payrolling is optional for other benefits in kind including taxable cheap loans and living accommodation benefits. There is no need to register benefits for which payrolling is mandatory. However, where a benefit is to be payrolled voluntarily in 2027/28, it must be registered for payrolling before the start of that tax year.

Phase two

From 6 April 2028, mandatory payrolling is extended to all other benefits in kind with the exception of taxable cheap loans and living accommodation benefits from 6 April 2028 (however, employers will be able to opt to payroll these voluntarily as long as they are registered for payrolling before the start of the new tax year).

Class 1A National Insurance

For 2026/27 and earlier tax years, Class 1A National Insurance is included in the Class 1A National Insurance calculation on the P11D(b). The liability is paid in a single lump sum after the end of the tax year. Payment must be made by 22 July following the end of the tax year where payment is made electronically or by 19 July if payment is made by cheque.

However, under mandatory payrolling, the associated Class 1A National Insurance will be reported through Real Time Information on the Full Payment Submission each month and paid over to HMRC with the PAYE and Class 1 National Insurance for the month. This will bring forward the payment date and may have cashflow implications for employers.

During the move to in-year collection, employers may pay some Class 1A National Insurance monthly and some after the end of the tax year.

Impact on P11D and P11D(b)

Where a benefit is payrolled, it is not reported on the P11D. The introduction of mandatory payrolling will render the P11D obsolescent. For 2028/29 and later tax years, it will only be used to report taxable cheap loans and living accommodation where the employer has not opted to payroll these.

As noted above, under mandatory payrolling, Class 1A National Insurance contributions are reported and paid in-year. This will mean that benefits in kind within mandatory payrolling will not be included in the Class 1A calculation on the P11D(b). For 2028/29 and later tax years, the P11D(b) will only be used to calculate the Class 1A National Insurance liability on taxable cheap loans and living accommodation benefits where these are not payrolled.

Pension contributions benefit from tax relief. However, the amount of the relief is capped at the lower of 100% of earnings (or £3,600 where this is higher) and the available annual allowance.

Annual allowance

The annual allowance is set at £60,000 for 2026/27. However, it is reduced where both adjusted net income exceeds £260,000 and threshold income (broadly income excluding pension contributions) exceeds £200,000, by £1 for every £2 by which adjusted net income exceeds £260,000 until the minimum allowance for the year is reached. This is set at £10,000 for 2026/27.

Once the current year’s allowance has been used up, unused allowances from the previous three years can be used, with an earlier year’s available allowance used before a later year.

Employer contributions

Employer contributions count towards the annual allowance but are not subject to the 100% of earnings cap.

Methods of tax relief

Individuals benefit from tax relief at their marginal rate of tax on pension contributions that they make up to the permitted limits.

There are two methods by which relief may be given – under a net pay arrangement or under a relief at source arrangement.

Relief at source

Under a relief at source arrangement, an employer takes an employee’s pension contribution from their net pay. The amount paid to the pension provider is net of basic rate tax. The pension provider reclaims the basic rate of tax from HMRC. If the employee pays tax at the higher or additional rates, they will need to claim relief for the difference between the rate at which they pay tax and the basic rate in their Self-Assessment tax return.

Example

David is a higher rate taxpayer. He pays into a personal pension and his employer deducts pension contributions of £300 a month from his net pay (£3,600 a year).

This is paid net of basic rate tax and equivalent to a gross contribution of £4,500. The pension provider claims an amount equal to the basic rate (£900) from HMRC.

As a higher rate taxpayer, David is entitled to relief at 40%. This is worth £1,800. He has received relief of £900 from HMRC. He can claim relief for the remaining £900 in his Self-Assessment tax return.

The contribution of £4,500 costs him £2,700 (the £3,600 deducted from his pay, less the further relief of £900 claimed in his tax return).

Net pay

Under a net pay arrangement, a pension contribution is deducted from a person’s gross pay (before applying PAYE). In this way, relief is given at their marginal rate of tax, and there is no need to claim relief through Self-Assessment. This method is usually used by workplace pensions.