Tax debts can quickly become a serious problem

A profitable business can still experience difficulty paying its tax bills.

VAT, PAYE, Corporation Tax and Self-Assessment payments can create significant demands on cash reserves, particularly where trading conditions have become more difficult or customers are taking longer to pay.

Recent reports of increasing use of HMRC's Time to Pay arrangements are a reminder that many businesses are experiencing these pressures.

The important point is to deal with the problem early.

Do not simply miss the payment

If you know that you will not have sufficient funds to meet an approaching tax payment, ignoring the deadline is rarely the best course of action.

HMRC may charge interest and, depending on the tax concerned and the circumstances, late payment penalties can also arise. Continued non-payment can eventually lead to debt collection action.

It is usually much easier to discuss the problem with HMRC before matters reach that stage.

Could Time to Pay help?

HMRC may agree a Time to Pay arrangement that allows a tax debt to be settled by instalments.

Whether an arrangement will be available, and the period over which the debt can be repaid, will depend on the circumstances. HMRC will normally want to understand why the tax cannot be paid on time, what the taxpayer can afford and whether future tax liabilities will also be paid as they fall due.

Some taxpayers may be able to set up an arrangement online, while others will need to contact HMRC.

Time to Pay does not make the tax liability disappear, and interest will normally continue to be charged. It can, however, provide valuable breathing space.

Look beyond the immediate tax bill

Needing a payment arrangement may also be an early warning that something else needs attention.

Perhaps customers are taking too long to pay. Prices may not have kept pace with costs. The owner could be drawing more money from the business than its cash flow can comfortably support, or an apparently profitable business may be carrying too much stock or repaying excessive borrowing.

Simply arranging extra time to pay HMRC will not solve these underlying problems.

A short-term cash-flow forecast can be particularly useful. It can identify when the lowest cash point is likely to occur and whether the business can meet both the proposed HMRC instalments and its forthcoming liabilities.

Talk to us before the problem gets worse

If you are concerned about an approaching tax bill, contact us as early as possible.

We can help you establish what is due, consider the available options and look at the wider cash-flow position. Acting early usually provides more choices than waiting until HMRC starts chasing an overdue debt

The first quarterly deadline has passed

Making Tax Digital for Income Tax is now a reality for many self-employed people and landlords.

Those brought into MTD from 6 April 2026 are required to keep digital records and use compatible software to send quarterly updates to HMRC. For those following the standard quarterly periods, the first update covered the period from 6 April to 5 July 2026 and was due by 7 August 2026.

If you were required to make an update and missed the deadline, the important thing is not to ignore it.

First, check whether MTD applies to you

Not every self-employed person or landlord is required to use MTD yet.

Broadly, you are within MTD for Income Tax from April 2026 if your qualifying gross income from self-employment and property exceeded £50,000 in the relevant tax year used to determine your start date. The threshold is due to fall to £30,000 from April 2027.

There are also exemptions in certain circumstances.

If you are unsure whether you should have made a quarterly update, check your position before assuming that you have missed a filing obligation.

Get your records up to date

If MTD does apply, the next priority is to make sure your digital records are complete.

The quarterly update is based on the income and expense information recorded in your compatible software. If bookkeeping has fallen behind, bringing those records up to date should usually be the first step.

Do not be tempted simply to wait until the next quarterly deadline. This could leave you trying to correct several months of records at the same time and increases the possibility of errors.

The second standard quarterly update is due by 7 November 2026, so getting back on track now will make the next submission considerably easier.

What about penalties?

MTD for Income Tax uses a points-based penalty system for late submissions. Broadly, a late submission can result in a penalty point, rather than an immediate financial penalty. Once the relevant points threshold is reached, a £200 financial penalty can become payable.

This makes it particularly important not to allow one missed deadline to turn into a pattern of late submissions.

Different rules apply to late payment of tax, so filing and payment obligations should not be confused.

Speak to us if you are uncertain

MTD represents a significant change in the way many taxpayers report their business and property information to HMRC. Some problems during the early stages are inevitable.

If you believe you should have submitted a quarterly update by 7 August, or you are unsure whether MTD applies to you, speak to us. We can help establish your position, check your records and make sure you are ready for the next deadline.

For many small businesses, employing the right people is essential to success. However, recent surveys suggest that rising employment costs are causing many business owners to rethink their recruitment plans.

Higher National Insurance costs, increases in the National Living Wage and wider employment obligations have all added to the overall cost of taking on staff. As a result, many businesses are looking more carefully at how they expand while maintaining profitability.

Recruitment decisions have become more important than ever.

Before filling every vacancy, it is worth considering whether there may be more effective alternatives.

Invest in productivity

Sometimes the best investment is not another employee but improving the efficiency of your existing team. Better software, improved processes and targeted staff training can often increase output without increasing headcount.

Use technology wisely

Many routine administrative tasks can now be automated. Cloud accounting software, customer relationship management systems and artificial intelligence tools can reduce repetitive work and allow employees to concentrate on activities that generate greater value.

Consider flexible resourcing

Not every role requires a full-time employee. Part-time staff, freelance specialists and outsourced services can provide expertise while keeping fixed employment costs under control.

Measure the return on recruitment

Every new employee should contribute more to the business than they cost. Preparing a simple financial projection before recruiting can help determine how quickly the investment is likely to pay for itself.

Review your pricing

Many businesses absorb rising employment costs instead of reviewing their prices. Regular pricing reviews help ensure that increased costs are reflected appropriately in the prices charged to customers.

Monitor key performance indicators

Measures such as revenue per employee, gross profit margins and staff utilisation can provide valuable insights into whether your workforce is operating efficiently.

Planning ahead

Businesses that regularly review staffing requirements are often better placed to adapt to changing market conditions. Recruitment should form part of a wider business strategy rather than simply responding to increasing workloads.

How we can help

As your accountant, we can help you assess the financial impact of recruitment decisions, prepare cash flow forecasts, calculate the true cost of employing additional staff and identify opportunities to improve productivity.

Good financial planning enables businesses to grow with confidence. By reviewing staffing decisions alongside profitability and cash flow, you can ensure that your business continues to develop in a sustainable and financially secure way.

Late payment has long been one of the greatest challenges facing small businesses. Many profitable businesses experience unnecessary financial pressure simply because customers take longer than agreed to settle their invoices. When cash is tied up in unpaid debts, it becomes harder to pay suppliers, invest in growth or even meet tax liabilities on time.

The Government has recently outlined further plans aimed at improving payment practices and strengthening support for smaller businesses. While many of the proposals are still subject to legislation, they indicate a clear intention to encourage larger organisations to pay their suppliers more promptly and to provide greater protection for SMEs.

What does this mean in practice?

Although the reforms are welcome, businesses should not rely on legislative changes alone to solve cash flow problems. Good credit management remains essential and can often make a greater difference than changes in the law.

There are a number of practical steps every business should consider.

Review your payment terms

Ensure your terms and conditions are clearly stated on quotations, contracts and invoices. If you currently offer 60-day payment terms as standard, consider whether a shorter period would be appropriate.

Invoice promptly

Delays in raising invoices inevitably delay payment. Wherever possible, invoices should be issued immediately after goods are supplied or work is completed.

Follow up overdue accounts

Many businesses hesitate to chase overdue debts for fear of upsetting customers. However, a polite reminder shortly after the due date often results in prompt payment. Having a structured credit control procedure helps remove the emotion from the process.

Monitor debtor days

Review the average time customers take to pay each month. If debtor days are increasing, investigate the reasons before the problem becomes serious.

Know your largest risks

If a significant proportion of your income comes from one or two customers, a delay in payment could have a major impact on your business. Consider whether your customer base is sufficiently diversified.

Maintain accurate cash flow forecasts

Regular cash flow forecasting allows potential shortfalls to be identified early, giving more time to arrange finance or reduce expenditure if necessary.

How we can help

Cash flow problems rarely develop overnight. They usually arise from a combination of slow-paying customers, rising costs and inadequate financial monitoring. We can help you analyse your working capital, review your credit control procedures and identify practical ways to improve cash flow before problems become critical.

Good cash flow management remains one of the most effective ways of protecting the long-term success of any business. Whatever changes are introduced by the Government, businesses that actively manage their cash flow will continue to place themselves in the strongest financial position.

Before a property development even begins, significant costs are often incurred. Planning applications, architects' drawings, engineering reports, environmental surveys and legal advice can all generate substantial expenditure long before construction starts.

HMRC has launched a consultation examining whether the current tax treatment of these pre-development costs remains appropriate and whether changes could help encourage investment.

What are pre-development costs?

Pre-development costs are expenses incurred before physical work begins on a development project. They may include:

� Architectural and design fees.

� Planning application costs.

� Site investigations and surveys.

� Environmental assessments.

� Legal and professional fees.

� Feasibility studies.

These costs are often unavoidable, yet the tax treatment can sometimes be uncertain depending on the nature of the project and the business involved.

Why is the Government consulting?

The Government wants to understand whether the existing rules discourage development or create unnecessary complexity.

Businesses have argued that uncertainty over whether certain costs qualify for tax relief can make investment decisions more difficult, particularly for larger commercial developments where early professional fees can be significant.

The consultation will consider whether the rules could be simplified while maintaining fairness across the tax system.

What does this mean for businesses?

There is no immediate change. Existing tax rules continue to apply until any future legislation is introduced.

However, developers, landlords and businesses considering new premises should continue to keep detailed records of every cost incurred during the planning stage. Good record keeping makes it much easier to determine the correct tax treatment and support any future claims.

Where projects span several years, accurate documentation becomes even more important.

Looking ahead

Although consultations do not always lead directly to new legislation, they often provide a clear indication of the Government's thinking.

Businesses planning property developments should monitor future announcements and consider how any changes might affect the cost of future projects.

How we can help

Property taxation is rarely straightforward, particularly where development projects are involved. Our team can advise on the current tax treatment of development costs, help maintain appropriate records and ensure your project remains as tax efficient as possible as the rules continue to evolve.

If you are planning a development or significant property investment, please contact us before major expenditure begins. Early advice can often save both time and tax later

1 August 2026 - Due date for Corporation Tax due for the year ended 31 October 2025.

19 August 2026 - PAYE and NIC deductions due for the month ended 5 August 2026. (If you pay electronically, the due date is 22 August 2026.)

19 August 2026 - Filing deadline for the CIS300 monthly return for the month ended 5 August 2026.

19 August 2026 - CIS tax deducted for the month ended 5 August 2026 is payable by today.

1 September 2026 - Due date for Corporation Tax due for the year ended 30 November 2025.

19 September 2026 - PAYE and NIC deductions due for the month ended 5 September 2026. (If you pay electronically, the due date is 22 September 2026.)

19 September 2026 - Filing deadline for the CIS300 monthly return for the month ended 5 September 2026.

19 September 2026 - CIS tax deducted for the month ended 5 September 2026 is payable by today.

Receiving money from a family member can be a welcome source of financial support, but many people are unsure whether they need to pay tax on it. In most cases, the person receiving a gift does not pay Income Tax on money given by family. However, the gift could have Inheritance Tax implications for the person making the gift.

Inheritance Tax may become an issue if the person giving the money dies within seven years of making the gift. Gifts made during this period may be included when calculating the value of their estate, depending on the amount given, who received it and when it was made.

Gifts can include money, property, land, personal possessions and shares. If someone sells an asset to a family member for less than its market value, the difference may also count as a gift.

There are several exemptions and allowances that allow people to give money without it becoming liable for Inheritance Tax. Each tax year, an individual can give away up to £3,000 known as the annual exemption. They can also make unlimited gifts of up to £250 per person, provided another exemption has not been used for the same recipient.

Certain wedding gifts are also exempt, including gifts of up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, and £1,000 to other individuals.

Regular financial support may also be exempt if it is paid from normal income and the person giving the money can still afford their usual living costs. This could include helping with rent, supporting an elderly relative or contributing into a savings account for a child under 18.

Anyone making significant gifts should ensure they keep records showing what was given, to whom, the value and the date of the gift as this may have Inheritance Tax implications in the future.

Most people are aware that cash donations to a charity can qualify for tax relief. However, it is less well known that gifts of land, property and qualifying shares can also provide valuable tax advantages.

If you donate land, property or shares to a UK charity, or sell them to a charity for less than their market value, you may be entitled to both Income Tax and Capital Gains Tax (CGT) relief. However, Income Tax relief is not available for gifts to Community Amateur Sports Clubs (CASCs).

Income Tax relief is claimed by deducting the value of the qualifying donation from your total taxable income for the tax year in which the gift or sale is made. If you complete a self-assessment tax return, the claim is made in the 'Charitable giving' section. Those who do not file a tax return can contact HMRC directly to claim the relief, either as a repayment or through an adjustment to their tax code.

There is also no CGT to pay on qualifying gifts of land, property or shares made to charity. Where an asset is sold to a charity for less than its market value, any gain is calculated using the actual amount paid by the charity rather than the asset's market value.

To support any claim, it is important to retain records showing that the gift or sale was made and accepted by the charity. If the charity asks you to sell the asset on its behalf before donating the proceeds, keep evidence of both the gift and the charity's request, as this will help preserve your entitlement to tax relief and avoid any unnecessary tax liability.

If you are selling shares or other investments, you may incur Capital Gains Tax (CGT) on any profit, or 'gain', you make. You will need to work out your gain to determine if you need to pay tax, which depends on whether your total gains exceed your CGT allowance for the tax year. 

You usually pay CGT on total gains above your annual tax-free allowance, which is currently £3,000. If your gains exceed the allowance, you must report and pay CGT. This is usually done through self-assessment, with different reporting deadlines depending on the type of asset disposed of. The rate of tax depends on your income. Basic rate taxpayers pay 18% CGT on gains within the basic rate band and 24% on amounts above it. Higher and additional rate taxpayers generally pay 24% CGT on all gains.

You do not usually pay CGT when you give shares as a gift to your husband, wife, civil partner, or a charity. Additionally, shares including those held within an ISA, those in employer Share Incentive Plans (SIPs) and UK government gilts are exempt. Your gain is typically the difference between what you paid for your shares and the sales proceeds. 

You can deduct costs like stockbrokers' fees and Stamp Duty Reserve Tax (SDRT) from your gain. Various tax reliefs may also reduce or delay your CGT liability, including Business Asset Disposal Relief, Gift Hold-Over Relief, Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Rollover relief. Special rules apply for working out the cost of shares bought at different times in the same company, or if sold through an investment club.

It is important to calculate your gain, consider any applicable reliefs, and report to HMRC if your total gains exceed the annual allowance.

It is important to know if HMRC is holding money that belongs to you. For example, if you have paid too much tax to HMRC, you may be able to claim a tax refund (also known as a tax rebate). Overpayments can happen for a number of reasons, including changes in your employment, paying tax using the wrong startegy or not claiming eligible expenses.

The process for claiming a refund depends on your circumstances, including whether you complete a self-assessment tax return and the type of income or expense involved. HMRC provides an online service to help you find out what you need to do if you have overpaid tax.

You may be able to claim a refund if you have paid too much tax on income from a job, job-related expenses such as working from home, fuel, work clothing or tools, a pension, overpayments revealed by a  self-assessment tax return or a redundancy payment. Refunds may also be available for UK income taxed while living abroad, interest from savings or payment protection insurance (PPI), income from a life or pension annuity, foreign income, or UK income earned before leaving the UK.

HMRC offers an online service at www.gov.uk/claim-tax-refund/y that allows you to check whether you are eligible and, in many cases, submit a claim.

If you have already claimed a tax refund, you can use HMRC's guidance to check when you should expect a response.