HMRC alert for the self-employed ahead of January deadline

Newsletter issue – January 2026

It's that time of year again! If you are required to submit a self-assessment tax return online, you must do so by January 31, declaring your income for the tax year ended April 5, 2025. You must also pay all the tax that you owe by that date. HMRC has reached out to SA taxpayers to remind them that it allows them to spread their liabilities over monthly instalments, if their tax bill doesn't exceed £30,000. You do this by submitting your return first, then set up a payment plan online using HMRC's 'Time to Pay' service. There have already been 18,000 payment plans set up this tax year, and HMRC says that it provides flexibility for people, allowing them to schedule payments according to their circumstances and avoid the stress of finding money to pay the whole bill at the end of January, when finances may be tight.

Chancellor clarifies tax change on state pension

Newsletter issue – January 2026 Following the Autumn Budget, the Chancellor has had to clarify what she meant when she said that nobody would pay tax on their state pension despite it certainly being higher than the personal allowance by April 2027. From April 2026, the new state pension will be about £20 below the frozen personal allowance. Due to that freeze and the triple lock guarantee, the state pension will grow to exceed £12,570 from April 2027 and so be liable for tax. However, Rachel Reeves has now clarified that pensioners relying solely on the state pension will not have to pay tax on the amount that exceeds the personal allowance. This has come as a relief for older people. But some have called it 'inter-generational unfairness', as working people on modest incomes won't have the same benefit when they are dragged into a higher tax band due to the freeze on the personal allowance. The Chancellor did acknowledge that she is 'asking ordinary people to pay a little bit more'.

Bank of England at odds with Chancellor's claims on impact of tax rises

Newsletter issue – January 2026 Catherine Mann, a rate-setter on the Monetary Policy Committee, told MPs that Rachel Reeves's policies - specifically the £26bn National Insurance tax increase and higher minimum wage - have slowed hiring. According to Bank of England analysis, about half of firms are reducing headcount to manage higher costs despite other options like cutting margins, automating roles and finding other efficiency savings. Rachel Reeves rejected claims of a link between her tax rises and unemployment. She highlighted that 329,000 jobs were added this year and pointed to government initiatives like the youth guarantee. However, figures from hiring platform Indeed indicate that the UK is the only large European nation to have suffered a drop in hiring for low-paid jobs since the pandemic. It is believed that the recent increase to the national living and minimum wages will continue to see a drop in lower-paid roles.

300,000 workers affected by scrapping of work-from-home tax relief

Newsletter issue – January 2026 Workers can currently claim either a flat £6 weekly allowance or actual additional costs, with claims backdated up to four tax years. From April 2026, employees will no longer be able to claim the £6 per week tax relief for home-working expenses. HMRC says the change is to address non-compliance - over half of claims checked were found to be ineligible. It is aiming to ensure fairness across the tax system. HMRC estimates that around 300,000 employees will be affected by this change, resulting in basic rate taxpayers paying about £62 more per year, and higher rate taxpayers about £124 more. However, employers can still reimburse home-working costs tax-free (no income tax or National Insurance deductions). So, businesses may need to decide whether to cover costs directly or risk losing staff who can't afford remote work.

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