Major chanMajor changes are approaching in the way accountancy firms function. In 2026, new regulations will transform your compliance processes, client interactions, and daily operations. What’s upcoming? Anti-money laundering oversight is transferring to a new regulator. Transparency rules for companies are becoming more stringent. Digital tax filing is broadening. Financial reporting standards are being revised. Here’s the essential information you need. 1. FCA Takes Over AML Supervision In October 2025, the government announced that the Financial Conduct Authority (FCA) will assume responsibility for anti-money laundering (AML) supervision starting in 2026. This transition replaces the current system, where approximately 26 different professional bodies independently oversee their members, leading to a fragmented AML compliance landscape. Why is this happening? The professional bodies applied rules inconsistently—what one approved, another might reject. Standards varied significantly across the profession. After reviewing this scattered approach, the government decided it was ineffective. By centralising oversight under the FCA, a unified rulebook will be established for all entities. This also facilitates improved collaboration between regulators and law enforcement in monitoring suspicious activities. The FCA, already known for stringent regulation and active enforcement in financial services, will extend those rigorous standards to the accountancy sector. Expect comprehensive checks, frequent audits, and higher standards than previously experienced. Client Checks Are Becoming More Comprehensive Client due diligence standards have been intensified. You are now required to conduct more comprehensive checks for additional clients, particularly those from countries identified by the Financial Action Task Force as high-risk. Simple checkbox procedures are no longer deemed adequate. The FCA mandates proper risk assessments, supported by detailed documentation. For clients from high-risk regions, you must undertake thorough background investigations and provide unequivocal proof of their source of funds. Your records should illustrate the evaluation process for each client’s risk level and the corresponding steps taken. When the FCA reviews your documentation, they will scrutinise for decisions that are logical and well-substantiated. Client Money Rules Are Becoming More Stringent If you manage client funds in pooled accounts, it is important to be aware that regulations are continuously evolving. You will need to enhance your transaction records, improve monitoring mechanisms to detect irregular activities, and conduct regular reviews of your account structures. Carefully examine your existing controls. How quickly could you identify a suspicious transaction? Are your safeguards sufficient to prevent the misuse of funds? The FCA mandates systems that operate effectively in practical scenarios, rather than solely having policies that seem robust on paper. More Trusts Require Registration The requirements for trust registration have been broadened. Previously, only particular trusts were mandated to register with HMRC’s Trust Registration Service. Currently, all non-UK trusts holding UK property are obliged to register, irrespective of the date of acquisition. This modification substantially affects estate planning and tax advisory firms. It is essential to perform comprehensive verifications for every trust managed and to ensure meticulous filing of all relevant documentation. While smaller trusts may be exempt, confirming eligibility necessitates a careful, case-by-case evaluation. Company Formation Services Now Covered by AML Regulations Do you offer off-the-shelf companies, assist clients with buying or selling businesses, or provide registered office services? These activities now fall under AML rules. The aim is to prevent individuals from concealing illicit activities behind company structures. If you provide these services, you need to understand the new requirements and update your compliance procedures accordingly. Crypto Clients Require Special Care Handling cryptocurrency clients adds extra complexities. Crypto firms are under closer scrutiny, and it’s crucial to understand the unique risks of digital assets. Rigorous due diligence is essential, and you should be alert to warning signs specific to the crypto sector. 2. What Happens If You Don’t Comply Non-compliance may result in substantial fines, service restrictions, or removal from the regulatory framework. While enforcement authority was previously distributed among various entities, the FCA now asserts more robust enforcement capabilities. Errors may lead to penalties, operational constraints, or expulsion from the system. This represents a more stringent level of enforcement than what was previously accessible to professional bodies. Furthermore, increased audits are anticipated as the FCA collects detailed data and requires comprehensive reports on clients, risk assessments, and any suspicious activities. Companies House Gains New Authority The Economic Crime and Corporate Transparency Act is updating the company registration process. Everyone Must Confirm Their Identity Effective 18 November 2025, company directors and individuals with significant control are mandated to confirm their identities. This obligation extends to existing directors, not solely new appointees. This development presents a beneficial opportunity. Accountancy firms are eligible to be recognised as Authorised Corporate Service Providers. Upon registration, these firms can authenticate the identities of their clients. This process ensures client compliance, mitigates the risk of penalties, and enhances the firm’s reputation as a proactive problem-solver. 3. Making Tax Digital is Expanding Digital tax reporting is continuously expanding into new domains. VAT has now transitioned to a fully digital process, necessitating all VAT-registered entities, regardless of their size, to maintain digital records and submit returns through HMRC-approved software. Income Tax is undergoing a digital transformation in stages. Making Tax Digital (MTD) for Income Tax Self-Assessment will be introduced as follows: This phased implementation provides adequate time for clients to prepare; however, proactive engagement should commence immediately. Quarterly reporting significantly differs from annual submissions, and clients need sufficient time to adapt and become proficient with new software. 4. Financial Reporting Standards Are Changing The Financial Reporting Council continues to update standards to align with international frameworks. FRED 88 introduces modifications to FRS 101 for 2025/26, incorporating IFRS 18 regarding financial statement presentation. These changes will take effect from 1 January 2027 for relevant periods. 5. Tax Allowances Are Being Cut Recent budget measures impact capital allowances, which are important for your clients’ tax planning strategies. Starting from 1 April 2026 (for corporation tax) and 6 April 2026 (for income tax), the rate for writing-down allowances on plant and machinery decreases from 18% to 14% annually. While this may seem technical, it affects your clients’ tax liabilities and investment timing. Some clients
The Employment Rights Bill: What Employers Need to Know
The proposed Employment Rights Bill indicates a significant shift in workplace practices, emphasising flexibility, fairness, and modern practices. While it is still moving through Parliament, the overall trend is evident: companies will need to adopt a more transparent, inclusive, and employee-centric approach to work. For employers, this creates both new responsibilities and opportunities. Anticipating what may come enables businesses to plan proactively, update policies, and remain competitive amid a shifting employment environment. Why the Employment Rights Bill Matters to Employers? Working practices have evolved significantly in recent years. Remote and flexible work arrangements are now common, and many businesses depend on part-time or freelance staff to stay agile. However, employment law has not always kept up with these changes. The proposed Employment Rights Bill aims to update workplace laws by providing more explicit guidance for employers and strengthening protections for employees. For employers, this translates into greater clarity, improved consistency, and a framework better suited to managing today’s workforce in a fair and efficient manner. What Are the Key Changes in the Employment Rights Bill? 1. Flexible Working: A Day-One Right to Request Under current legislation, employees have the right to request flexible working from the first day of employment. Flexible working can include changes to working hours, patterns, or location, such as working from home or in a hybrid model. The proposed changes intend to reinforce this existing right by establishing a clear process for employers to follow when they cannot agree to a request. Employers might need to provide the business reasons behind a refusal and ensure that the decision is reasonable. 2. Pay Transparency and Fair Pay The Employment Rights Bill places greater emphasis on fair pay and transparency, particularly in sectors where pay and working conditions have been less consistent. While the Bill does not mandate pay audits for all employers, it includes targeted measures to improve fairness and accountability. These proposals encompass sector-specific pay arrangements, more precise guidelines on tip handling, and higher expectations for larger employers to address issues such as the gender pay gap. Collectively, these changes signify a broader shift toward transparent pay structures and equitable outcomes. 3. Protection During Industrial Action The Bill proposes increased protections for employees participating in lawful industrial actions, encompassing expanded safeguards against unfair treatment and termination related to such participation. While employers maintain the discretion to manage their workforce and ensure the continuity of business operations, these proposed amendments aim to enable employees to exercise their rights without fear of unjust consequences. For employers, this underscores the significance of establishing clear employee relations policies and addressing collective matters with due consideration. 4. Parental Leave and Statutory Sick Pay The Bill proposes enhancements to family-friendly rights and sick pay. Starting in April 2026, Statutory Sick Pay (SSP) is expected to become a day-one entitlement, eliminating the waiting period and lowering the earnings threshold. This change aims to enable more employees to qualify for sick pay from the first day of illness. Additionally, current rights to paternity leave and unpaid parental leave are anticipated to be available immediately from the first day of employment. These reforms are designed to better support working parents, including new hires. 5. Unfair Dismissal: Shorter Qualifying Period The Bill proposes reducing the qualifying period for employees to submit an unfair dismissal claim from two years to six months. This modification would enable employees to access protections against unfair dismissal at an earlier stage of their employment. 6. Zero-Hours and Insecure Work The Bill advocates for initiatives to mitigate insecure employment, with particular emphasis on the utilisation of exploitative zero-hours contracts. It encompasses rights such as: These measures are designed to provide workers with increased certainty while preserving employer flexibility where genuinely required. 7. Stronger Protections Against Harassment The proposed amendments aim to enhance employer responsibilities in preventing workplace harassment. Employers will need to take all reasonable steps to stop such misconduct, including actions towards third parties like customers or clients. When Will the Proposed Changes Take Effect? The Employment Rights Bill is set to be rolled out in stages over the coming years. Not all changes will occur at once, and some details remain subject to consultation. What Employers Will Need to Do? Once the Employment Rights Bill becomes law, employers will need to take practical steps to ensure compliance: Conclusion The Employment Rights Bill signals a significant shift in how work may be regulated in the UK. It reflects a move towards greater flexibility, fairness, and security in the workplace, while aiming to provide clearer frameworks for employers managing a modern workforce. For employers, the focus is on preparing for change by reviewing policies, contracts, and processes. For employees, the proposed changes aim to strengthen protections, support fair pay, and promote a better work–life balance. As the Bill progresses through Parliament, staying informed and planning ahead will be key for both employers and employees as they adapt to the future of work. How can The Infinity Group help? At The Infinity Group, we understand that changes to employment law can be complex and time-consuming. Our team supports businesses in understanding the proposed Employment Rights Bill and preparing for the changes it may bring. We work with employers to review policies, contracts, and people management processes, helping them stay compliant and adaptable as requirements evolve. Where appropriate, we also offer an umbrella solution, allowing businesses to place employment and compliance responsibilities with us, reducing administrative burden and risk. Our approach is practical and flexible, supporting employers whether they wish to manage responsibilities in-house or use our umbrella solution to handle key obligations on their behalf. We aim to help businesses build fair, inclusive, and well-managed workplaces that support long-term success. Subscribe to Our Newsletter for Weekly Updates!
How Directors Manage Self- Assessment: Essential Information for the Tax Year
Self-Assessment is a familiar component of the tax year for many individuals; however, for company directors, it entails a particular level of responsibility. Although the process is relatively straightforward when all income is processed through PAYE, most directors do not fall into this category. Instead, they often receive earnings from multiple sources, many of which are not captured solely by payroll. Self-Assessment serves as the method employed by HMRC to consolidate all income and ensure that the overall financial position can be accurately assessed, as outlined in official HMRC Self Assessment guidance. Many directors are often unaware of the extent to which their income exists outside of PAYE. Dividends, benefits, and other taxable items can significantly influence a director’s tax obligations. Additionally, rental income, investment returns, or occasional consultancy projects can further complicate the financial picture, rendering a standard payslip insufficient to reflect a director’s full-year earnings. This guide aims to outline essential information that directors should be aware of throughout the tax year and how the process can be managed with confidence and efficiency pressure. When a Director is Required to Submit a Tax Return A director must submit a Self-Assessment return if any of the following apply: Even directors with fairly straightforward arrangements might still fall under these rules. Regularly reviewing the situation each year is the most reliable way to stay compliant. HMRC’s Expectations for Directors Declarations Self Assessment is a detailed summary of the financial year. Directors usually need to report a wider range of information than standard employees. HMRC expects the return to include: Dividends and benefits are often the areas most easily overlooked, and these omissions commonly lead to HMRC queries. Common Mistakes Directors Make Directors tend to have limited time available, and Self Assessment is often addressed close to the deadline. This can lead to predictable and avoidable mistakes, including: Although these issues are common, they can lead to underpaid tax or unnecessary scrutiny. A more structured and timely approach avoids most of these pitfalls. What Happens If a Director Fails to File or Files Incorrectly HMRC applies penalties in a clear and structured way. A late return results in an automatic ÂŁ100 fine even if no tax is payable. Interest is charged on unpaid tax, and additional penalties may follow where income has been under declared. Directors are also more likely to receive compliance questions when information appears incomplete. There is also a professional aspect to consider. A director’s approach to tax compliance reflects on the wider business, so filing correctly and on time is essential both personally and professionally. How Directors Can Manage Self Assessment More Smoothly Self Assessment becomes much simpler when handled consistently throughout the year. Useful practices include: A well structured approach reduces errors and removes much of the pressure around filing season. How The Infinity Groups Supports Directors The Infinity Groups works closely with directors across a range of sectors. Our approach is steady, practical and based on a full understanding of HMRC requirements. We support directors by: Our aim is to give directors confidence that their Self Assessment is complete, compliant and handled with the level of care expected from a specialist team. Conclusion Self Assessment is simply part of the director’s role, but it does not have to be difficult. With a clear understanding of what needs to be reported and a consistent approach to record keeping, the process becomes routine rather than burdensome. By reviewing income carefully and seeking advice where necessary, directors can move through the tax year without unexpected issues. The Infinity Groups is available to provide the support directors need to ensure their return is accurate and compliant. Frequently Asked Questions Do all directors need to file a Self Assessment tax return? Not all, although many do because of dividends, benefits or outside income. What income must a director report to HMRC? Salary, dividends, benefits in kind, rental income, investment earnings and any other untaxed income. Are dividends included in the return? Yes. Dividend income must be declared regardless of the amount. What happens if a director files late? A ÂŁ100 penalty is issued automatically, followed by interest or further penalties if tax is unpaid. Can PAYE only directors avoid Self Assessment? Only if they genuinely have no other income, benefits or reporting requirements. What records should directors keep? Dividend vouchers, P11Ds, payroll summaries, rental and investment statements and receipts for allowable expenses. What is the Self Assessment deadline? The online filing deadline is 31 January each year, in line with official Self Assessment filing deadlines Subscribe to Our Newsletter for Weekly Updates!
Budget 2025 and the Construction Sector: What Businesses Should Prepare For
The 2025 Autumn Budget arrives at a time when numerous construction firms are still endeavouring to stabilise in the aftermath of several unpredictable years. Material costs have escalated significantly, planning outcomes have varied considerably between regions, and inflation has elevated daily project expenses well beyond previous estimates by contractors. Understandably, many stakeholders within the sector anticipated that this Budget would outline a more definitive approach toward investment, planning, and long-term growth. Instead, what has been presented is a combination of cautious measures, gradual adjustments, and a reminder that the upcoming year will necessitate more stringent margin management. Although the Budget does not fundamentally alter the regulations governing the construction industry, it introduces a series of subtle financial modifications intended to influence tender preparation, workforce strategies, cash flow management, and cost forecasting. The effects of these changes are expected to permeate the industry, impacting entities ranging from small builders and subcontractors to large developers, infrastructure specialists, and firms providing services across the broader supply chain. A Slow but Steady Rise in Operational Costs A key feature of this year’s Budget is the persistent freeze on personal tax thresholds. Although it may appear unchanged at first glance, its actual impact is more complex. As wages increase to align with inflation and to attract skilled labour, a larger number of employees will transition into higher tax brackets. This development is particularly relevant for construction companies, as it influences the net income of skilled workers, supervisors, and technical personnel. Diminished disposable income often prompts workers to consider roles offering higher net earnings, thereby complicating retention efforts. Contractors bidding on multi-year frameworks or substantial projects must also consider potential wage pressures, rather than assuming current compensation rates will remain constant throughout the project duration. Furthermore, the increase in the National Living Wage exacerbates cost pressures. For companies that depend extensively on general operatives, apprentices, and entry-level site teams, this wage escalation cannot be quietly absorbed. Smaller firms working with already narrow margins will need to adjust pricing models to avoid underestimating labour costs when submitting new tenders. New Tax Pressures for Landlords, Developers and Mixed Income Earners An unexpected announcement was the decision to include rental income within the scope of National Insurance contributions. Although it may seem like a narrow adjustment, its implications extend far beyond it. Developers with completed units, businesses earning additional rental income, and individuals who combine PAYE with Self-Assessment will all need to adjust their financial plans. Construction firms that rely on rental income to stabilise cash flow or manage borrowing will need new models. Build-to-rent schemes may also require updated forecasts to ensure their expected returns are still accurate. The move to shift mixed-income Self-Assessment liabilities into PAYE from 2029 is also important. Since subcontracting remains a key part of the construction workforce, workers might see more variability in their monthly deductions. Businesses will need to review their subcontractor payment schedules to prevent confusion over changing take-home pay. Pension Adjustments and Their Role in Workforce Retention The adjustments to pension tax relief may be subtle, but they matter to construction firms competing for senior expertise. Roles such as project managers, site leads and technical specialists often depend on strong pension packages as part of their benefits. From 2029, tighter limits on how much can be directed into pensions and ISAs through salary exchange may reduce the appeal of some benefit packages. Companies that rely on enhanced pension schemes to attract and retain long-serving staff may need to reconsider the balance of their compensation strategies, given the ongoing shortage of skilled labour. Real Time Reporting Becomes Part of Daily Operations Starting in 2027, there will be a stringent requirement for real-time reporting of benefits in kind in the Budget, marking a significant administrative change. Construction companies, especially those with multiple sites, rotating staff, diverse allowances, and reimbursements for tools or equipment, will experience this challenge more acutely than most industries. Year-end corrections will no longer be permitted, so payroll teams must ensure benefits are recorded precisely as they occur. Site supervisors and project administrators will need clearer procedures and updated digital systems to avoid compliance issues. Companies with outdated or less organised internal systems may face specific difficulties during this transition. Vehicle Planning Receives a Short Reprieve Major updates to vehicle-related benefits have been postponed until 2030, giving businesses extra time to prepare. Many construction companies manage large fleets that support surveyors, safety officers, site managers, and delivery crews. This delay enables these businesses to reevaluate their fleet renewal schedules, consider switching to hybrid or electric vehicles, and adjust their long-term mileage policies. For companies engaged in multi-year infrastructure projects, where fleet expenses are a major part of operational costs, this stability aids in better forecasting and budgeting. Planning, Infrastructure and Regional Investment Context While the Budget emphasises financial aspects, it is part of broader national conversations on planning reform, regional growth, and long-term infrastructure goals. Contractors across the country keep urging faster planning decisions, clearer land use policies, and more predictable approval processes. Although the Budget doesn’t directly solve these issues, it supports wider efforts to streamline development procedures and boost private investment. Companies engaged in regeneration, housing, commercial projects, or public works should stay alert to how these reforms develop. What This Budget Really Means for Construction Firms Overall, the Budget indicates a year characterised by steadily increasing costs, more stringent reporting standards, and a heightened necessity for disciplined financial management. While no single measure is revolutionary, their collective impact will shape how companies set prices, manage personnel, and protect profit margins. Key themes for the sector include: Firms that respond early by refreshing forecasts, reviewing workforce plans and strengthening administrative systems will be better positioned to stay stable as these measures take effect. How The Infinity Group Helps Construction Firms Navigate Change The Infinity Group supports construction businesses across the country in interpreting policy updates, assessing financial risk and strengthening long term resilience. Our team helps firms refine tender assumptions, review labour and overhead structures, evaluate
CIS Tax Refund: A Subcontractor’s Guide to Recovering Overpaid TaxesÂ
Subcontractors working under the Construction Industry Scheme (CIS) often end up paying more tax than they owe. This happens because the upfront CIS deductions are calculated at a set rate, without accounting for any expenses incurred throughout the year. When relevant costs—such as tools, safety equipment, fuel, and travel between sites—are considered, the actual tax liability is usually lower, which could even qualify the subcontractor for a refund. This guide aims to provide a comprehensive overview of how subcontractors can claim CIS refunds, identify eligibility criteria, outline claimable expenses, and ensure that tax returns are submitted accurately in compliance with HMRC regulations. What Is a CIS Tax Refund? This amount is refunded by HMRC when the tax deducted at source exceeds your actual liability. Subcontractors registered under CIS usually have 20% withheld, while unverified subcontractors may face a 30% deduction. Because these deductions happen before accounting for business expenses, many subcontractors end up overpaying their taxes. After you submit your self-assessment, HMRC will review your return and determine your actual tax liability. If the CIS deductions made during the year are more than what you owe, the surplus will be refunded to you. Allowable Expenses for CIS Subcontractors HMRC allows a wide range of business expenses to be claimed against your income. These reduce your taxable profit and help determine the refund you are entitled to receive. Tools and Equipment These are allowable if they are wholly and exclusively for your work: Protective Clothing (PPE) HMRC allows the cost of protective and specialist clothing required for your work, such as: Travel Between Sites You may claim the cost of travel between sites or temporary workplaces, including: Use of Home for Business If you carry out administrative tasks at home, you can claim a reasonable proportion of household running costs that relate to business use, including: Insurance and Professional Fees Allowable costs include: Materials and Consumables These are allowable when purchased for work and not reimbursed by the contractor, such as: Proper record-keeping is crucial. Receipts, mileage logs, and invoices provide evidence to support your claims if HMRC requests documentation. How to Claim a CIS Tax Refund Most CIS (Construction Industry Scheme) workers reclaim overpaid tax through self-assessment. To do this, you should gather your CIS statements, record all the income you received, and collect evidence of your allowable expenses. Complete your self-assessment return by declaring your income, CIS deductions, expenses, and any personal allowances. Once you have submitted your return to HMRC, they will process it and verify it against contractor records. If everything checks out, HMRC will issue any refunds directly to your bank account. CIS Refunds and Making Tax Digital (MTD) The implementation of Making Tax Digital (MTD) for Income Tax will soon affect subcontractors, who will be required to retain digital records and submit quarterly reports. Key Dates It is recommended to commence the digitalisation of receipts, mileage logs, and CIS statements presently, as this measure will facilitate a smoother transition to quarterly reporting following the implementation of the new regulations. Why Subcontractors Use an Accountant While completing your return yourself is possible, many subcontractors opt for professional support to ensure: How Does The Infinity Group Help? At The Infinity Group, we assist subcontractors at every stage, ensuring that your tax returns are accurate, comprehensive, and reflect all allowable business expenses. We handle all tasks meticulously and efficiently, enabling you to focus on your work while confidently relying on the full compliance of your tax affairs. Practical Tips for a Smooth Refund Frequently Asked Questions Can I claim mileage if I use my own vehicle? Yes—travel between job sites is allowable, but travel from home to your first job is not. Can I claim a refund if I worked under both CIS and non-CIS jobs? All income is reported on your tax return, and CIS deductions are incorporated into the overall tax calculation. Your refund depends on your total earnings and allowable expenses. How do I prepare for MTD? Begin storing your receipts in a digital format and keep accurate mileage logs and CIS statements to make upcoming quarterly submissions easier once the new regulations come into effect. Subscribe to Our Newsletter for Weekly Updates!
Income Tax Goes Digital in 2026: HMRC Sending Early Notification Letters From November 2025
The tax system has been gradually modernising in recent years, placing greater emphasis on digital processes and accurate online record-keeping. A significant part of this shift is the introduction of Making Tax Digital for Income Tax (MTD ITSA), which becomes mandatory for certain taxpayers from April 2026. To ensure taxpayers have enough time to prepare, HMRC will begin issuing early notification letters from November 2025. These will be sent to individuals who fall within the first group required to transition to digital reporting. What Making Tax Digital for Income Tax Means Although Making Tax Digital has already been introduced for VAT, extending it to Income Tax represents a significant change to the Self-Assessment system. From April 2026, individuals within scope will no longer file a single annual Self Assessment tax return. Instead, they will be required to: â—Ź Keep their financial records digitally.â—Ź Submit quarterly using approved MTD-compatible software.â—Ź Review their annual figures in the End of Period Statement.â—Ź Complete a Final Declaration to confirm their total income for the year. The aim is to reduce errors, improve accuracy, and give taxpayers a clearer, more up-to-date view of their financial position throughout the year. Who Must Join MTD in April 2026 The first phase of MTD for Income Tax will apply from April 2026 to: â—Ź Self-employed individuals earning over ÂŁ50,000â—Ź Landlords with gross rental income above ÂŁ50,000 A second phase, expected in April 2027, will extend the requirement to those earning over ÂŁ30,000. HMRC will communicate updated timelines as the implementation date approaches. Individuals who are part of the first phase will start receiving a notification letter from HMRC in November 2025. What Will the Letters Cover? The letters are intended to provide taxpayers with early clarity, avoid confusion, and allow a reasonable time to prepare. Each letter will outline a few essential points: 1. Confirmation That MTD Applies HMRC will confirm, based on the taxpayer’s latest Self-Assessment return, whether they fall within the group required to transition to digital reporting starting April 2026. 2. Brief Guidance on What to Prepare The letter outlines essential steps, including selecting appropriate MTD-compatible software and maintaining digital records of income and expenses. 3. Direct Link to Official Information A QR code will be included to direct recipients to the relevant GOV.UK guidance, ensuring taxpayers can access clear, accurate, and up-to-date information from an official source. 4. Encouragement to Seek Professional Advice HMRC acknowledges that some individuals, particularly those with multiple income streams or rental properties, may require additional support. The letter suggests that taxpayers consult an accountant or tax adviser for further guidance if needed. The letters are informative rather than formal or pressuring, helping taxpayers prepare at a steady, manageable pace. Why HMRC Is Sending Letters Early Moving to digital record-keeping and quarterly reporting marks a significant change in how many people manage their financial information. To facilitate this transition and mitigate last-minute complications, HMRC is allowing taxpayers a reasonable time to prepare. By reaching out to individuals early, HMRC aims to: How Reporting Will Change Under MTD Quarterly Updates Taxpayers must provide updates every three months to give HMRC and themselves a clearer and more timely view of their income and expenses throughout the year. Digital Record-Keeping Paper receipts and spreadsheets that are not integrated with approved software will no longer comply with standards. Records must be stored and submitted in a digital format. End of Period Statement At the end of the tax year, taxpayers review their figures, make necessary adjustments, and ensure everything is accurate before the final submission. Final Declaration This replaces the traditional Self Assessment return and verifies all taxable income for the tax year. Benefits of Moving to Digital Tax Reporting While the system requires more frequent updates, many taxpayers find that digital record-keeping simplifies financial management in the long run. Regularly submitting information tends to lead to fewer errors and offers a clearer picture of potential tax liabilities throughout the year. Digital systems also help with: For many individuals and businesses, what begins as a compliance requirement quickly evolves into a more efficient and organised method for managing financial information. How The Infinity Group Can Support You As HMRC begins sending out these letters, many taxpayers will start considering their next steps. At The Infinity Group, we strive to make the transition to Making Tax Digital (MTD) as easy as possible and can manage the entire process on your behalf. Once we confirm whether MTD applies to you, we will identify the most suitable software, handle the setup, and provide guidance on day-to-day requirements as needed. As an authorised tax agent, we can act on your behalf to take care of quarterly submissions, digital bookkeeping, Self Assessment, and your overall tax affairs. Our support is fully tailored to each client rather than being a one-size-fits-all service. Our goal is to make your transition to MTD smooth, straightforward, and completely stress-free. Subscribe to Our Newsletter for Weekly Updates!
How Gross Payment Status Works in the Construction Industry Scheme
The construction industry is governed by a regulated tax framework designed to maintain compliance across the sector. HMRC introduced the Construction Industry Scheme (CIS) to reduce tax avoidance and improve compliance across the industry. Under CIS, contractors must deduct tax at the source before paying subcontractors. While this protects HMRC’s revenue, the deductions often mean subcontractors are paying tax upfront. Although many can reclaim some of this tax later through their self-assessment return, the immediate reduction in income can create significant cash-flow pressure, especially for smaller businesses or sole traders who rely on the full value of their invoices to cover labour, materials, and daily operating costs. The Gross Payment Status (GPS) is an attractive option for subcontractors who meet HMRC’s eligibility requirements. With Gross Payment Status, subcontractors receive the full value of every invoice without any CIS deductions, allowing them to pay their tax at a later date through Self Assessment or Corporation Tax. This arrangement can significantly improve cash flow, strengthen financial stability, and free up capital for business growth. At The Infinity Group, we regularly support both contractors and subcontractors with all aspects of CIS, including registration, GPS applications, and compliance checks. This guide explains how CIS normally works, what GPS means, who is eligible, how to apply, the advantages of obtaining GPS, and the responsibilities that come with it. How Payments Normally Work Under CIS Under the Construction Industry Scheme, a portion of a subcontractor’s payment should be deducted by the contractor before releasing funds. This amount is transferred directly to HMRC and treated as an advance towards the subcontractor’s annual tax and National Insurance liabilities. The remaining amount is then paid to the subcontractor. What Gross Payment Status (GPS) Means Gross Payment Status allows subcontractors to be paid the full value of their invoices, with no CIS deductions taken at the source. Instead of contractors withholding 20% or 30% tax, the subcontractor receives the entire payment and later pays the correct tax through their self-assessment or corporation tax return. For many businesses, this represents a significant change. Receiving full payments improves cash flow, strengthens relationships with suppliers, and frees up capital for investment and growth. GPS also signals trust: HMRC only grants it to businesses that have demonstrated strong financial management and consistent compliance with tax obligations. However, this benefit comes with responsibility. Subcontractors must maintain strict tax compliance and stay fully up to date with filings and payments. Any failure to comply can result in HMRC removing the GPS and reverting the business back to Net status. Difference Between Net Payment Status and Gross Payment Status The key difference between the two systems is who is responsible for paying the tax to HMRC. For subcontractors, this is a significant shift. Net status reduce immediate cash flow, whereas GPS provides greater control over money and improves liquidity. For contractors, the difference is minimal; they simply pay the subcontractor’s invoice in full rather than after deductions. How Payments Work Under Gross Payment Status Once a subcontractor has been granted Gross Payment Status, the payment process becomes straightforward. They issue invoices as normal, and contractors pay the full amount without making any CIS deductions It is important to note that GPS does not reduce the amount of tax owed. The tax liability remains the same. The only change is when the tax is paid and who is responsible for paying it. Eligibility: Who Can Apply for GPS Not every subcontractor will qualify for Gross Payment Status. HMRC applies three strict tests to decide whether a business is eligible: Business Test The subcontractor must be carrying out work that falls within the scope of the Construction Industry Scheme. This includes activities such as building, plumbing, electrical work, roofing, decorating, demolition, and other construction-related operations.Businesses outside these categories cannot qualify for GPS. Turnover Test The business must meet HMRC’s minimum construction turnover requirements. Turnover must: The thresholds differ depending on the business structure: Sole TradersMust have at least £30,000 in construction turnover. Partnerships£30,000 for each partneror at least £100,000 total across the whole partnership. Limited CompaniesHMRC applies one of two:• £30,000 for each director who is actively involved in construction workor• at least £100,000 total construction turnover for the company. New BusinessesNew subcontractors do not need to meet the turnover test for their first 12 months.However, they must still pass the Business and Compliance Tests. Compliance Test HMRC will assess the business’s tax history to confirm it has a strong record of compliance. This includes: Late submissions or late payments will almost always result in the application being refused. Who Can Apply Both sole traders and limited companies can apply for Gross Payment Status if they meet HMRC’s requirements. New businesses are also eligible; although they are exempt from the turnover test during their first 12 months, they must still demonstrate reliability and full compliance from the outset. How to Apply Applying for Gross Payment Status is a simple process, but HMRC will only approve businesses that can clearly demonstrate they meet the required standards. The steps are as follows: If Your Application Is Refused HMRC will explain the reason for refusal. You can appeal the decision or reapply later once any issues such as late submissions or unpaid tax have been resolved. Annual Reviews HMRC will carry out yearly reviews to ensure your business continues to meet the GPS criteria. Failure to maintain compliance may result in GPS being withdrawn. Advantages of Gross Payment Status Gross Payment Status offers several valuable benefits for subcontractors, beyond simply avoiding CIS deductions at the source: At The Infinity Group, many of our clients have benefited from GPS through improved cash flow, stronger supply chains, and increased capacity to grow their businesses. Responsibilities and Risks Gross Payment Status offers significant advantages, but it also comes with important responsibilities. A business must maintain high standards of compliance at all times. Responsibilities Risks GPS provides freedom, but it requires discipline. Subcontractors should have strong bookkeeping and cash management systems in place before applying.
Mandatory Payrolling of Benefits in Kind and Expenses: How the 2027 HMRC Payrolling Reform Will Affect Employers
From April 2027, the way employers handle Benefits in Kind and expenses will change permanently. HMRC is shifting the responsibility for reporting most non-cash benefits, expenses, and similar perks such as company cars, medical insurance, or staff loans directly into payroll. Instead of waiting until the end of the tax year to submit a P11D, the value of these benefits will be processed and taxed through the regular payroll cycle and reported to HMRC through RTIs (Real Time Information). At first glance, it may seem like a technical adjustment. In reality, it represents a fundamental shift in how payroll and taxation operate together. What Counts as a Benefit in Kind A Benefit in Kind (BiK) is any perk that carries a financial value but isn’t paid in cash. Examples include private health cover, an interest-free loan, or access to a company car, all of which must be taxed appropriately. Until now, most employers reported these once a year using forms P11D for employees and P11D(b) for their own Class 1A National Insurance contributions obligations. The data would then feed back into HMRC systems, often months after the benefit was first provided. That time gap created unnecessary admin and confusion for both payroll teams and employees trying to reconcile tax codes. Under the upcoming rule, the delay will disappear. The taxable value of each benefit will be processed directly through payroll, allowing HMRC to collect tax and NICs in real time. This update follows official guidance from HMRC on reporting and paying Income Tax and Class 1A NICs on Benefits in Kind in real time, which outlines how employers will need to report benefits through payroll from April 2027. What Will Actually Change From the 2027/28 tax year onwards, employers will no longer rely on P11D forms for reporting most benefits in kind. Instead, each month or pay period, payroll must include the cash-equivalent value of every BiK, ensuring that the correct Income Tax and Class 1A NIC are applied automatically. There will be a few exceptions such as accommodation and certain loans which will remain outside the first phase of the change, but for most organisations, all other benefits will move fully within the payroll process. Employers who have already chosen to payroll benefits voluntarily are unlikely to notice much difference. Those who still handle benefits manually at year end will need to prepare in advance. Payroll software, data capture methods, and internal communication practices should all be reviewed and updated well before April 2027. Why HMRC Is Making the Change This reform isn’t about creating extra work; it’s about removing outdated processes. For decades, benefits taxation has lagged behind modern payroll systems. When a benefit is given in May but taxed the following April, mistakes are almost inevitable. HMRC aims to close that gap. Real-time payrolling will: The change also supports the government’s wider Making Tax Digital programme, which aims to simplify every stage of employer reporting. In short, less paperwork, fewer surprises, and faster communication between payroll and HMRC. How This Affects Employers Day-to-Day For most businesses, the impact will be practical rather than dramatic, but it will be noticeable across several areas. Payroll Software and Systems You will need a payroll software capable of calculating benefit values, including them in the Full Payment Submission (FPS), and storing the data securely. Many mainstream providers already offer this, but it is important to confirm that your version complies with HMRC’s technical standards. Accuracy and Data Checks As reporting moves to real time, accuracy becomes critical. If the taxable value of a car benefit changes halfway through the year, payroll must reflect that immediately. Good record keeping and internal review processes will prevent over or under taxation. Employee Awareness Expect more questions when staff see benefit values listed on payslips. A short explanation within onboarding materials or adding a note to payslips can help avoid unnecessary confusion. Cash Flow Planning Since liabilities will be settled monthly rather than annually, finance teams should model how this change will affect cash flow and working capital throughout the year. Preparing for the Transition Preparation doesn’t need to be complicated, but it should be organised. Start with a structured checklist. 1. Audit Existing BenefitsDocument every non-cash benefit currently offered and identify which ones will need to be payrolled. 2. Review Your Payroll SoftwareCheck that your payroll system supports Benefits in Kind (BiK) fields and real-time submissions. If not, speak with your vendor about updates or migration options during the 2026/27 year. 3. Try Voluntary Payrolling EarlyHMRC currently allows employers to register voluntarily. Doing this before the deadline gives you time to test systems and train staff with minimal pressure. Employers can also review HMRC’s official guidance on payrolling employees’ taxable benefits and expenses to understand the voluntary process and prepare for the 2027 transition. 4. Train Internal TeamsEnsure that Payroll and HR teams understand how to calculate cash equivalents, handle queries, and apply Class 1A NIC rules correctly. 5. Communicate with EmployeesKeep communication simple and transparent. Explain what will appear on payslips and why it’s happening. A transparent approach builds trust. How The Infinity Group Can Help At The Infinity Group, we specialise in umbrella and payroll management services that help businesses stay fully compliant with HMRC regulations. Whether you choose to employ your own workforce and outsource payroll to us, or prefer us to act as the employer under our umbrella service, we ensure all payroll processes, including Real Time Information (RTI) submissions, are handled accurately and on schedule. Our experienced team provides end to end payroll management, compliance reviews, and up to date guidance, allowing you to focus on running your business with confidence. If your organisation needs reliable support with payroll compliance or is exploring the benefits of using an umbrella arrangement, The Infinity Group is here to help every step of the way. Common Questions When does mandatory payrolling begin?It starts in April 2027 marking the start of the 2027/28 tax year. Will P11Ds still exist?Only in limited cases.
How UK Employers Should Handle Student and Postgraduate Loan Deductions
Student and postgraduate loan deductions must be carefully addressed in the ever-changing environment of UK payroll compliance. While thresholds and plan types may change each year, the principles for accurate deductions remain the same This article outlines the general rules employers should always follow when handling student and postgraduate loan deductions and provides an update on the upcoming Plan 5, set to begin in April 2026. Loan Plan Overview: An insight into the Loan Plan Structure By 2026, HMRC will operate five different student and postgraduate loan repayment schemes, each with separate eligibility criteria and deduction thresholds. Until then, during the 2025–26 tax year, only four plans (Plans 1, 2, 4, and Postgraduate Loan) are active. Employers must ensure that the correct plan type is applied according to official HMRC records, not according to assumptions. For full guidance, visit the HMRC Student and Postgraduate Loan Deductions page on GOV.UK. Present Loan Schemes: Plan 1It applies to undergraduate students in England and Wales (those who started their studies before 1 September 2012).Threshold: ÂŁ26,065 per yearDeduction Rate: 9% of income over the threshold Plan 2Applies to students from in England and Wales who have been admitted to undergraduate courses of study on or after 1 September 2012.Minimum level: ÂŁ28,470 a yearDeduction Rate: 9% of income above the threshold. Plan 4Applies to student loans in Scotland.Threshold: ÂŁ32,745 per yearDeduction Rate: 9% of income above the threshold Plan 5 (New – Effective from April 2026)Introduced for new students taking undergraduate or Advanced Learner Loan courses starting on or after 1 August 2023 in England.Start Date of Deduction: April 2026 (beginning of the 2026–27 tax year)Deduction Rate: 9% of income above the threshold (when live from 2026–27) Further details can be found in the Student Loans: Terms and Conditions 2025 to 2026 Postgraduate Loan (PGL)Applies to Master’s and Doctoral loansThreshold: ÂŁ21,000 per annumDeduction Rate: 6% of income above the threshold Employer Obligation: Employers must confirm the correct loan plan for each employee using one of the following: Using the wrong loan plan type is one of the most common payroll errors. It can result in over- or under-deductions, employee complaints, and potential compliance issues with HMRC. Employers should therefore verify loan plan details carefully before processing payroll. Summary Table Deduction Thresholds—2025–26 Loan Plan Annual Limit Monthly Equivalent Weekly Equivalent Deduction Rate Plan 1 ÂŁ26,065.00 ÂŁ2,172.08 ÂŁ501.25 9% over threshold Plan 2 ÂŁ28,470 ÂŁ2,372.50 ÂŁ547.50 9% on threshold Plan 4 ÂŁ32,745 ÂŁ2,728.75 ÂŁ629.71 9% over threshold Plan 5 NA (until 2026) NA NA 9% (after 2026) PGL ÂŁ21,000 ÂŁ1,750.00 ÂŁ403.85 6% over threshold Illustrative Example: A Plan 2 employee earns ÂŁ30,000 per year. The amount deductible is calculated as:(ÂŁ30,000 – ÂŁ28,470) Ă— 9% = ÂŁ137.70 per year This equates to approximately ÂŁ11.48 per month Major Compliance Risks and How to Avoid Them Improper deductions — whether over- or under-deductions — expose employers to both reputational and financial risks. Common mistakes include: 1. Failure to Apply HMRC Notices Employers must not start deductions without the related SL1 or PGL1 notice. These documents provide official guidance on repayment obligations. 2. Incorrect Plan Classification Under-deductions resulting from the misclassification of the employee plan (i.e., defaulting to Plan 1 when no plan is confirmed) can lead to significant losses. This often leads to matching issues during HMRC auditing. 3. Failure to Review Employee Declarations Not processing starter checklists or P45 can result in missing or incorrect loan declarations, leading to compliance issues. 4. Continuing Deductions After a Stop Notice As soon as the SL2/ PGL2 notice is received, the deductions should be stopped by the employer. A delay in stopping deductions may lead to employee complaints and result in overpayments. Recommendation: To maintain compliance and prevent deduction errors: Compliance-Support and Automation Tools The use of modern payroll software can help reduce manual mistakes and ensures thresholds are automatically updated. Common tools include. Among the tools commonly used by UK employers are â—Ź HMRC Basic PAYE Tools: Simple software that allows for manual checks. It is free and suitable for small businesses. â—Ź Auto-Updates Payroll Solutions: These systems have versions that communicate with HMRC and automatically update thresholds based on the latest rules. â—Ź SL1/PGL1 Import Tools: Some payroll platforms can automatically import HMRC notices, ensuring faster and more accurate updates. Frequently Asked Questions (FAQs) Q: How to make sure I got the right loan plan on a new staff member? A: Always check their starter checklist, P45, or the SL1/PGL1 notice. HMRC rules do not accept any guessing. Q: Can an employee have both student and postgraduate loan deductions? A: Yes. In this case, different deductions need to be calculated, 9% on the student loan and 6% on the postgraduate loan, as long as both limits are passed. Q: What happens if the wrong type of loan plan was selected? A: Extra payments must be returned quickly. If there was underpayment, then the employer is allowed to recover the amount slowly, as long as the employee agrees. Repeated mistakes may lead to fines. Q: Are there deductions during unpaid leave or when hours are reduced? A: No, repayments are only taken when the employee’s pay goes above the threshold for that pay period. Employer Strategies To achieve long-term accuracy and keep employee payments correct: â—Ź Centralise Documentation:Ensure all starter forms and HMRC notices are stored securely in one place for quick access. â—Ź Add Quality Controls: Regularly review deduction entries, particularly after onboarding new employees or updating records. â—Ź Support Clear Payslips:Each payslip should clearly display deduction details to prevent confusion or disputes. â—Ź Stay Updated: Subscribe to HMRC’s Employer Bulletin and assign someone on your team to follow regulation updates. How The Infinity Group Can help At The Infinity Group, we specialise in umbrella and payroll management services that help UK businesses stay fully compliant with HMRC regulations. Whether you prefer to be the employer and manage your own workforce or would like us