In this month’s Enews, HMRC launches a new online PAYE service. There are also warnings to self assessment taxpayers and landlords on the impact of Making Tax Digital and SMEs missing potential savings on National Insurance. We have a lot to update you on. HMRC warns homebuyers over bogus SDLT claims. There is also news on the government’s crackdown on late payments and the latest economic confidence indicators to update you on. We look at the charges exporters to the US will face later this month. There is also news on Tax-Free Childcare and the latest data from a weakening jobs market to update you on. We look at HMRC’s campaign on personal expenditure on self assessment tax returns. There is also news on the tax authority’s changes to late and penalty interest rates and the deadline for extending Child Benefit claims for 16-19 year olds to update you on. We look at the numbers of taxpayers that will need to report quarterly when Making Tax Digital (MTD) for Income Tax comes into force. There is also a scams warning for self assessment and the latest guidance for employers to update you on.
- HMRC launches online PAYE service
- Time for taxpayers to get ready for Making Tax Digital for Income Tax
- SMEs missing out on £2.7 billion in National Insurance savings
- Homebuyers get bogus SDLT claims warning
- Crackdown on late payments launched in plan to back small businesses
- Economic confidence plummets to all-time low
- SME exporters hit by new US customs charges
- HMRC urges families to save money with Tax-Free Childcare
- UK labour market continues to weaken
- HMRC targets personal expenditure on self assessment
- HMRC cuts late payment interest rate to 8%
- Deadline approaching to extend teen Child Benefit claims
- Over 850,000 self employed to be pulled into first phase of Making Tax Digital
- Warning as 170,000 self assessment scams reported to HMRC
- Latest guidance for employers
HMRC launches online PAYE service
HMRC has launched a new online PAYE service, which it says will give 35 million workers more control over their tax affairs.
The tax authority says the new service will make it simpler and easier to check and update their income, allowances, reliefs and expenses, and will be available via their Personal Tax Account or through the HMRC app.
This service forms part of HMRC’s Transformation Roadmap that sets out ambitious plans to become a digital first organisation by 2030, with 90% of customer interactions taking place digitally.
HMRC says its plans to modernise the tax and customs system, introduce new AI technologies and work with third parties and intermediaries will make it easier for taxpayers, businesses and intermediaries to interact with it.
The digital first approach will see HMRC automating tax wherever possible and offering new digital self-serve options across a number of tax regimes.
In addition, taxpayers liable for the High Income Child Benefit Charge (HICBC) will no longer have to register for self assessment.
James Murray MP, Exchequer Secretary to the Treasury, said: ‘We are going further and faster to make HMRC fit for the 21st century, including delivering a simpler and easier system for all PAYE workers.
‘By 2030, taxpayers can expect a modern and innovative HMRC with cutting-edge AI, industry-leading customer service practices, and a laser focus on delivering taxpayer value for money by ensuring everyone pays their fair share.’
Internet link: HMRC press release
Time for taxpayers to get ready for Making Tax Digital for Income Tax
Self-employed taxpayers and landlords should file their 2024/25 tax return early to find out if Making Tax Digital (MTD) will apply to them from next April, says the Low Incomes Tax Reform Group (LITRG).
Taxpayers who report more than £50,000 of gross income from self-employment and/or rental income in their 2024/25 tax return will be required to join the new Making Tax Digital for Income Tax regime from April 2026 and must have the software needed to participate.
LITRG is encouraging anyone who thinks they could be in scope of MTD from April 2026 to complete their 2024/25 tax return well in advance of the 31 January 2026 deadline to see whether their income exceeds this limit.
HMRC will use the information provided in 2024/25 self assessment tax returns to identify taxpayers who will be impacted by MTD from April 2026.
HMRC will then write to tell them they must follow the MTD rules, but this could be as late as February or March 2026.
Some people who meet the income threshold might be able to apply for an exemption from MTD if they meet certain criteria, for example if they are digitally excluded.
Sharron West, Technical Officer at LITRG, said: ‘There are still more than six months to go until the self assessment deadline for 2024/25 tax returns, but if you think you may meet the MTD threshold, you should act now.’
Internet link: Chartered Institute of Taxation website
SMEs missing out on £2.7 billion in National Insurance savings
Most UK SMEs are not using salary exchange so are missing out on a potential £2.7 billion in employer National Insurance contributions (NICs) savings, according to insurance broker Howden.
Using salary exchange to boost pension contributions and after-tax pay would also generate £1.8 billion in employee savings, Howden’s Employee Benefits research found.
The research found that in response to the NICs increase, 33% of SMEs are passing costs onto customers, which could lead to inflationary pressures in the wider economy. Meanwhile, 32% are freezing hiring, and 28% are delaying planned salary increases.
Only 29% of SMEs currently use salary exchange (also known as salary sacrifice) for pensions, which Howden says has the potential to deliver valuable savings at a time of critical economic pressures.
The research reveals a significant knowledge gap: 36% of SMEs are aware of salary exchange but have not explored it in detail, and 17% are not aware of it at all.
Cheryl Brennan, Managing Director UK Employee Benefits, Howden, said: ‘At a time when SMEs are under immense financial pressure and employees are struggling with the cost of living, salary exchange is a powerful, underused tool.
‘Our research shows that the majority of SMEs are missing out on significant savings that could be reinvested into their people and growth.’
Internet link: Howden website
Homebuyers get bogus SDLT claims warning
Homebuyers are being warned to avoid Stamp Duty Land Tax (SDLT) scams, following a landmark Court of Appeal decision.
HMRC is warning buyers to be vigilant of tax agents offering to secure (SDLT) repayments on their behalf where repairs are needed to a property they have bought.
Some agents have suggested that, for a fee, they can reclaim SDLT the buyer has already paid by saying that the property is non-residential because it’s uninhabitable.
But HMRC says that making claims of this kind often leave the homeowner liable for the full amount of SDLT, plus penalties and interest.
A recent Court of Appeal judgment in the case of Mudan & Anor v HMRC has confirmed that housing in need of repair is chargeable at the residential rates of SDLT, and that repayment claims based solely on a property’s condition are not valid.
HMRC says it is taking decisive action on spurious SDLT repayment claims, using civil and criminal powers.
Anthony Burke, HMRCs Deputy Director of Compliance Assets, said:
‘The Court of Appeal’s decision is a major win, protecting public funds. Homebuyers should be cautious of allowing someone to make a SDLT repayment claim on their behalf. If the claim is inaccurate, you could end up paying more than the amount you were trying to recover.’
Internet link: HMRC press release
Crackdown on late payments launched in plan to back small businesses
The government is set to tackle late payments to businesses with significant legislative reforms.
Late payments cost the UK economy £11 billion a year and shut down 38 businesses every day, according to the government.
The new laws are set to give stronger powers to the Small Business Commissioner to empower them to wield fines, worth potentially millions of pounds, against the biggest firms who persistently choose to pay their suppliers late.
Following the legislation, the UK will have the toughest late payments laws in the G7, the government added.
The legislation is part of reforms to back small businesses and unlock growth as part of the Plan for Change.
Business and Trade Secretary Jonathan Reynolds said:
’This country is home to some of the brightest entrepreneurs and innovative businesses in the world, and we want to unleash their full potential by giving them back time and money to do what they do best – growing our local economies.
‘Our Small Business plan – the first in over a decade – is slashing unnecessary admin costs, making it easier for businesses to set up shop and giving SMEs the financial backing they need.
‘This is our Plan for Change in action, putting more money in people’s pockets, boosting local communities and ensuring Britain is a great place to do business and thrive.’
Internet link: GOV.UK
Economic confidence plummets to all-time low
Economic confidence amongst the UK’s business leaders has dropped to an all-time low, according to data from the Institute of Directors (IoD).
The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, fell to -72 in July 2025 from -53 in June.
This exceeds the previous record low of -69 in April 2020 and marks the lowest reading of the Index since its introduction in July 2016.
Business leader confidence in their own organisations also fell to -9 in July 2025, from +3 in June. This is the second lowest reading of this indicator since its introduction in July 2016.
Anna Leach, Chief Economist at the IoD, said:
‘UK business leaders have entered the summer with the lowest confidence levels we’ve seen since our records began in 2016.
‘Companies continue to battle cost increases – particularly arising from the national minimum wage and National Insurance changes – and many are frustrated that while the government has been quick to raise costs for business, it has been much slower to deliver improvements to the wider business environment.
‘Last year, damaging speculation around tax rises in the lead-up to the 2024 Budget caused many firms to pause investment and hiring decisions – contributing to six months of near-zero economic growth. We’re now living with the economic consequences of those tax hikes, even as uncertainty around future costs once again builds.’
Internet link: IoD website
SME exporters hit by new US customs charges
President Trump’s decision to charge import duties for low value goods entering the US is a major blow to the UK’s SME exporters, says the British Chambers of Commerce (BCC).
Under an Executive Order issued by the President, duties will be payable on goods valued under $800 from 29 August 2025. These will be in line with the rates applied to other goods from each country in accordance with its tariff rates.
For most UK goods export sectors this means the tariff rate they used to have plus the additional 10% reciprocal rate applied to most UK goods since April.
Alternatively, for the first six months only, a specific rate of $80 per item would apply to low value packages from the UK entering the US. After that period, the duties described above will be enforced on all packages of UK origin in scope.
William Bain, Head of Trade Policy, said:
‘This development has been coming for several months but is still a major blow to UK exporters to the US. Smaller firms and sole traders, who have invested strongly in e-commerce sales internationally, will be worst hit.
‘But the UK is in a comparatively advantageous position in terms of these additional duties compared with those faced by other countries.
‘The EU is also likely to scrap its de minimis threshold by 2028, and the UK government is launching a review into removing the threshold here too.’
Internet link: White House website BCC website
HMRC urges families to save money with Tax-Free Childcare
HMRC is encouraging working families to save money by signing up to Tax-Free Childcare and using one of the thousands of facilities accepting it as payment.
Tax-Free Childcare means working families can save up to £2,000 annually for each child up to the age of 11, and £4,000 for a disabled child up to the age of 16, when they’re paying for their childcare.
There are now 75,000 childcare settings accepting Tax-Free Childcare as payment including nurseries, registered childminders, holiday activity clubs. In addition, when school starts back in September it includes before and after school clubs.
Families yet to sign up for Tax-Free Childcare can do it now to pay for their summer activities or start paying into it ready for breakfast and after-school clubs when the new term starts.
Myrtle Lloyd, HMRC’s Chief Customer Officer said:
‘Whether your child is interested in football, climbing, crafting or dance, there’s a huge variety of childcare settings accepting Tax-Free Childcare. Children can learn something new and have fun with their friends while their parents save on their childcare bills. Visit GOV.UK to sign up today.’
Internet link: HMRC press release
UK labour market continues to weaken
The UK labour market continues to weaken, shedding 149,000 jobs over the past 12 months, according to the latest data from the Office for National Statistics (ONS).
The number of vacancies, which has now been falling steadily since early 2022, fell to 718,000 in June, which is a fall of 44,000 for the quarter.
Payrolled jobs are still falling fastest in the low paying hospitality sector, suggesting that the mini shock of the employer National Insurance contributions (NICs) and National Living Wage rise combination in April is still feeding through.
Pay growth continues to weaken too, but at a slower pace than the jobs market. Annual private sector wages grew by 4.8% in the year to June – down from 5.3% the year before.
Hannah Slaughter, Senior Economist at the Resolution Foundation, said:
‘The UK’s post-pandemic labour market was red hot. But that period is officially over – the labour market is loose and getting looser, having shed 165,000 payrolled jobs over the past eight months.
‘These jobs falls continue to be concentrated in low paying sectors like retail and hospitality. This reinforces the government’s decision to take a cautious approach to the minimum wage next year as the economic fallout from the recent employer NICs rise continues.’
Internet link: ONS website Resolution Foundation website
HMRC targets personal expenditure on self assessment
HMRC will run a digital campaign to ensure that self assessment taxpayers do not claim tax relief for personal expenditure on 2025/25 tax returns, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
HMRC has told the ICAEW that the digital campaign follows a trial in 2024.
This trial generated over £27 million in tax revenue and ‘highlighted reporting of disallowable private use in business expenditure’.
HMRC says that it will be opening more enquiries to check that sole traders, partners and landlords only claim deductions for business-related expenses. This includes ensuring that mixed use expenses are apportioned correctly between business and personal use, which considers the circumstance of the particular tax year.
The legislation states that in order for an expense to be deductible, it must be ‘incurred wholly and exclusively for the purposes of the trade’.
Where an identifiable part of an expense is incurred for trade purposes, that part of the expense is an allowable deduction. It is important that the method of apportionment used is:
- supported by records (eg, mileage records); and
- applied consistently from one tax year to the next.
It must also be the case that the expense is not capital in nature. Capital allowances are available for qualifying expenditure on plant and machinery.
Taxpayers have the option to use flat rate ‘simplified expenses’ to work out allowable expenses on motor costs, use of home and private use of business premises.
Internet link: ICAEW website
HMRC cuts late payment interest rate to 8%
HMRC will reduce late payment and repayment interest rates from 27 August following the 0.25% cut in the base rate earlier in the month.
The Bank of England cut the base rate to 4% on 7 August, triggering a 0.25% cut in HMRC interest rates which are pegged to the base rate.
From 27 August, the late payment interest rate will be cut to 8.0% from 8.25%.
The repayment interest rate will be cut to 3% from 3.25% from 27 August.
HMRC late payment interest is set at base rate plus 4%. Repayment interest is set at base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%.
Following the cut to the base rate, Tina McKenzie, Policy Chair at the Federation of Small Businesses (FSB), said:
‘The small business community will now look to lenders to reflect this rapidly across their offering, cutting the cost of finance. They will also want to see the Bank of England set out a clear path for the rest of the year, with a further easing in the base rate badly needed to reduce the financial strain they are under.
‘There will be no growth in the economy overall unless small firms are able to expand and fulfil their potential, but their confidence is still firmly in negative territory, according to our research.
‘Lower borrowing costs will encourage small businesses to invest, giving the wider economy a much-needed fillip.’
Internet link: GOV.UK FSB website
Deadline approaching to extend teen Child Benefit claims
Parents have less than two weeks to tell HMRC their 16-19-year-old is continuing education or training, or their Child Benefit payments will stop.
Hundreds of thousands of teenagers will decide on their future after they receive their GCSE results on 21 August 2025.
For parents of 16-19-year-olds who haven’t yet extended their claim, Child Benefit payments will stop after 31 August. If their child is going to continue in approved education or training, parents can continue receiving Child Benefit and HMRC is urging them to extend their claim now.
Parents can quickly and easily extend their Child Benefit claim online on or via the HMRC app.
According to HMRC, more than 509,000 parents have extended their claim digitally so far, with the changes applied to their record without the need to wait on the phone.
Child Benefit is worth up to £1,354.60 a year for the first or only child and up to £897 a year for every additional child.
Myrtle Lloyd, Chief Customer Officer at HMRC, said:
‘Teenagers can be expensive and Child Benefit is an important source of income for your household. As soon as you know what your teen is doing in September, don’t miss out. You can extend your claim in minutes through the HMRC app or online to ensure your payments continue.’
Internet link: HMRC press release
Over 850,000 self employed to be pulled into first phase of Making Tax Digital
HMRC has confirmed that 864,000 self-employed workers and landlords will be pulled into the quarterly reporting rules for Making Tax Digital (MTD) for Income Tax when it comes into force.
The first phase of MTD for Income Tax will begin next April at the start of the 2026/27 tax year. It will require individuals with a qualifying income over £50,000 to file quarterly returns using software with a final year end round out.
When businesses need to start using MTD for Income Tax depends on their qualifying income within a tax year. If their qualifying income is over:
- £50,000 for the 2024/25 tax year, they will need to use it from 6 April 2026
- £30,000 for the 2025/26 tax year, they will need to use it from 6 April 2027
- £20,000 for the 2026/27 tax year, they will need to use it from 6 April 2028
According to HMRC, around 2.9 million have a qualifying income above £20,000 and will need to join MTD for Income Tax, based on self assessment figures for 2023/24.
HMRC said:
‘MTD for Income Tax is a new way for sole traders and landlords to report their income and expenses to HMRC. They will need to keep digital records and every quarter, submit simple summaries of their income and expenses to HMRC using compatible software. This is expected to reduce the tax gap by reducing the scope for error and failure to take reasonable care.’
Internet link: GOV.UK
Warning as 170,000 self assessment scams reported to HMRC
HMRC is calling on self assessment taxpayers to remain vigilant to scams that claim to be from the department after receiving 170,000 reports of incidents.
The tax authority says that scammers often impersonate HMRC, offering fake refunds or demanding urgent payments to steal personal and banking information.
More than 170,000 scam incidents were reported to HMRC in the 12 months to 31 July 2025, and 47,000 of these reports involved fake tax refund claims.
HMRC will never:
- leave voicemails threatening legal action or arrest
- ask for personal or financial information via text message or email
- contact customers by email, text, or phone to inform them about a refund or ask them to claim one.
Anyone due a refund can claim it securely via their HMRC online account or via the HMRC app.
HMRC says that filing early can also help, as those who have already submitted their tax return are less likely to be caught off guard by scam attempts closer to the self assessment 31 January 2026 deadline.
Kelly Paterson, HMRC’s Chief Security Officer, said:
‘Scammers target individuals when they know self assessment customers will be preparing to file their tax returns. We’re urging everyone to stay alert to scam emails and texts offering fake tax refunds.
‘Taking a moment to pause and check can make all the difference. Report any suspicious activity to us before the fraudsters do any more harm. Search ‘HMRC scams advice’ and refer to the scams guidance on GOV.UK to stay informed and protect yourself.’
Internet link: HMRC press release
Latest guidance for employers
HMRC has published the latest issue of the Employer Bulletin. The August issue has information on various topics, including:
- P11D and P11D(b) for tax year 2024/25
- PAYE Settlement Agreement – calculations and payment
- employers PAYE disputed charges
- Spotlight 69 — liquidation of a Limited Liability Partnership used to avoid Capital Gains Tax
- implementation of the Employment Rights Bill.
Internet link: GOV.UK
