The Tax Round: Autumn Edition 2025

Welcome to our Autumn Tax Round, where we bring you timely insights into the latest tax developments impacting individuals, families, and businesses across the UK. As the regulatory landscape continues to shift, this edition takes a closer look at the practical implications of recent changes and clarifies how they may affect your planning and compliance.

The Autumn edition includes:

• What is a family investment company (FIC) in the UK?
• Why use a Trust
• HMRC capital allowances guidance: how the latest updates affect your claims
• HMRC confirms end of Making Tax Digital for Corporation Tax
• PAYE and High Income Child Benefit Charge: What has changed
• How to pay Gift Aid correctly
• Why it pays to pay tax on time | HMRC late payment interest explained 
• UK transfer pricing reform 2025: SME rules under review

We hope that you find them informative. If you require any further information or clarification on the topics discussed in this newsletter, or you have any tax or accounting queries, please contact  Mark Moore, Marina Trinchese or James Hadley.  We look forward to hearing from you.

Happy reading!

What is a family investment company (FIC) in the UK?

A family investment company (FIC) is a private UK company created by families to manage and grow wealth in a tax-efficient way. With lower corporation tax rates and structured inheritance planning, FICs allow assets to be passed on to future generations while maintaining family control.

A family investment company (FIC) is becoming an increasingly popular way for families in the UK to manage, protect, and pass on wealth to future generations. An FIC is typically set up as a private UK company  incorporated under the Companies Act 2006, either limited or unlimited, where the shareholders are almost invariably entirely made up of family members.

For families looking to invest funds for the long term, an FIC can provide significant tax efficiencies, as corporation tax on profits is generally lower than personal income tax or capital gains tax. However, personal tax liabilities can arise when extracting funds from the company, making careful planning essential.

Why use a Trust

This article explains the key reasons why people use trusts during their lifetime and on death.

Trusts are mainly used to pass assets and wealth down through the generations. Trusts have been used for many years to protect assets, control their management and to control how, when and if the assets are transferred to beneficiaries. Tax is also an important factor and trusts can be used as part of Inheritance Tax (IHT) planning.

HMRC capital allowances guidance: how the latest updates affect your claims

In September 2024, several professional bodies met with HMRC to review how existing capital allowances guidance could be improved. Following the discussions, HMRC has released a series of updates designed to clarify key areas of the legislation and provide businesses and advisers with greater certainty when applying capital allowance claims.

The general consensus during the consultation was that the principle-based nature of the legislation, not the guidance itself, is the main cause of uncertainty. However, HMRC has now implemented changes across several important areas, with more updates expected in the months ahead. As capital allowances remain one of the most valuable forms of tax relief for businesses investing in assets, it’s essential to stay informed on how these revisions might affect future claims.

HMRC confirms end of Making Tax Digital for Corporation Tax 

Government drops   Making Tax Digital for Corporation Tax from long-term strategy

In July 2020, the Government published its 10-year Tax Administration Strategy. The aim was to develop a fully digital tax system that operated closer to real time, improved fairness, and strengthened public trust. Making Tax Digital for Corporation Tax (MTD for CT), was intended to be a key component of that vision.

However, in July 2025, HMRC confirmed that it will not introduce Making Tax Digital for Corporation Tax (CT), marking a significant shift in the digital direction of corporate tax.

PAYE and High Income Child Benefit Charge: What has changed

HMRC have introduced a new service for taxpayers with a liability to the High Income Child Benefit Charge (HICBC) to pay the charge via PAYE without completing a self-assessment return if they are not required to file a return for another reason. This change, first announced in the Spring Statement 2025, will remove the need for self-assessment for thousands of individuals who currently file a return only because they receive Child Benefit and earn above the income threshold.

The new system supports HMRC’s ongoing digital transformation and promises to reduce administrative burdens for higher earners taxed entirely through PAYE.

How the new PAYE system for HICBC will work

The digital service allows taxpayers to declare whether they or their partner received Child Benefit during the tax year. HMRC will assess whether the individual’s income exceeds the HICBC threshold and, if so, adjust their tax code to collect the charge gradually through monthly payroll deductions.

How to claim Gift Aid correctly

Gift Aid today: the rules that shape every claim 

Gift Aid only applies when a UK-recognised charity or CASC receives a voluntary gift from an individual and holds a valid declaration for that donor. The declaration must name the charity, record the donor’s full name and home address, identify the gift or gifts covered, and confirm that the donor has paid enough UK Income Tax or Capital Gains Tax to cover the reclaim. If the donor has not paid enough tax, HMRC will look to the donor for the shortfall. The donor’s first responsibility, therefore, is to ensure that they have paid (or will pay) sufficient tax to cover the claim – and then to ensure that the documentation is completely correctly, and copies retained in case of HMRC enquiry.

These are the foundations of how to claim Gift Aid correctly. If the donor has not paid sufficient tax to cover the claim, it will be up to them and not the charity to pay the shortfall to HMRC. 

Why it pays to pay tax on time | HMRC late payment interest explained 

When you fail to pay tax by its due date, HM Revenue & Customs (HMRC) immediately begins charging late payment interest from the very day your obligation becomes overdue. In the last few years, the rate of interest HMRC charges has risen dramatically. Understanding these changes is not just about avoiding extra costs, it explains why it pays to pay tax on time for businesses and individuals alike.

Why HMRC Rates Matter: consequences beyond interest

Charging more interest is only one side of the coin. Penalties also stack up if you miss deadlines. Under the Self-Assessment rules, HMRC imposes penalties of 5% of any unpaid tax after 30 days, another 5% at six months, and a further 5% after twelve months.

Late payment penalties differ for VAT, and the pending deployment of Making Tax Digital (MTD) for Income Tax promises further changes.

Regardless of the kind of tax, Income Tax, National Insurance, Capital Gains Tax, Corporation Tax, VAT – you are exposed to both interest charges and penalty risk.

UK transfer pricing reform 2025: SME rules under review

On 28 April 2025, HMRC launched a 10-week consultation on proposed reforms to the UK’s transfer pricing framework. Among the headline proposals was the removal of the transfer-pricing exemption for medium-sized enterprises (SMEs), narrowing the relief to apply only to “small enterprises”, with updated thresholds. The consultation also proposed the introduction of a new International Controlled Transactions Schedule (ICTS).

Alongside this, HMRC released a companion proposal covering reform of UK transfer pricing law, permanent establishments (PE), and Diverted Profits Tax (DPT). Draft legislation aims to exempt most UK-to-UK transactions, confirming HMRC’s shift to a risk-based model that reduces compliance where UK risk is low, while demanding richer cross-border data to tackle profit diversion.

The consultation formally closed on 7 July 2025, and the government is now considering the responses received. In the meantime, businesses are being encouraged to prepare for change and review how these proposals may affect their compliance position.

Guest Authors for our upcoming Winter Tax Round

If any of our associates are interested in writing content for our next Winter edition of the Tax Round, please contact Jenny Tryfonos and we will be happy to discuss your contribution as a guest author.