The Tax Round: Spring Edition 2026

We are pleased to share the Spring edition of Tax Round, bringing together an overview of the latest tax developments and regulatory updates.

This issue covers a range of timely insights, including Making Tax Digital for self-employed individuals and landlords, upcoming inheritance tax reforms, VAT error corrections, and changes to capital allowances and incorporation relief. We also explore key updates from the Spring Statement 2026, developments in corporation tax, PAYE considerations, and changes affecting charities and EMI share option schemes, all designed to keep you informed and prepared for what lies ahead.

The Spring edition includes:

• MTD | What self-employed individuals & landlords need to know
• Agricultural-business-property-relief-reforms-2026-:-Government-raises-inheritance-tax-relief-threshold-to-£2.5-million
• How to correct VAT errors and report them to HMRC
• How capital allowance changes will affect businesses in 2026
• Incorporation relief in 2026: New rules businesses need to know
• Expanding EMI share option scheme thresholds
• Spring Statement 2026: top 10 key highlights
• Charity tax rules April 2026: HMRC, Gift Aid changes
• Corporation tax deducting expenses
• PAYE and the High Income Child Benefit Charge

If you would like any further clarification on the topics discussed in this newsletter, please contact  Mark Moore, or James Hadley.  We look forward to hearing from you.

Happy reading!

MTD: What self-employed individuals & landlords need to know

A significant shift in reporting obligations is approaching, with certain taxpayers now required to submit income and expense information to HMRC digitally on a quarterly basis. With the implementation date fast approaching, preparation is becoming increasingly important.

Making Tax Digital for Income Tax will be introduced from 6 April 2026, applying initially to sole traders and landlords whose qualifying income exceeds set thresholds. Those with income above £50,000 in the 2024/25 tax year will be required to comply from this date. Based on HMRC estimates, approximately 864,000 taxpayers will be brought within the scope of the new regime, marking a substantial change in how income is recorded and reported.

Agricultural business property relief reforms 2026 : Government raises inheritance tax relief threshold to £2.5 million

The Government, on 23 December, 2025 has confirmed a significant policy reversal affecting the agricultural business property relief reforms 2026, reshaping the inheritance tax landscape for farmers, landowners, and family-owned rural businesses. Following sustained pressure from the agricultural sector and professional advisers, the threshold for 100 per cent inheritance tax relief on qualifying agricultural and business property will increase from £1 million to £2.5 million per individual from April 2026.

How to correct VAT errors and report them to HMRC

Errors on the VAT return will now be notified online to HMRC in most cases. The old VAT652 form, previously used for this, has been withdrawn. At Rayner Essex, we support businesses in navigating these changes, ensuring that VAT errors are identified, assessed and reported correctly in line with current requirements.

The online notification process is completed via your Government Gateway log-in. The form can be found by searching ‘Check how to tell HMRC about VAT Return errors’ on gov.uk. You will need to have the net value of the error, and the total value of sales, to hand. We can assist in preparing this information and reviewing your figures before submission, helping to reduce the risk of further inaccuracies.

Businesses exempt from Making Tax Digital for VAT will continue to notify in writing. It is also worth noting that taxpayers can choose to notify HMRC in writing, instead of using the online facility, if preferred. Our VAT team can advise on the most appropriate approach for your business and manage the process on your behalf where required.

How capital allowance changes will affect businesses in 2026

The 2025 Autumn Budget introduced several changes to capital allowances that affect how businesses claim tax relief on investment in equipment and machinery in 2026. These budget changes to capital allowances are designed to encourage investment while reshaping how tax relief is delivered over time.

Two major changes to capital allowances sit at the centre of the government’s policy: 

1. The government is introducing a new 40% First-Year Allowance (FYA) for qualifying plant and machinery
2. The government is reducing the main rate Writing-Down Allowance (WDA) from 18% to 14%. 

For businesses investing in equipment, understanding these capital allowance changes will be the key to planning effectively. 

Incorporation relief in 2026: New rules businesses need to know

If you’re a sole trader or thinking about transferring your business into a company, understanding incorporation relief is essential. This relief can defer your Capital Gains Tax (CGT), giving you more flexibility to grow your business without an immediate corporate tax hit. But from 6 April 2026, the rules are changing, so it’s important to know how to claim and what documentation is required.

Section 162 incorporation relief lets businesses defer CGT when they transfer a business into a company in exchange for shares. Individuals or partners don’t pay tax immediately; instead, any gain is rolled into the base cost of the shares they receive. This process gives businesses the opportunity to reinvest in the company without being immediately taxed on the increase in business value.

Expanding EMI share option scheme thresholds

Many businesses continue to overlook valuable tax relief through under-claiming or missed capital allowances. Discover the most commonly missed capital allowance opportunities and how to recover hidden qualifying expenditure.

Following our recent article on capital allowances for office fit outs and commercial renovations, we have received several requests for further guidance on areas that are frequently under-claimed or entirely overlooked. Many organisations miss hidden capital allowance opportunities that could reduce taxable profits and improve cash flow.

The Spring Statement 2026: top 10 key highlights

The UK Spring Statement 2026, delivered by Chancellor Rachel Reeves, set out the government’s latest assessment of the UK economy, alongside updated forecasts from the Office for Budget Responsibility (OBR). The statement did not introduce major new tax measures or spending commitments. Instead, it focused on the direction of UK economic growth, inflation, public borrowing, and the labour market over the coming years.

Addressing MPs in the House of Commons, Reeves defended the government’s fiscal strategy in the face of global uncertainty and market volatility.

She told Parliament that the government remains committed to restoring stability and supporting sustainable growth, stating: “We are living in a more uncertain world, but our task is clear: to secure Britain’s economic future through stability, investment and reform.” The Spring Statement therefore centred on updated economic forecasts and fiscal projections that will shape policy ahead of the next UK Budget.

Charity tax rules April 2026: HMRC, Gift Aid changes

Charities and Community Amateur Sports Clubs (CASCs) will enter a more demanding compliance environment from April 2026, as new charity tax rules take effect. These changes form part of the government’s wider effort to close the tax gap and strengthen HMRC oversight of reliefs such as Gift Aid.

While most organisations already meet their obligations, trustees should expect greater scrutiny and a higher standard of evidence across key processes. As stated by the government, ‘The majority of charities meet their tax obligations, but a small minority persistently fail to comply and yet still claim tax reliefs such as Gift Aid.’

Alongside these tax developments, charities should also consider wider regulatory changes affecting financial reporting and audit thresholds. Our article on Navigating the new charity SORP and new audit thresholds in 2026 explores these in more detail and provides additional context on the evolving compliance landscape.

Corporation tax deducting expenses

On 11 November 2025, HMRC published guidance to help companies determine whether they can deduct the costs of running their business, when calculating taxable profits for corporation tax purposes.

The guidance has likely been issued in response to ongoing uncertainty among small companies. Following the publication of data in June 2025, which identified a corporation tax gap of £14.7 billion, HMRC has sought to provide clearer information on allowable and non-allowable expenses in order to improve compliance and accuracy.

A summary of the guidance, together with practical examples, is set out below.

PAYE and the High Income Child Benefit Charge

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.

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.

Key Dates 2025/2026

Guest Authors for our upcoming Spring 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.