In December 2025, HM Revenue and Customs announced the finalists in a competition aimed at helping close the UK tax gap. The initiative forms part of HMRC’s wider effort to modernise tax administration and improve its ability to identify and address deliberate tax evasion. The announcement signals a growing reliance on external innovation and data driven solutions to support compliance activity.

Purpose of the competition
The competition was launched earlier in 2025 with the aim of encouraging private sector organisations to develop practical tools that could strengthen HMRC’s compliance capabilities. Rather than focusing on theoretical ideas, the emphasis has been on solutions that can be tested in live environments and potentially embedded into HMRC’s existing systems.

The tax gap, which represents the difference between tax theoretically due and tax actually collected, remains a central concern for government. Reducing it is seen as a way of supporting public finances without increasing headline tax rates, while also reinforcing confidence in the fairness of the tax system.

The shortlisted finalists
Two organisations were selected as finalists and will now work alongside HMRC during a twelve month pilot phase. This next stage is intended to test how effectively their proposed technologies perform in practice and whether they can deliver measurable improvements in identifying non-compliance and tax evasion.

During the pilot period, HMRC will assess how well the solutions integrate with existing processes and whether they provide actionable insights that compliance teams can use. The focus is on outcomes rather than experimentation for its own sake, with a clear expectation that successful tools could be adopted more widely.

Government and HMRC perspective
Ministers have framed the competition as a practical way of harnessing specialist expertise from outside government. By partnering with private sector innovators, HMRC can access advanced analytical techniques and technological approaches that may be difficult to develop internally at pace.

Senior HMRC officials have also highlighted the value of collaboration. Closing the tax gap is described as a complex challenge that requires new ways of thinking, particularly as economic activity becomes more digital and sophisticated. External partnerships are seen as one way of keeping HMRC’s compliance approach aligned with modern risks.

Role of small and medium sized businesses
One notable aspect of the competition has been the level of engagement from small and medium sized enterprises. More than half of the submissions reportedly came from SMEs, demonstrating that innovation in tax technology is not limited to large multinational firms.

This reflects a broader trend in public sector procurement, where agility and specialist knowledge are increasingly valued alongside scale. Smaller firms often bring focused expertise and innovative approaches that can complement the resources of larger organisations.

What this means going forward
The pilot phase will be critical in determining whether the finalists’ solutions deliver real benefits. If successful, the technologies could form part of HMRC’s longer term strategy for improving compliance and reducing tax losses from evasion and error.

For taxpayers and advisers, this initiative underlines HMRC’s continued investment in data analysis and technology. While the stated aim is to target deliberate non-compliance, it also reinforces the importance of accurate reporting and robust record keeping across all sectors.

Conclusion
HMRC’s competition to help close the tax gap highlights a clear direction of travel. The department is increasingly looking beyond traditional methods and drawing on private sector innovation to strengthen compliance activity. The outcome of the pilot phase will be closely watched, as it may shape how HMRC approaches tax enforcement and risk assessment in the years ahead.

In late 2025 the government confirmed a significant change of direction on inheritance tax reliefs for farmers and family owned businesses. Following sustained criticism of earlier proposals, ministers announced an increase in the threshold at which full inheritance tax relief applies to qualifying agricultural and business assets. The move has been widely described as an about face, reflecting the strength of opposition from the farming and rural business community.

What has changed From 6 April 2026, the threshold for full Agricultural Property Relief and Business Property Relief will rise from £1 million to £2.5 million per estate. Where spouses or civil partners jointly hold assets, this effectively allows up to £5 million of qualifying property to be passed on free of inheritance tax.

Relief will still be available above this level, but at a reduced rate. The revised structure is intended to protect the majority of working farms and trading businesses, while limiting unlimited relief for the largest estates.

Why the government reversed its position The original proposals, announced as part of earlier Budget measures, triggered strong reactions across the agricultural sector. Many farmers argued that a £1 million cap bore little resemblance to modern land and business values, particularly in areas where farmland prices have risen sharply over the past decade.

There was widespread concern that families could be forced to sell land or business assets simply to fund inheritance tax liabilities, undermining long term succession planning and the viability of family farms. Protests, lobbying by representative bodies, and sustained media attention kept the issue firmly in the public eye.

In responding to these concerns, the government acknowledged that it had listened to feedback and accepted that the earlier threshold risked unintended consequences for ordinary family enterprises.

Government rationale Ministers have framed the revised threshold as a balanced solution. The stated aim is to protect productive farms and genuine trading businesses, while still ensuring that inheritance tax applies more effectively to large estates.

The government has also emphasised the economic and social importance of family farms and small to medium sized businesses, particularly in rural communities. By raising the threshold, it expects to significantly reduce the number of estates affected by the reforms compared with the original proposals.

Reaction from the sector Farming organisations and business groups have broadly welcomed the announcement, describing it as a sensible and pragmatic adjustment. For many families, the increased

threshold removes immediate pressure and provides greater certainty when planning for succession.

That said, some commentators have noted that the revised rules do not eliminate inheritance tax exposure altogether. Larger estates and asset rich businesses will still need to consider how reduced relief above the threshold may affect long term planning.

Planning implications For farmers and business owners, the change offers welcome breathing space, but it does not remove the need for careful inheritance tax planning. Asset values, ownership structures, partnership arrangements, and the interaction with other reliefs remain critical factors.

Early planning remains essential, particularly for estates approaching or exceeding the new thresholds. Professional advice can help families understand how the revised rules apply to their circumstances and avoid unexpected liabilities.

Conclusion The increase in inheritance tax relief thresholds represents a clear shift in government policy. It highlights how sustained sector engagement can influence tax decisions, and it provides greater reassurance for family farms and businesses heading into the 2026 tax year. However, with reliefs still capped and reduced above certain levels, inheritance tax planning remains firmly on the agenda.

As part of the Budget measures, the government confirmed plans to make some changes to the Construction Industry Scheme (CIS).

From 6 April 2026, HMRC will be able to take immediate action where a business makes or receives a payment that it knew, or should have known, was connected to fraud. In these circumstances, HMRC will have the power to remove Gross Payment Status (GPS) with immediate effect, assess the business for the associated tax loss, and impose a penalty of up to 30%. This penalty may be applied to the business itself or to its officers. Where GPS is withdrawn due to fraud or serious non-compliance, the business will also be barred from reapplying for GPS for a period of five years (an increase from the current one-year limit).

Alongside these measures, the government also plans to simplify the CIS by exempting payments to local authorities and certain public bodies. As part of this change the requirement for construction contractors to submit nil returns will be required. These changes are due to take effect from 6 April 2026 and will first be subject to technical consultation.

The CIS is a set of special tax and National Insurance rules for businesses operating in the construction industry. Under the scheme, businesses are classed as either contractors or subcontractors, and both must understand their tax obligations.

Qualifying contractors are required to deduct tax from payments made to subcontractors and pass these deductions to HMRC. The amounts deducted count as advance payments towards the subcontractor’s tax and National Insurance liabilities.

Subcontractors are not required to register for the CIS, but where they are not registered, contractors must deduct tax at a higher rate of 30%. Registered subcontractors are subject to a 20% deduction unless they qualify for GPS. Where GPS applies, no deductions are made by the contractor, and the subcontractor is responsible for paying all tax and National Insurance at the end of the tax year.

To qualify for GPS, a subcontractor must meet specific criteria, including a strong compliance history of paying tax and National Insurance on time, and carrying on a business that undertakes construction work or supplies construction labour in the UK.

If you live abroad and sell your UK home, you may have to pay Capital Gains Tax (CGT) on any gain made since 5 April 2015. Only the portion of the gain made after 5 April 2015 is liable for tax. One of the most commonly used and valuable exemptions from CGT is Private Residence Relief (PRR), which applies when a property has been used as your main family home. Investment properties that have never been your main residence do not qualify for any CGT relief.

For non-UK residents, PRR can still apply, but there are additional conditions. You may not have to pay CGT for any tax year in which you, your spouse, or civil partner spent at least 90 days in the UK home, provided you meet the necessary conditions and nominate it as your only or main home when reporting the sale to HMRC.

Certain parts of the property, such as areas let out, used exclusively for business, or grounds larger than 5,000 square metres, may reduce the relief. You also automatically receive relief for the last nine months of ownership (or 36 months if you are disabled or in long-term care). 

Regardless of whether any tax is due, you must submit a Non-Resident CGT (NRCGT) return and pay any CGT within 60 days of the sale. Penalties apply if the return is late or tax is unpaid by the deadline. Even if there is no CGT to pay the return must still be submitted by the deadline.

The new rules will allow companies to raise more capital under the following schemes although investors will need to factor in reduced VCT Income Tax relief when assessing opportunities.

The Venture Capital Trusts (VCT) and Enterprise Investment Scheme (EIS) are designed to encourage private investment into trading companies. Both schemes help support business growth while at the same time encouraging individuals to fund these companies.

A number of changes to the schemes were announced at Budget 2025 and will apply from 6 April 2026.

The main changes are as follows:

• Gross assets limits: Companies’ gross assets will increase for EIS and VCT eligibility to £30 million immediately before the share issue (from £15 million) and £35 million immediately after the issue (from £16 million).
• Annual investment limits: Companies will be able to raise up to £10 million annually (from £5 million) and £20 million for knowledge-intensive companies (from £10 million).
• Lifetime investment limits: Companies’ lifetime limit will increase to £24 million (from £12 million), and £40 million for knowledge-intensive companies (from £20 million).
• VCT Income Tax relief: The rate of Income Tax relief for individuals investing in VCTs will reduce from 30% to 20%.

These increases in annual, lifetime and gross assets apply only to qualifying companies that are not registered in Northern Ireland and are not engaged in trading goods, or in the generation, transmission, distribution, supply, wholesale trade, or cross-border exchange of electricity.

These companies remain eligible under the current scheme limits.

These changes are designed to encourage larger investments into qualifying companies. 

Investors should be aware of the reduced VCT Income Tax relief available and ensure that investments still remain worthwhile.

There is now less than 1 months to the self-assessment filing deadline for submissions of the 2024-25 tax returns. We urge our readers who have not yet completed and filed their 2024-25 tax return to file as soon as possible to avoid the stress of last-minute preparations as the 31 January 2026 deadline fast approaches.

You should also be aware that payment of any tax due should also be made by this date. This includes the remaining self-assessment balance for the 2024-25 tax year, and the first payment on account for the 2025-26 tax year.

Earlier this year, more than 11.5 million people submitted their 2023-24 self-assessment tax returns by the 31 January deadline. This included 732,498 taxpayers who left their filing until the final day and almost 31,442 that filed in the last hour (between 23:00 and 23:59) before the deadline!

There is a new digital PAYE service for the High Income Child Benefit Charge (HICBC). This allows Child Benefit claimants who previously used self-assessment solely to pay the charge to opt out and instead pay it through their tax code.

If you are filing online for the first time you should ensure that you register to use HMRC’s self-assessment online service as soon as possible. Once registered an activation code will be sent by mail. This process can take up to 10 working days. 

If you miss the filing deadline you will be charged a £100 fixed penalty (unless you have a reasonable excuse) which applies even if there is no tax to pay, or if the tax due is paid on time. 

There are further penalties for late tax returns still outstanding 3 months, 6 months and 12 months after the deadline. There are additional penalties for late payment of tax amounting to 5% of the tax unpaid at 30 days, 6 months and 12 months.

1 January 2026 – Due date for Corporation Tax due for the year ended 31 March 2025

19 January 2026 – PAYE and NIC deductions due for month ended 5 January 2026. (If you pay your tax electronically the due date is 22 January 2026).

19 January 2026 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2026. 

19 January 2026 – CIS tax deducted for the month ended 5 January 2026 is payable by today.

31 January 2026 – Last day to file 2024-25 self-assessment tax returns online.

31 January 2026 – Balance of self-assessment tax owing for 2024-25 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2025-26.

1 February 2026 – Due date for Corporation Tax payable for the year ended 30 April 2025.

19 February 2026 – PAYE and NIC deductions due for month ended 5 February 2026. (If you pay your tax electronically the due date is 22 February 2026)

19 February 2026 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2026. 

19 February 2026 – CIS tax deducted for the month ended 5 February 2026 is payable by today.

HM Revenue and Customs (HMRC) has recently issued a timely reminder about the support available to taxpayers as the Self-Assessment deadline nears. With 31 January 2026 fast approaching, many businesses, sole traders and individuals are understandably starting to feel the pressure of meeting their tax obligations. To help manage this, HMRC is highlighting the Time to Pay service, which allows taxpayers to spread their Self-Assessment tax bill over a series of monthly payments rather than paying everything in one lump sum by the deadline.

This update is particularly relevant as nearly 18,000 Self-Assessment payment plans have already been set up since the start of the tax year on 6 April 2025. It shows that many taxpayers are finding the flexibility afforded by Time to Pay helpful as part of wider financial planning.

What is the Time to Pay service?

Time to Pay is not a new concept, but recent publicity from HMRC serves as a useful reminder of how it works and why it might be helpful. Broadly, the service allows taxpayers who cannot pay their Self-Assessment tax bill in full by the 31 January deadline to:

• Set up a tailored repayment plan, spreading their liability over monthly instalments.
• Avoid late payment penalties by agreeing terms that reflect what they can realistically afford.
• Make use of online channels to set up a plan for bills up to a specified threshold without needing to speak to HMRC directly.

For many taxpayers with bills of up to £30,000, a payment plan can be arranged online via the Government Gateway or the HMRC app as soon as their Self-Assessment return has been filed. This avoids the need to call or negotiate directly with HMRC in many cases.

If the tax owed is more than £30,000 or if a longer repayment period is needed, the taxpayer can still seek support, but they will need to contact HMRC directly to discuss and agree terms.

Why this matters now

The Self-Assessment system requires businesses and individuals to calculate and pay their tax liabilities by 31 January each year. While many taxpayers plan for this in advance, unexpected circumstances, rising costs or irregular income can make it hard to settle the tax bill in full by the due date.

By promoting Time to Pay, HMRC aims to encourage taxpayers to act early, rather than waiting and risking automatic penalties and interest. An agreed Time to Pay arrangement can minimise stress around the deadline and help taxpayers manage cash flow more effectively through the winter months.

It is important to note that interest on the unpaid amount continues to accrue during the repayment period, and taxpayers should plan accordingly. However, the interest charged under a structured plan is usually less onerous than the cumulative impact of penalties that would otherwise apply if payments were missed or late.

Simple Assessment and other reminders

In addition to the Time to Pay service, HMRC is also reminding customers who have received a Simple Assessment letter that they do not need to complete a full Self-Assessment return. Instead, these customers have three months from the date of their letter to pay any tax owed for the 2024 to 2025 tax year.

Simple Assessment is issued where income tax cannot be collected through Pay as You Earn (PAYE) by employers or pension providers, and it simplifies the process for individuals who have relatively straightforward tax situations.

Conclusion

HMRC’s renewed emphasis on Time to Pay reflects an understanding that taxpayers often face real challenges in meeting lump sum tax obligations, especially in a period of ongoing cost pressures. Being aware of the support available and helping affected clients make the necessary arrangements sooner rather than later can make a meaningful difference to their financial wellbeing.

The recent Budget may not have delivered many dramatic headline changes, but as the detail settles, a number of important themes are beginning to emerge. Conversations with business owners suggest that concern is less about any single announcement and more about the combined effect of rising costs, higher personal tax exposure and increasing administrative demands.

These issues provide both a warning sign and an opportunity to plan more proactively.

Rising employment costs and staffing pressure

One of the most immediate challenges for many businesses is the rising cost of employing staff. Increases to minimum wage rates have a direct impact on payroll, but the wider effect often runs deeper. When entry level pay rises, expectations across the workforce frequently follow, leading to pressure on pay differentials and overall salary structures.

Employer National Insurance contributions and workplace pension costs continue to add to the total cost of employment. For businesses operating on tight margins, particularly in labour intensive sectors, this can quickly erode profitability. Some owners are already reviewing staffing levels, recruitment plans and working patterns to maintain control over costs.

Fiscal drag and higher personal tax bills

Another issue gaining traction is the continued freeze on income tax and National Insurance thresholds. As profits and salaries increase in line with inflation, more individuals are being pulled into higher tax bands without any meaningful increase in real income.

For owner managed businesses, this has a direct impact on decisions about salary, dividends and profit extraction. Dividend tax rates have risen in recent years; allowances remain static and the scope for tax efficient income planning has narrowed. The result is that after increases in remuneration, many business owners are paying more tax without a significant increase in take home pay (taxed earnings).

Fiscal drag can be easy to overlook, but over time it represents a significant and often underestimated increase in the overall tax burden.

Cash flow and financing costs

Higher interest rates continue to weigh heavily on businesses that rely on overdrafts, loans or asset finance. Even where inflation is easing, the cost of borrowing remains elevated, increasing monthly outgoings and putting pressure on cash flow.

Many business owners were looking to the Budget for measures that might ease short term funding pressures. In practice, most support is indirect, leaving businesses to manage higher financing costs alongside rising wages and operating expenses.

This has led some businesses to delay investment, hold back on expansion or prioritise cash retention over growth.

Investment decisions and uncertainty

Capital allowances and investment incentives still attract interest, but with growing caution. While reliefs can improve the tax efficiency of capital expenditure, uncertainty about how long they will remain in place makes long term planning more difficult.

Business owners are increasingly reluctant to base significant investment decisions solely on tax incentives that could change in future Budgets. Stability and predictability are now key factors in deciding when and how to invest.

Increasing compliance and administrative demands

Alongside cost pressures, businesses are also facing a gradual increase in administrative and reporting requirements. Developments such as the expansion of Making Tax Digital, Companies House reforms and enhanced transparency obligations all add to the compliance burden.

Individually, these changes may appear manageable. Collectively, they contribute to a sense that running a business is becoming more complex and time consuming, particularly for smaller organisations without in house finance teams.

A cumulative challenge rather than a single issue

What stands out following this Budget is not one specific measure, but the cumulative impact of multiple pressures moving in the same direction. Higher employment costs increased personal tax exposure, tighter cash flow and growing compliance requirements all reduce flexibility and increase risk.

This reinforces the importance of forward planning. Reviewing business structures, remuneration strategies, cash flow forecasts and investment plans can help you adapt to a more demanding environment and avoid reactive decision making.

How we can help

This is an ideal time to engage in meaningful discussions about your planning options. Small changes, implemented early, can often make a significant difference over time.

If any of these issues are affecting your business, please get in touch so we can help you review your position and consider the most appropriate next steps.

Many business owners reach a point where they begin to question whether the way their companies are arranged still suits their ambitions. Separate trading entities might have grown organically, acquisitions may have been made along the way or activities may have been kept apart for practical reasons. Over time, these associated companies can become difficult to manage as a whole. A group structure can therefore be an attractive way to bring order, improve tax efficiency and create a clearer long term strategy. The process is not as complex as many fear, although it does require careful planning to meet the legal and tax conditions needed for a clean reconstruction.

What a group structure achieves

A group structure allows the owners to place several companies under a single holding company. This creates a framework that links the entities while still preserving the limited liability of each. The holding company acts as the parent, which introduces the possibility of group tax reliefs, smoother dividend flows and better protection of assets. It also creates a tidier position for succession planning, investment and future exit options. For many owners, the appeal of a group is the sense that the business finally reflects its true scale, with the structure supporting the way the enterprise actually operates.

Improving the movement of funds

When associated companies are left separate, profits are locked within each company. This can restrict reinvestment because funds are not easily moved to where they are needed. A group structure can remove this constraint. Once the companies sit under a common parent, tax free dividends can be paid between members of the group. This allows one entity to support another without the friction of additional tax charges. It also improves the stability of the wider business because spare resources in one company can be redeployed quickly. For growth minded owners, this can be transformative.

Tax planning benefits

There are also clear tax planning advantages. Relief for losses is often one of the most immediate. Where a group exists, losses in one company can be set against profits in another, subject to standard rules. This can smooth tax liabilities and support companies that are either in early stage development or experiencing temporary cost pressures. Asset protection is another. High risk trading activity can be separated from valuable intellectual property or investment assets, which can sit in a different group company. If one part of the business experiences difficulties, the other parts may be better insulated from that risk.

How the reconstruction is carried out

Reconstruction tends to follow a familiar pattern. Usually, a new holding company is incorporated, and the shares of each existing company are transferred to it. In practice, the shareholders swap their shares in the old companies for shares in the new parent. If this is carried out correctly, the transaction can qualify for tax neutral treatment. The share exchange rules, together with the rules that apply to company reorganisations, allow ownership to be restructured without triggering capital gains or stamp duty charges. This is why professional advice is essential. The conditions must be met, and documentation must be prepared with precision.

Practical considerations to address

It is worth noting that liabilities, banking arrangements, contracts and licences may need to be updated. Banks often require new guarantees or revised facility letters. Landlords may need comfort that the covenant strength of the tenant is unchanged. Contracts that include change of control clauses must be reviewed, as the introduction of a holding company may trigger notification requirements. These matters are manageable, although they need to be handled with care so that business continuity is not disrupted.

Long term advantages of moving to a group

A group structure brings discipline and clarity. Owners gain a single place from which to view the business as a whole, which can lead to better decision making. Future investment rounds can be structured more easily because new investors can be brought into the parent company rather than individual subsidiaries. If an eventual sale is planned, a group can make it simpler to sell a division or ring fence a particular activity.

For many businesses, a group structure is a natural next step. It can unlock new opportunities, remove constraints and create a more resilient organisation. The key is to approach the reconstruction with a clear plan and good advice, so that the tax neutral status of the reorganisation is preserved. Once in place, the benefits tend to emerge quickly, and owners often wish they had acted sooner.