Newsletter 202

 

October 2025

In this month’s Enews, 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 scam warning for self assessment and details of a new fraud law.The Chancellor has announced the date for her Autumn Budget with details of a Budget Board to boost economic growth and the call for the Chancellor to make changes to National Insurance and Income Tax rates in the Autumn Budget. There is also news on HMRC’s ability to recover debts from bank accounts and a warning about the damage long-term sickness is doing to the economy to update you on and more.

• 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
• Autumn Budget to be delivered on 26 November
• HMRC splits advisory fuel rates for electric cars
• Advisory fuel rates for company cars
• Lowering VAT threshold would be manifesto breach, warns IPSE
• Companies face prosecution risk as new fraud law comes into force
• Economic outlook remains subdued
• Chancellor to explore reforms to business rates on second premises
• Budget Board must focus on easing the cost of doing business, says IoD
• Covid repayment window opens
• Chancellor urged to cut National Insurance but hike Income Tax in Autumn Budget
• AI to boost trade by nearly 40% by 2040 if gaps are bridged, says WTO
• Failed housing transactions cost £1.5 billion a year
• Digitally excluded can apply for MTD for Income Tax exemption now
• HMRC to resume taking tax owed by debtors directly from their bank accounts
• Long-term sickness blighting UK economy

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

Autumn Budget to be delivered on 26 November

The Autumn Budget will be delivered on 26 November by the Chancellor of the Exchequer, HM Treasury has announced.

The Office for Budget Responsibility’s latest outlook for the economy and public finances will be released on the same day.

The Budget outlines the government's plans for raising or lowering taxes and sets out its spending commitments for health, schools, police and other public services.

Chancellor of the Exchequer, Rachel Reeves said: ‘Britain’s economy isn’t broken. But I know it’s not working well enough for working people. Bills are high. Getting ahead feels tougher. You put more in, get less out. That has to change.

‘We’ve got huge potential - world-leading brands, dynamic industries, brilliant universities, and a skilled workforce. We’re a global hub for trade.

‘Fixing the foundations has been my mission this past year … but I’m not satisfied. There’s more to do. Cost of living pressures are still real.

‘And we must bring inflation and borrowing costs down by keeping a tight grip on day-to-day spending through our non-negotiable fiscal rules. It’s only by doing this can we afford to do the things we want to do.

‘If renewal is our mission and growth are our challenge. Investment and reform are our tools. The tools to building an economy that works for you - and rewards you.’

Internet link: GOV.UK

HMRC splits advisory fuel rates for electric cars

HMRC has split fuel advisory rates for electric cars depending on where drivers charge their company cars due to the price discrepancy between home and public chargers.

From 1 September 2025, the single rate for fully electric cars will be abolished and replaced with two different rates reflecting whether a car is charged at home or on a public charger.

The rate will be 8 pence per mile for home charging and 14 pence per mile for public charging. This will replace the current universal rate of 7 pence per mile.

These rates will be reviewed quarterly in line with petrol and diesel advisory fuel rates.

HMRC said:

‘The ‘Domestic electricity cost per kilowatt-hour’ is the Department for Energy Security and Net Zero annually published figure, uprated with the latest estimate of electricity prices from the Office for National Statistics.

‘The ‘slow or fast public charge cost per kilowatt-hour’ is the Zapmap public charging price index monthly published figure for slow or fast chargers (charging speed less than 50 kilowatts), uprated with the latest estimate of electricity prices from the Office for National Statistics.

‘A higher amount than the advisory rates can be used as long as you can show that the fuel cost per mile is higher. Therefore, if the public charger used is higher in cost per mile than the new advisory rate introduced for public charging, a higher rate can be used as long as you can show the cost per mile is higher.’

Internet link: GOV.UK AFR

Advisory fuel rates for company cars

New company car advisory fuel rates have been published and took effect from 1 September 2025.

The guidance states: ‘you can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 September 2025 are:

Engine size	Petrol
1400cc or less	12p
1401cc - 2000cc	14p
Over 2000cc	22p
Engine size	Diesel
1600cc or less	12p
1601cc - 2000cc	13p
Over 2000cc	18p
Engine size	LPG
1400cc or less	11p
1401cc - 2000cc	13p
Over 2000cc	21p

HMRC guidance states that the rates only apply when you either:

• reimburse employees for business travel in their company cars
• require employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is below. Electricity is not a fuel for car fuel benefit purposes.

Advisory Electricity Rate
Home Charger	8p
Public Charger	14p

If you would like to discuss your company car policy, please contact us.

Internet link: GOV.UK AFR

Lowering VAT threshold would be manifesto breach, warns IPSE

Lowering the threshold for VAT registration would breach Labour’s manifesto, IPSE, the Self-Employed Association has warned.

IPSE says that the government is in a bind both politically and economically. Having ruled out tax rises on ‘working people’ and hiking employer National Insurance contributions (NICs) the Chancellor’s options are limited.

IPSE asks, in these circumstances will Ms Reeves reform taxes rather than raising them?

Sole traders are required to register for, charge and pay VAT once their annual turnover goes over £90,000.

IPSE says this threshold can put a ceiling on the ambitions of sole traders earning close to that amount; they may be reluctant to artificially increase the price of their services by 20%, giving customers and clients a reason to buy from competitors.

Newspaper reports say that the Treasury is now considering slashing the threshold to as low as £30,000.

Fred Hicks, Senior Policy and Communications Adviser at IPSE, said:

‘This would make registering for VAT unavoidable for anyone whose main source of income is from self-employment, and then some.

‘Cutting the VAT registration threshold is not the same as increasing rates of VAT – even if it ultimately ends up with more people having to charge and pay it. And if this radical reform did go ahead, this may well be how government justifies it.

‘But make no mistake – in IPSE’s eyes, it absolutely would be a breach of their commitment – and a breach of faith – to claim that dragging people into paying a new tax is not the same as putting their taxes up.’

Internet link: IPSE website

Companies face prosecution risk as new fraud law comes into force

Companies could be prosecuted and face unlimited fines if they fail to prevent fraud that their firm profits from under a new corporate offence.

The offence will hold large organisations to account if they profit from fraud. It forms part of wider measures introduced by the government to tackle fraud and protect the UK economy.

These have been introduced as part of the Economic Crime and Corporate Transparency Act (ECCT) 2023 and came into force on 1 September.

Under the new law, which was passed with cross-Parliament support, large organisations can be held criminally liable where an employee, agent, subsidiary, or other ‘associated person’ commits a fraud intending to benefit the organisation.

In the event of prosecution, an organisation will now have to demonstrate to the court that it had reasonable fraud prevention measures in place at the time the fraud was committed.

Lucy Rigby KC MP, the Solicitor General, said:

‘Fraud undermines our British values of fairness and playing by the rules. It hurts individuals and businesses, and harms business confidence.

‘This new legislation sends a clear message that large organisations must take responsibility for preventing fraud, and those that fail to do so will be prosecuted with the full force of the law.

‘This government is committed to protecting our economy and we’re determined that those who don’t play by the rules will be brought to book.’

Internet link: GOV.UK

Economic outlook remains subdued

The overall outlook for the UK economy remains subdued despite an upgrade to its forecast, says the British Chambers of Commerce (BCC).

The UK economy is expected to grow by 1.3% in 2025, revised up from the previous forecast of 1.1%, says the BCC.

This upgrade reflects better-than-expected economic performance in Q1, supported by public spending. However, GDP is expected to slow slightly in 2026 to 1.2%, before rising to 1.5% in 2027 – unchanged from the previous forecast.

Business investment across 2025 is projected to be 1.6% – a significant downgrade from 4.8% in the last forecast, the business group added.

Vicky Pryce, Chair of the BCC Economic Advisory Council, said:

‘While 2025 may be slightly better than forecast, the overall growth landscape for the UK in the next couple of years looks weak. The economy will continue to be buffeted by global headwinds, alongside ongoing worries about high bond yields.  

‘Government expenditure has bolstered the economy this year, but the spending taps are likely to be tightened very soon across Whitehall.  

‘The spectre of inflation is set to loom over the economy for some time to come, with consumers reluctant to spend. That’s likely to slow the path of interest rate cuts.  

‘Government long-term strategies are welcome – but firms can’t only exist on promises of tomorrow. They need help today to grow, recruit and compete.’

Internet link: BCC website

Chancellor to explore reforms to business rates on second premises

Chancellor Rachel Reeves will look at fixing the cliff edges in business rates that can discourage small business investment and growth, according to a report from HM Treasury.

Currently when a business opens a second property, they will lose access to all Small Business Rates Relief (SBRR) unless they meet specific conditions, holding businesses back from expanding.

That means that a local bakery would have to pay thousands of pounds more for opening a small shop in the next village.

The report confirms that the government will review how SBRR can support business growth, potentially lifting growth and living standards in the future for those who work in these small businesses.

This is one of the options being explored in the Treasury’s business rates interim report.

Chancellor of the Exchequer, Rachel Reeves, said:

‘Our economy isn’t broken, but it does feel stuck. That’s why growth is our number one mission. We want to see thriving high streets and small businesses investing in their future, not held back by outdated rules or strangled by red tape.

‘Tax reforms such as tackling cliff-edges in business rates and making reliefs fairer are vital to driving growth. We want to help small businesses expand to new premises and building an economy that works for, and rewards working people.’

Internet link: HM Treasury website

Budget Board must focus on easing the cost of doing business, says IoD

The government’s Budget Board must focus on easing the cost of doing business, says the Institute of Directors (IoD).

The board has been created to link top ministers and 10 Downing Street officials with the Treasury.

The board will meet weekly and will be chaired by the Prime Minister’s new economic advisor Baroness Minouche Shafik and Treasury Minister Torsten Bell.

Anna Leach, Chief Economist at the IoD, said:

‘We are glad to see the government putting renewed energy into the growth agenda with a particular focus on business.

‘It is positive that the government has announced the creation of this body, bringing together teams across Number 10 and the Treasury, focussed on ensuring that the Autumn Budget delivers vitality to the economy.

‘Business confidence has fallen to historically low levels since last year’s Budget. Our own economic confidence index fell to its lowest ever level in July this year, with taxes and the wider economic climate dominating concerns amongst business leaders.

‘To be successful, this board needs to deliver a Budget that really works for business, with swift action to remove barriers to growth from the regulatory and tax system. We look forward to engaging constructively with the board to ensure the voice of enterprise is at the heart of its work.’

Internet link: IoD website

Covid repayment window opens

The government has launched a voluntary repayment scheme to allow recipients of financial Covid support to repay outstanding money they were not entitled to or did not need with ‘no questions asked’.

The government says that over £10 billion was lost to pandemic fraud, flawed contracts and waste under the previous government’s pandemic era procurement and schemes. £1.54 billion has already been recovered through existing efforts.

It says it will do everything in its power to recoup money lost to Covid fraud.

All Covid schemes, including loans, grants, social security and tax benefits fall under the voluntary repayment scheme.

The government says that individuals who don’t take the chance to come forward and repay outstanding money could face prosecution when it receives additional investigatory powers next year.

Changes to how director disqualification works could also see more people stopped from being involved in businesses or facing compensation orders.

A Covid fraud reporting website is also being launched to allow members of the public to report suspected fraud.

Covid Counter-Fraud Commissioner Tom Hayhoe said:

‘Our message to those who still owe Covid era money is simple – pay now, clear your conscience, or face the consequences.

‘This money belongs in communities, the NHS, police and armed forces. Those who don’t take up this straightforward offer and have knowingly, wrongly claimed tax-payer-funded help could face prosecution, disqualification, or prison.

‘The digital trail is forever, so the time to settle is now - before new investigatory powers and tougher rules come into force.’

Internet link: GOV.UK

Chancellor urged to cut National Insurance but hike Income Tax in Autumn Budget

Chancellor Rachel Reeves has been urged to cut National Insurance contributions (NICs) and increase Income Tax to create a ‘level playing field’ and protect workers' pay.

The Resolution Foundation said the Chancellor should make a 2p cut to NICs as well as a 2p rise in Income Tax in the Autumn Budget.

The think tank said the move would help to address ‘unfairness’ in the tax system.

Adam Corlett, Principal Economist at the Resolution Foundation, said:

‘Significant tax rises will be needed for the Chancellor to send a clear signal that the UK’s public finances are under control.

‘Any tax rises are likely to be painful but given the fallout from the recent employer NICs rise, the Chancellor should do all she can to avoid loading further pain onto workers’ pay packets.

‘She can do this by switching our tax base away from employee NICs and onto Income Tax, which is paid by a far broader group in society. This should form part of wider efforts to level the playing field on tax, such as ensuring that lawyers and landlords face the same tax rates as their clients and tenants.

‘These sensible reforms would raise revenue while doing the least possible harm to workers and the wider economy. And by acting decisively, the Chancellor can turn her full attention back onto securing stronger economic growth.’

Internet link: Resolution Foundation website

AI to boost trade by nearly 40% by 2040 if gaps are bridged, says WTO

Artificial intelligence (AI) could boost the value of cross-border flows of goods and services by nearly 40% by 2040 thanks to productivity gains and lower trade costs, according to a World Trade Organization (WTO) report.

However, the report says that for AI and trade to contribute to inclusive growth policies need to be in place to bridge the digital divide, invest in workforce skills, and maintain an open and predictable trading environment.

William Bain, Head of Trade Policy at the British Chambers of Commerce (BCC), said:

‘This report is a call to action for business and policymakers worldwide to ensure we realise the full benefits of AI in boosting global trade, productivity and skills.

‘It identifies a possible AI premium for global economic growth of 12-13% and goods export growth of up to 37% by 2040. AI can boost exports by reducing red tape, speeding up journey times, and cutting customs delays. AI-services are also highly exportable, and can be a major source of growth, in an area where the UK is already a world leader.

‘But tariff and technical barriers to trade need to be dealt with to allow AI to realise these full gains. We also need to ensure that electronic transmission of services across the world remains tariff-free.’

Internet link: WTO website BCC website

Failed housing transactions cost £1.5 billion a year

Failed housing transactions cost consumers and the economy at least £1.5 billion every year, according to research published by Santander.

The research says that over 530,000 transactions fall through every year due to the UK’s antiquated homebuying process.

The economic analysis shows that the direct cost to consumers of this through expenditure on elements such as mortgage and solicitors’ fees that consumers cannot recoup, is £560 million annually.

However, the impact is not just limited to consumers. The repercussions on the broader economy include the loss of work output due to stress and the time taken to buy a property within work hours, estimated at £380 million per year.

There is also the cost of people’s reduced wellbeing, estimated to be £400 million and wasted leisure time, approximately £170 million.

David Morris, Head of Homes at Santander UK, said:

‘The homebuying journey is still operating in the confines of a framework that was established a century ago. This antiquated system is an increasingly heavy anchor weighing on the economy and fixing it must be key.

‘While the government has put the housing market firmly on its agenda – as this research shows - the scale of the challenge remains largely underappreciated, and that’s why we’re calling for powerful reforms to give buyers and sellers more confidence, ease the financial and emotional strain and create a housing system fit for the needs of today’s consumers and economy.’

Internet link: Santander website

Digitally excluded can apply for MTD for Income Tax exemption now

HMRC has opened up a service for landlords and self-employed to apply for exemption from Making Tax Digital (MTD) for Income Tax phase one.

From next April, people who are self-employed and landlords, and declare more than £50,000 of gross income in their 2024/25 self assessment tax return, will be legally required to follow the new MTD for Income Tax rules from April 2026 onwards.

Anyone who thinks they may be eligible for exemption must phone or write to HMRC. Third parties such as relatives and agents can do this on behalf of taxpayers if they are authorised. It will take up to 28 days for HMRC to respond with a decision.

Sharron West, Technical Officer at the Low Incomes Tax Reform Group (LITRG), said:

‘Because HMRC will deal with applications on a case-by-case basis, we don’t yet know how generous their interpretation of the rules will be, but we know that HMRC are keen to see as many people as possible manage their taxes online.

‘If you are already exempt from MTD for VAT, HMRC say you should contact them when the exemption application process opens so they can check your circumstances and confirm if you’ll also be exempt from MTD for Income Tax.

‘The clock is ticking and it’s time to get ready.’

Internet link: GOV.UK Chartered Institute of Taxation website

HMRC to resume taking tax owed by debtors directly from their bank accounts

HMRC has resumed its programme allowing direct recovery of money from debtors’ bank accounts.

The Direct Recovery of Debts (DRD) policy, which was paused during the Covid-19 pandemic, has restarted in a ‘test and learn’ phase’, the tax authority has confirmed.

DRD targets individuals and businesses who can afford to pay their debts but deliberately choose not to, HMRC said.

This power enables HMRC to compel banks and building societies to transfer funds directly from a debtor’s account. It applies to debts of £1,000 or more, with safeguards against undue hardship and for vulnerable customers.

Before debts are considered for recovery through DRD, every debtor will receive a face-to-face visit from HMRC agents to personally identify the taxpayer to confirm it is their debt and to discuss options to resolve the debt.

Safeguards include only taking action against those who have established debts, have passed the timetable for appeals, and have repeatedly ignored HMRC’s attempts to make contact.

The safeguards also include leaving a minimum of £5,000 in the debtor’s accounts to ensure that sufficient money is available to pay wages, mortgages or essential business or household expenses.

HMRC said:

‘The vast majority of taxpayers pay their taxes in full and on time, but a minority choose not to pay, even though they have the means to do so.’

Internet link: GOV.UK

Long-term sickness blighting UK economy

The UK must tackle its status as the sick man of the G7 if it wants to grow the economy, warns the British Chambers of Commerce (BCC).

Businesses want to see a major shake-up of the UK’s approach to ill-health which is excluding people from work and hobbling the economy, says the BCC.

It says around 7% of the UK workforce, almost 2.8 million people, is currently out of work due to long-term sickness, whereas the equivalent figure in Japan is just 3.5%.

The government’s own calculations put the lost economic output from this inactivity at a minimum of £130 billion, a figure which does not include welfare payments.

The BCC is calling for joint action by government and businesses to halt the rising tide of sickness and help people suffering ill-health to get back into work or stay there.

Shevaun Haviland, Director General of the BCC, said:

‘Sickness absenteeism is a growing concern. The UK has more than nine million people who aren’t working with one third of them suffering from long-term health conditions.  

‘This is a devastating loss of potential – for these individuals, the businesses that need them and our local economies.  

‘If the government is serious about growth, then we must turn the tide on this loss of talent. The evidence is also clear that being in work is good for health.  

‘Employers recognise the problem and want to do more, but the increasing cost and complexity of the landscape means many lack the resources to respond quickly and effectively.’

Internet link: BCC website