September has brought several important developments for UK businesses, sole traders, landlords and property investors. The government is consulting on simplifying corporate reporting, HMRC is beginning to register people who should already be using Making Tax Digital (MTD) for Income Tax, and the latest housing data suggests modest price growth alongside weaker mortgage approvals. This briefing explains what has changed, what is still only a proposal and what action may be appropriate now. Information is correct as at 11 September 2026. 1. Corporate reporting reform: possible simplification, but no immediate change to audit requirements On 7 September 2026, the government opened a consultation on modernising corporate reporting. The proposals are intended to make reporting more proportionate and useful, especially for small and medium-sized businesses. Areas under consideration include: updating company-size thresholds and related exemptions; allowing some medium-sized companies to qualify for audit exemption; simplifying strategic, directors' and remuneration reporting; and making digital communication and reporting the default in more situations. The consultation closes on 30 November 2026. These measures are proposals, not current law. A company that is presently required to have an audit should therefore continue to plan on that basis unless and until legislation changes and the company meets the final eligibility conditions. Businesses may nevertheless wish to review their reporting processes now. If the proposals proceed, the practical benefit is likely to depend on company size, group structure, lender or investor requirements, and whether an audit is useful even when it is not legally required. A separate confirmed change from April 2028 Companies House has separately confirmed that, from 1 April 2028, all UK companies will need to file annual accounts using commercial software. Web and paper filing for accounts will close from that date. Small companies and micro-entities will also be required to file profit and loss accounts with Companies House, although they will be able to opt out of making that information public. Companies House, HMRC and law-enforcement bodies will still be able to access the filed information. Detailed opt-out arrangements are expected later. Companies that still prepare or submit accounts manually should use the lead time to review compatible software, responsibilities and internal record-keeping. 2. Making Tax Digital for Income Tax: HMRC registration activity is increasing MTD for Income Tax became mandatory on 6 April 2026 for eligible sole traders and landlords whose combined qualifying gross income from self-employment and property exceeded £50,000. HMRC reported in August that more than 570,000 people had signed up and more than 436,000 had submitted their first quarterly update. For people following the standard quarterly periods, the first period ran from 6 April to 5 July 2026 and the submission deadline was 7 August 2026. From September, HMRC is starting to sign up customers who appear to be required to use MTD for the 2026/27 tax year but have not registered. Eligibility is generally assessed using information from the 2024/25 Self Assessment return. Some people may be exempt or able to apply for an exemption, so an HMRC registration notice should be checked against the individual's circumstances rather than ignored. To comply, affected taxpayers generally need to: keep digital records using compatible software; submit quarterly summaries of income and expenses; and complete their year-end tax obligations through the MTD process. Quarterly updates are summaries, not four separate tax returns. The usual 31 January deadline for the final Self Assessment position remains. HMRC has also said that late quarterly updates will not attract penalty points during the 2026/27 tax year, but taxpayers should still establish a reliable process as early as possible. The qualifying-income threshold is due to fall to more than £30,000 from April 2027, bringing more sole traders and landlords into scope. 3. Housing market: prices edged higher, but lending demand remains subdued Nationwide's August 2026 house-price index recorded a 0.2% monthly increase. The average UK house price was £275,465, with annual growth of 1.6%, up from 1.4% in July. This is a modest improvement rather than evidence of a broad housing boom. Bank of England data showed that net mortgage approvals for house purchase fell to 56,100 in July from 58,200 in June. The figures suggest that affordability, borrowing costs and buyer confidence are still constraining activity. The Bank of England maintained Bank Rate at 3.75% in July. Its next Monetary Policy Committee decision is due on 17 September 2026. Borrowers and investors should avoid basing decisions on a single rate forecast and should test affordability under a range of interest-rate and vacancy assumptions. For buy-to-let investors, the tax position can be as important as the purchase price. Ownership structure, finance costs, Stamp Duty Land Tax, rental-profit taxation and future capital gains should be considered together before a transaction is completed. Practical next steps Business owners should distinguish between confirmed rules and proposals. The April 2028 software-filing timetable is confirmed, while the wider corporate-reporting consultation may change before any legislation is introduced. Sole traders and landlords who may be within MTD should check their qualifying income, confirm whether HMRC has registered them and ensure that their software and records are ready. Property investors should model tax and financing costs using cautious assumptions rather than relying on headline price movements alone. TB Accountants can help with company reporting, MTD readiness, landlord tax and cross-border tax matters. Official sources UK government consultation: Modernising corporate reporting Companies House: Changes to accounts filing from April 2028 HMRC: 436,000 sole traders and landlords make their tax digital Nationwide: House price growth remained subdued in August Bank of England: Money and Credit — July 2026 Bank of England: Monetary Policy Committee dates This article provides general information only and does not constitute accounting, tax, legal, investment or mortgage advice. Rules and individual circumstances vary. Obtain professional advice before taking action.

If you are UK tax resident and hold a bank account, property or investments in China, Hong Kong, Singapore or elsewhere, HMRC may already hold information about those accounts. It arrives through the Common Reporting Standard (CRS), an automatic exchange of financial account information that more than 100 countries have committed to. That is why some people receive an HMRC nudge letter mentioning overseas income, offshore income or foreign assets — and why the letter itself is not an accusation. Key Takeaways A nudge letter is not a tax investigation. It is a prompt to check your own position, not a finding that you owe anything. An overseas account does not mean the information stays overseas. Under CRS, local banks identify tax residence and the data is passed on through automatic exchange. Having money abroad is not the same as owing UK tax on it. £100,000 sitting in an overseas account is not £100,000 of taxable income. What matters is what the asset produced. The rules changed on 6 April 2025. The remittance basis was abolished and replaced by the Foreign Income and Gains (FIG) regime, based on tax residence rather than domicile. Needing to report is not the same as paying twice. Foreign Tax Credit Relief and double taxation agreements may offset tax already paid abroad. Do not reply in a hurry, and do not ignore it. Check the position first, then decide how to respond. 1. Receiving a Nudge Letter Is Not the Same as Being Investigated This is the point most often misunderstood. A nudge letter is not a formal tax investigation notice in a fixed format. "Nudge" means exactly what it sounds like: HMRC uses information it already holds to identify potential tax risk, then writes to prompt you to review your own tax position. So, to be clear: Receiving a nudge letter does not mean HMRC has concluded you evaded tax Receiving a nudge letter does not mean a formal investigation has begun Holding an overseas account does not mean tax is owed The question worth asking is a different one: why does HMRC think your records may need rechecking? Where the letter specifically mentions overseas income, offshore income or foreign assets, your past returns deserve a careful review. 2. You Live in the UK, Your Money Is Abroad — So How Does HMRC Know? Many people hold a traditional assumption: if the money is in China, Hong Kong, Singapore or anywhere else, and it never entered a UK bank, HMRC cannot see it. That assumption is increasingly inaccurate, and the main reason is the Common Reporting Standard. CRS is an OECD-developed framework for the automatic exchange of financial account information for tax purposes. HMRC's own Worldwide Disclosure Facility guidance notes that more than 100 countries have committed to multilateral exchange under CRS. In simple terms: if you are UK tax resident and also hold a reportable financial account in another participating country, the local financial institution identifies the account holder's tax residence under local CRS rules. That account information may then be reported to the local tax authority and passed to the relevant tax jurisdiction through automatic exchange. So an account being overseas does not mean the information stays overseas. HMRC has also said it uses CRS and similar data to encourage offshore tax compliance, and to remind taxpayers to complete the Foreign pages of their Self Assessment return correctly. This is why the reaction to such a letter is so often the same question: "How does HMRC even know?" 3. Money in an Overseas Account Does Not Automatically Mean UK Tax This is the single most important distinction in the whole subject. Holding an overseas bank account, overseas property or other foreign assets does not mean the full value of those assets is UK taxable income. For example, having £100,000 in an overseas bank account does not mean the UK will charge Income Tax on that £100,000. What actually needs analysing is the nature of the money: Savings accumulated in earlier years? Salary or employment income? Bank interest? Rental income? Dividends from shares? A capital gain on selling an asset? A distribution from a company? These are entirely different tax questions. HMRC's guidance on offshore non-compliance describes an "offshore matter" as covering income arising outside the UK, assets situated outside the UK, and activities carried on wholly or mainly outside the UK. So the real question is usually not "how much do I have overseas?" but "have those overseas assets produced income or gains that need to be dealt with in the UK?" 4. The Foreign Income Most Often Overlooked Many people hear "foreign income" and immediately think: "But I don't run a business overseas." In practice, foreign income is far more common than that. Overseas bank interest Interest generated by deposits in accounts in China, Hong Kong, Singapore or elsewhere. Principal and interest are two different things: the capital sitting in the account is not income, but the interest it earns each year may need UK tax treatment. Overseas rental income You live in the UK but still rent out a property back home. Whether that rent involves UK tax depends on your UK tax residence status for the year in question and the specific rules that apply. Overseas dividends Holding shares in US, Hong Kong or other overseas companies and receiving dividends can equally form part of your foreign income. Gains on selling overseas assets Selling overseas shares, funds or property can produce a capital gain. Note carefully: the sale price is not the same as the profit. A capital gain is normally calculated by reference to acquisition cost and other factors. Overseas pensions and other income Some overseas pensions, trust-related income and other foreign income may also need UK tax treatment. For anyone living in the UK long term while still holding property, bank accounts or investments back home, this is worth revisiting. 5. A Key Change: The Rules Are Different After 6 April 2025 If you have previously heard the phrase "foreign income is only taxed in the UK if you remit it here," that shorthand can no longer simply be applied. From 6 April 2025, the UK's remittance basis was abolished and replaced by the Foreign Income and Gains (FIG) regime. HMRC's helpsheet HS266 sets this out. From 6 April 2025, the regime no longer uses domicile as its central connecting factor and is based on tax residence instead. UK tax residents are in principle taxed on their worldwide income and gains on the arising basis. Alongside that, the new regime offers qualifying new residents relief on foreign income and gains arising in their first 4 years of UK residence. Two conditions matter in particular: You must be a qualifying new resident — broadly, in one of your first 4 years of UK residence following a period of at least 10 consecutive tax years of non-UK residence. Relief is not automatic. You must make a claim for each tax year and for the foreign income or gains you are claiming on. So deciding whether foreign income is taxable in the UK is no longer just a question of "did I bring the money in?" It also depends on: Are you UK tax resident? Which tax year does it fall in? What type of foreign income or gain is it? Do you qualify under the FIG regime? Has tax already been paid overseas? Can you claim Double Taxation Relief or Foreign Tax Credit Relief? One time-limited point worth knowing: the Temporary Repatriation Facility If you previously used the remittance basis, there is a transitional measure that is easy to miss. The Temporary Repatriation Facility (TRF) is available for three tax years from 6 April 2025 and lets former remittance basis users designate pre-6 April 2025 foreign income and gains for tax at a reduced flat rate, after which the funds can be brought to the UK without a further charge. 2025 to 2026: 12% 2026 to 2027: 12% 2027 to 2028: 15% You must be UK resident in the tax year of designation and have previously used the remittance basis. This window closes after 2027 to 2028, so anyone with pre-April 2025 foreign income and gains should look at it sooner rather than later. 6. I Already Paid Tax Overseas — Do I Pay Again in the UK? This is another common worry. If tax was already paid on rental income back home, why should the UK be involved at all? Two ideas need separating here: needing to report is not the same as paying tax twice. The UK has double taxation arrangements with many countries and territories. Where the conditions are met, tax already paid overseas may be relieved through mechanisms such as Foreign Tax Credit Relief. How much can be relieved, and whether any UK tax remains payable, depends on the type of income, the foreign tax paid, and the applicable treaty. So do not jump from "I already paid tax at home" to "there is nothing to do in the UK." Those are not the same statement. 7. If You Receive an HMRC Nudge Letter, Do Not Rush to Reply If you receive an HMRC letter about overseas income, overseas accounts or foreign assets, do not assume tax is due — and do not ignore it either. The account balance HMRC holds is not the same as your taxable income. The position needs to be assessed against: Which tax year is involved Whether you were UK tax resident in that year Whether the overseas funds are capital, interest, rent, dividends or investment gains Whether the income was already declared or taxed overseas Whether the FIG regime or Foreign Tax Credit Relief applies If you are not sure what HMRC is actually focused on, it is worth having a professional review the position before you reply. 8. What If You Find Something Was Missed? If a review shows foreign income or gains may have been under-reported in the past, it is generally not advisable to simply file a correction yourself or reply to HMRC off the cuff. Different tax years can be subject to different rules, and the following all need weighing together: The amount of foreign income and gains involved Your UK tax residence status Tax already paid overseas Interest and any potential penalties Whether disclosure should be made through the Worldwide Disclosure Facility Getting the route right matters, because a voluntary and correctly structured disclosure is normally treated more favourably than an error HMRC identifies itself. Frequently Asked Questions Does an HMRC nudge letter mean I am being investigated? No. A nudge letter is a prompt, not a formal investigation notice. HMRC uses data it already holds to flag potential risk and invites you to check your own position. It does not mean HMRC has concluded that tax is owed. How does HMRC know about my bank account in China or Hong Kong? Most commonly through the Common Reporting Standard. Under CRS, local financial institutions identify account holders' tax residence and report the account information to their own tax authority, which can then be exchanged automatically with HMRC. More than 100 countries have committed to this exchange. I have £100,000 in an overseas account. Do I owe UK tax on it? Not on the balance itself. Holding £100,000 overseas is not £100,000 of UK taxable income. What matters is whether that asset produced income or gains — interest, rent, dividends or a capital gain — and whether you were UK tax resident in the relevant year. I already paid tax overseas. Do I have to pay again in the UK? Not necessarily. Needing to report is not the same as paying twice. The UK has double taxation arrangements with many countries, and Foreign Tax Credit Relief may offset tax already paid abroad. How much relief applies depends on the income type, the foreign tax paid and the relevant treaty. What changed for foreign income on 6 April 2025? The remittance basis was abolished and replaced by the Foreign Income and Gains (FIG) regime, set out in HMRC helpsheet HS266. The regime is based on tax residence rather than domicile. Qualifying new residents — broadly those in their first 4 years of UK residence after at least 10 consecutive tax years of non-UK residence — can claim relief, but it must be claimed and is not automatic. What should I do if I think I under-declared foreign income? Do not file an ad hoc correction or reply to HMRC without checking the position first. The right route depends on the amounts, your residence status, tax already paid overseas, and whether the Worldwide Disclosure Facility is appropriate. Take advice before you respond. A Word from TB Accountants Many people have long assumed that if money never entered the UK, HMRC would not know about it. With CRS information exchange and HMRC's growing use of data analysis, that understanding needs updating. If you hold overseas bank accounts, property, shares, company dividends or other income, the questions that matter are these: have those assets produced income or gains; were you UK tax resident in the relevant year; and were your Self Assessment returns completed correctly? Check first, then assess, then act. How TB Accountants Can Help At TB Accountants, we support UK companies, international businesses, and overseas entrepreneurs with professional accounting and tax compliance services. Our experienced team can assist with: Reviewing HMRC nudge letters about overseas income UK tax residence and Statutory Residence Test analysis Foreign income and gains reporting on Self Assessment FIG regime claims and the Temporary Repatriation Facility Double Taxation Relief and Foreign Tax Credit Relief Worldwide Disclosure Facility disclosures With extensive experience supporting international clients and overseas entrepreneurs in the UK, we help you establish the facts before responding to HMRC. Why TB Accountants? Professional Assurance: Our team includes ACA members and ACCA-certified professionals, delivering services to the highest industry standards. Responsive Service: We respond to your inquiries within 24 hours, ensuring efficient communication across time zones. Multilingual Support: Services available in English, Mandarin, Cantonese, Japanese, French, German, Spanish, Italian, Turkish, and more. Trusted by Clients Worldwide: Consistently praised by global clients for proactive, professional, and reliable accounting and tax support. Contact Received an HMRC letter about overseas income and unsure how to respond? Get in touch with TB Accountants. We can review the letter alongside your residence status, the source of the overseas income and your filing history, and help you decide on the right course of action. Get in touch with us at info@tbagroup.uk or for a free one-to-one consultation. Email: info@tbagroup.uk WhatsApp: +44 7776 908114 Tel: +44 208 349 3939 This article is intended as general guidance only, and does not replace any legal or professional advice. For enquiries, please contact TBA Group via email or WhatsApp. TB Accountants UK Accounting | Tax Compliance | VAT Services | Business Advisory

Realistically, no. If you earn money through Etsy, eBay, Airbnb, Vinted, Fiverr, Uber, Deliveroo or TikTok Shop, HMRC most likely already holds a record of it. Since 1 January 2024, digital platforms have been legally required to collect seller income data and report it to HMRC, with the first reports submitted in January 2025. Nothing about that is a new crackdown — it is simply that side hustle income is now visible by default rather than by investigation. Key Takeaways Platforms already report your income. This has been in force since January 2024. HMRC receives the data whether or not you file. The £1,000 trading allowance is a single, gross figure. It covers all your side hustles added together, and it applies to turnover, not profit. Making Tax Digital for Income Tax began in April 2026 for sole traders and landlords with qualifying income over £50,000. The first quarterly update deadline was 7 August 2026. The reporting threshold is rising to £3,000 — but the allowance is not. The £1,000 trading allowance stays. What changes is when you must file a full Self Assessment return. How you get paid is irrelevant. PayPal, WeChat, bank transfer or cash — the tax obligation attaches to the income, not the payment method. Why Your Side Hustle Income Is More Visible Than It Used To Be Digital Platforms Already Report Your Income to HMRC Under international rules developed by the OECD, digital platforms that facilitate the sale of goods, services or rentals must collect and report qualifying seller information to tax authorities. The rules took effect on 1 January 2024, and platforms submitted their first reports to HMRC in January 2025. Platforms covered include marketplaces and services such as eBay, Etsy, Airbnb, Fiverr, Uber and Deliveroo. If you sell through one of these platforms, you should also receive a copy of the information reported about you — worth checking against your own records. Two things this does not mean: HMRC is not issuing an investigation notice to every side hustler, and not every side hustle owes tax. What has genuinely changed is HMRC's ability to cross-check what platforms report against what taxpayers declare. Making Tax Digital for Income Tax Started in April 2026 Making Tax Digital for Income Tax became mandatory from April 2026 for sole traders and landlords with qualifying income over £50,000. Those affected must keep digital records using compatible software and submit quarterly updates of income and expenses, rather than reporting once a year. First quarterly update period: 6 April to 5 July 2026 (some may use calendar quarters from 1 April to 30 June) Deadline for the first update: 7 August 2026 No penalty points will be issued for late quarterly updates during the first year The threshold then steps down: over £30,000 from April 2027, and over £20,000 from April 2028. If your side hustle is growing, you may be in scope sooner than you expect. Does Earning Over £1,000 Mean You Owe Tax? This is the single most misunderstood point, and the answer is genuinely "it depends." The UK has a £1,000 trading allowance per tax year. Three details catch people out. First, £1,000 is gross income, not profit. It refers to total turnover before deducting any expenses. Second, it is one allowance across all your side hustles. You do not get £1,000 per platform. For example: Etsy sales: £700 eBay sales: £500 Neither platform alone exceeds £1,000, but combined turnover is £1,200 — over the threshold, so a reporting obligation may arise. Third, the amount is not the only test. Whether the activity counts as trading, the nature of the income, and whether other reliefs apply all affect the outcome. So both "over £1,000 means you definitely pay tax" and "under £1,000 means you can ignore it entirely" are too simplistic. A Change Is Coming — But Read It Carefully The government has announced that the Self Assessment reporting threshold for trading income will rise from £1,000 to £3,000 gross within this parliament, taking around 300,000 people out of filing tax returns. Roughly 90,000 of them will have no tax to pay at all. Two points are widely misreported: The £1,000 trading allowance itself is not changing. If you earn between £1,000 and £3,000, you may still owe tax on the amount above the allowance. You will still have to tell HMRC. A new online service is expected by 2029 for reporting income between £1,000 and £3,000, replacing the need for a full Self Assessment return. In short: simpler reporting, not a bigger tax break. Five Common Misconceptions "The platform won't tell HMRC." Platforms have reported seller data since January 2024. This is a legal obligation, not a choice. "I was paid by PayPal or WeChat, so it doesn't count." The tax obligation attaches to the income itself, not to how it reaches you. "The amount is small, HMRC won't care." Compliance is about whether income is correctly reported, not whether the sum is large. "Only registered companies need to report." Sole traders and freelancers have obligations under UK tax law in their own right. "I'll deal with it if HMRC contacts me." With platform data and MTD, discrepancies surface far earlier — and voluntary correction is treated more favourably than a discovered error. How to Get Your Side Hustle Tax Right Keep complete records of income and expenses Add up income across all platforms, not each one separately Check whether you have crossed the £1,000 gross threshold Compare the platform's reported figures against your own records Choose the right structure — sole trader or limited company — for how you actually operate Use HMRC-compatible digital bookkeeping software, especially if you may enter MTD Get advice when the position is unclear, rather than guessing Frequently Asked Questions Does HMRC know about my Etsy or eBay income? Very probably. Digital platforms have been required to collect and report seller income to HMRC since 1 January 2024, with the first reports filed in January 2025. You should also receive a copy of what was reported about you. Do I have to pay tax on a side hustle under £1,000? Generally no, if your total gross income from all trading side hustles is under £1,000 in the tax year — the trading allowance covers it. But the £1,000 applies to combined turnover across every platform, not to each one separately. Is the trading allowance rising to £3,000? No. The £1,000 trading allowance is staying. What rises to £3,000 is the Self Assessment reporting threshold, so fewer people file a full return. If you earn between £1,000 and £3,000 you may still owe tax, and a new online service is expected by 2029 to report it. Does Making Tax Digital apply to my side hustle? It applies from April 2026 to sole traders and landlords with qualifying income over £50,000, dropping to over £30,000 from April 2027 and over £20,000 from April 2028. I was paid through PayPal — is that taxable? The payment method makes no difference. What matters is the nature and amount of the income. What happens if I have not declared side hustle income? Correcting it voluntarily is almost always treated more favourably than waiting for HMRC to identify the discrepancy. Take advice on the right disclosure route for your circumstances. A Word from TB Accountants The UK has not announced a special crackdown on side hustles. What has happened is quieter and more consequential: tax administration has become digital and data-led, and side hustle income is now visible as a matter of routine. For anyone building a side business, selling cross-border, or freelancing in the UK, tax compliance is no longer an annual task completed each January. It is part of running the activity at all. Understanding the rules, reporting properly and planning ahead reduces risk — and makes it far easier to grow the business without unwelcome surprises. How TB Accountants Can Help At TB Accountants, we support UK companies, international businesses, and overseas entrepreneurs with professional accounting and tax compliance services. Our experienced team can assist with: Self Assessment registration and filing Side hustle, freelance and sole trader tax E-commerce and online platform income Choosing between sole trader and limited company Making Tax Digital readiness and software setup Voluntary disclosures to HMRC Why TB Accountants? Professional Assurance: Our team includes ACA members and ACCA-certified professionals, delivering services to the highest industry standards. Responsive Service: We respond to your inquiries within 24 hours, ensuring efficient communication across time zones. Multilingual Support: Services available in English, Mandarin, Cantonese, Japanese, French, German, Spanish, Italian, Turkish, and more. Trusted by Clients Worldwide: Consistently praised by global clients for proactive, professional, and reliable accounting and tax support. Contact Unsure whether your side hustle needs reporting? Get in touch with TB Accountants for a free one-to-one consultation. Get in touch with us at info@tbagroup.uk or for a free one-to-one consultation. Email: info@tbagroup.uk WhatsApp: +44 7776 908114 Tel: +44 208 349 3939 This article is intended as general guidance only, and does not replace any legal or professional advice. For enquiries, please contact TBA Group via email or WhatsApp. TB Accountants UK Accounting | Tax Compliance | VAT Services | Business Advisory

On 23 June 2026 the UK government published Tax Update 2026: Simplification, Modernisation and Fairness, setting out dozens of reforms and consultations across VAT, PAYE, Self Assessment, the platform economy and tax debt management. It is the broadest UK tax policy update of 2026 so far. Several measures are open consultations, but two dates are now fixed: e-invoicing becomes mandatory for VAT invoices from 2029, and Self Assessment customers with PAYE income will begin paying more of their liability in-year from April 2029. Key Takeaways E-invoicing is confirmed, not proposed. Electronic invoicing will be required for all business-to-business and business-to-government VAT invoices from 2029. Self Assessment moves to in-year payment from April 2029. Those with both PAYE income and a Self Assessment obligation will pay more of their forecast liability through their PAYE code. VAT and PAYE may become Direct Debit only. A consultation is now open on making Direct Debit mandatory, subject to exceptions. Online marketplace VAT liability may extend to UK sellers. Consultation open. Currently these rules bite hardest on overseas businesses. HMRC wants at least 90% of customer interactions digital by 2030. It reached 78% in 2025/26, up from around 65% in 2020/21. Enforcement is shifting from after-the-fact checks to prevention. Errors are flagged at filing rather than discovered years later. What Is Tax Update 2026? Tax Update 2026 is built around three stated themes: Simplification — reducing the administrative burden of tax on businesses and individuals. Modernisation — digitising HMRC and upgrading the underlying tax systems. Fairness — tightening oversight to reduce evasion and incorrect filing. In other words, the government is not simply adjusting tax rates. It is redesigning how tax is reported, paid, supervised and collected. The practical consequence for businesses is that filing correctly is no longer sufficient on its own — filings must also be timely, well-documented and machine-readable. The Six Changes at a Glance VAT e-invoicing — Confirmed. Mandatory for all B2B and B2G VAT invoices from 2029. Self Assessment paid in-year via PAYE code — Confirmed for April 2029. Consultation open on the detail. VAT and PAYE paid by Direct Debit — Consultation open. No implementation date. Online marketplace VAT liability extended to UK sellers — Consultation open. HMRC digital transformation — Already underway. At least 90% digital target by 2030. Prevention-first compliance — Direction of travel, already visible in HMRC practice. The Six Changes in Detail 1. VAT and PAYE Payments May Move to Direct Debit The government announced at Budget 2025 its intention to consult on making Direct Debit the mandatory payment method for VAT and PAYE return liabilities, subject to defined exceptions. That consultation has now been published, and also considers what enforcement arrangements or incentives might accompany the change. If it proceeds, businesses would need to plan cash flow further ahead, make sure filed figures are accurate before collection, avoid failed collections caused by insufficient balances, and treat payment dates as hard deadlines. Status: Consultation open — no implementation date. | What it means for you: Review your cash flow cycle against your VAT and PAYE payment dates now, before the choice is made for you. 2. Self Assessment Moves to In-Year Payment from April 2029 The government has published a consultation on more timely payments for Income Tax Self Assessment. The direction is already set: from April 2029, Self Assessment customers who also have PAYE income will be required to pay more of their forecast Self Assessment liability in-year through PAYE, rather than in a lump sum after the tax year ends. The consultation covers how this is implemented, and also seeks views on potential reform of Payments on Account for other Self Assessment taxpayers. Status: Confirmed for April 2029 — consultation open on the detail. | What it means for you: Company directors, landlords, self-employed people and anyone with side income should model the cash flow effect now. This changes when money leaves the business, not just how much. 3. Platform Economy VAT Oversight Tightens Further Online marketplaces such as Amazon, eBay and TikTok Shop have taken on progressively more VAT compliance responsibility in recent years, largely in relation to overseas sellers. The government has now published a consultation on extending VAT online marketplace liability rules to UK-based businesses, aimed at VAT non-compliance that distorts competition. If implemented, platforms would likely tighten seller identity checks, VAT status verification, and transaction data retention. Status: Consultation open. | What it means for you: Both overseas and UK-based sellers should expect stricter platform-level tax verification. Keep VAT registration details current on every marketplace you sell through. 4. E-Invoicing Becomes Mandatory in 2029 This is the firmest commitment in the package. Announced at Budget 2025, the government will require the use of electronic invoicing for all VAT invoices on business-to-business and business-to-government transactions from 2029. On 23 June 2026 it confirmed that Peppol will be the core interoperability network for UK e-invoicing, giving software vendors and businesses a concrete standard to build towards. E-invoicing does not simply mean emailing a PDF. It requires invoices to be issued, transmitted and archived in a standardised, structured data format. An implementation roadmap and detailed standards are due at Budget 2026. Businesses will need to consider: Whether their accounting software supports Peppol-based e-invoicing Whether their ERP system can connect to the network Whether VAT codes are applied accurately Whether customer and supplier records are complete and standardised Status: Confirmed — mandatory from 2029. | What it means for you: If you still invoice from Excel, Word or by hand, this is the change that will force a digital upgrade. Watch for the implementation roadmap at Budget 2026. 5. HMRC Is Becoming More Data-Driven HMRC's Transformation Roadmap progress update reports that 78% of customer interactions took place through automated or digital self-serve channels in 2025/26, up from around 65% in 2020/21. The HMRC app had 7.6 million unique users in 2025/26, up from 5.9 million the year before, and 19.7 million people used the Personal Tax Account. HMRC is targeting at least 90% of customer interactions being digital by 2030. Alongside this, HMRC continues to develop cloud-based tax systems, automated data matching, AI-assisted customer service, smarter risk identification, and cross-department data sharing. Status: Already underway. | What it means for you: Your VAT returns, payroll data, bank records and platform transaction history are increasingly cross-referenced. Inconsistencies between them are what trigger enquiries. 6. Supervision Is Shifting from Detection to Prevention Historically, many businesses only considered tax risk once an enquiry notice arrived. HMRC now aims to use its digital systems to identify anomalies at the point of filing and prompt taxpayers to correct them proactively. Status: Direction of travel. | What it means for you: The valuable capability is no longer remediation after the fact — it is a compliance process that stays continuously accurate. Why Is HMRC Pushing These Reforms? HMRC's published figures show the UK still has a tax gap running to tens of billions of pounds. The government is therefore investing in raising the level of tax digitalisation, strengthening collection and enforcement, making better use of third-party data, improving taxpayer service efficiency, and tackling deliberate evasion and incorrect filing. For the large majority of businesses that operate compliantly, the purpose of these reforms is not to increase the tax burden. It is to reduce filing errors and improve transparency. How UK Businesses Should Prepare Now Several of these reforms are still at consultation stage, but the two 2029 dates are already set, and there is preparation you can do immediately: Check that your VAT, PAYE and other filing processes are properly documented Ask your software provider about their Peppol e-invoicing roadmap Build more complete digital financial records Regularly reconcile sales data, bank records and VAT returns against each other Model the cash flow effect of paying Self Assessment in-year from April 2029 Deal with HMRC letters and online notices promptly Run periodic tax health checks to identify risks early Cross-border e-commerce sellers should pay particular attention to platform VAT policy changes, where a tax issue can affect the operation of the storefront itself, not just the tax position. Frequently Asked Questions Is Tax Update 2026 now law? Partly. Tax Update 2026, published on 23 June 2026, is a mixed package. Some elements are open consultations that may still change — Direct Debit for VAT and PAYE, and online marketplace liability for UK sellers. Others are confirmed commitments with dates attached, including mandatory e-invoicing from 2029 and in-year Self Assessment payments from April 2029. When does UK VAT e-invoicing become mandatory? From 2029. Announced at Budget 2025, electronic invoicing will be required for all VAT invoices on business-to-business and business-to-government transactions. Peppol was confirmed on 23 June 2026 as the core interoperability network, and an implementation roadmap with detailed standards is expected at Budget 2026. Will I have to pay VAT and PAYE by Direct Debit? Possibly. The government announced at Budget 2025 its intention to make Direct Debit the mandatory payment method for VAT and PAYE liabilities, subject to defined exceptions, and a consultation is now open. No implementation date has been set. How is Self Assessment changing in 2029? From April 2029, Self Assessment customers who also have PAYE income will be required to pay more of their forecast Self Assessment liability during the tax year through their PAYE code, instead of in a lump sum afterwards. A consultation on the detail is open, and also covers possible reform of Payments on Account for other Self Assessment taxpayers. Does this affect sellers on Amazon, eBay or TikTok Shop? Likely yes. The government has published a consultation on extending VAT online marketplace liability rules to UK-based businesses, having previously focused these rules on overseas sellers. In practice that tends to mean stricter seller verification, VAT status checks and transaction record-keeping by the platform. What should a small business do first? Two things. Start with reconciliation, making sure sales records, bank statements and VAT returns agree with one another. Then ask your accounting software provider what their Peppol e-invoicing roadmap looks like, because that is the change with a fixed date and the longest lead time. A Word from TB Accountants Tax Update 2026 sends a clear signal: UK tax administration is moving from digital filing to digital supervision. In future, what businesses face is not only tax rates and tax types, but a broader test of data quality, systems capability and sustained compliance. The earlier you complete digital migration, standardise financial processes and put a proper tax framework in place, the lower your operational risk as the regulatory environment continues to change. This matters particularly for international businesses and overseas entrepreneurs operating in the UK, where systems, records and correspondence are often spread across jurisdictions and time zones. How TB Accountants Can Help At TB Accountants, we support UK companies, international businesses, and overseas entrepreneurs with professional accounting and tax compliance services. Our experienced team can assist with: UK VAT registration, filing and reviews Payroll and PAYE compliance Self Assessment for directors, landlords and the self-employed Making Tax Digital and e-invoicing readiness Platform and cross-border e-commerce VAT Tax health checks and risk reviews With extensive experience supporting international businesses operating in the UK, we help clients stay ahead of HMRC policy change rather than react to it. Why TB Accountants? Professional Assurance: Our team includes ACA members and ACCA-certified professionals, delivering services to the highest industry standards. Responsive Service: We respond to your inquiries within 24 hours, ensuring efficient communication across time zones. Multilingual Support: Services available in English, Mandarin, Cantonese, Japanese, French, German, Spanish, Italian, Turkish, and more. Trusted by Clients Worldwide: Consistently praised by global clients for proactive, professional, and reliable accounting and tax support. Contact If you have questions about UK VAT filing, payroll, Self Assessment, corporation tax or the latest HMRC policy, get in touch with TB Accountants. We track UK tax policy developments continuously and provide professional, timely compliance support. Get in touch with us at info@tbagroup.uk or for a free one-to-one consultation. Email: info@tbagroup.uk WhatsApp: +44 7776 908114 Tel: +44 208 349 3939 This article is intended as general guidance only, and does not replace any legal or professional advice. For enquiries, please contact TBA Group via email or WhatsApp. TB Accountants UK Accounting | Tax Compliance | VAT Services | Business Advisory

In recent years, a growing number of British pensioners have opted to retire abroad—especially in EU countries. According to the latest analysis, tens of thousands of UK retirees living in Europe are enjoying what some are calling a ‘hidden perk’: receiving as much as £35,000 a year in State Pension income, with little to no UK tax liability. By contrast, millions of pensioners residing in the UK are paying income tax on their growing pension income. What lies behind this stark contrast? And how do the UK’s Double Taxation Agreements (DTAs) protect pensioners who receive income from overseas? Let’s explore why retiring in Europe is being viewed by many older Britons as a tax-efficient strategy—and what legal mechanisms make it possible. Tens of thousands of UK pensioners in Europe legally receive full pensions tax-free According to August 2024 data from the Department for Work and Pensions (DWP), there are currently 480,906 UK State Pension recipients living in EU countries. Of these, around 42,000 receive pensions exceeding the UK’s personal allowance of £12,570—and yet pay no income tax on that income to the UK government. Some receive up to £35,500 per year—equivalent to roughly £680–£690 per week. The reason many UK pensioners abroad escape the UK tax net is due to the complexities of international tax law, particularly the UK’s network of Double Taxation Agreements with EU countries. Higher-than-standard pension recipients – not everyone receives the same The UK’s State Pension system is nuanced, and some individuals qualify for significantly more than the standard full pension (£11,976 per year or £230.25 per week in 2025/26). Some pensioners may receive up to three times that amount. These higher payments often come from additional entitlements, such as: Earnings-related schemes under the former State Earnings-Related Pension Scheme (SERPS), which may provide an extra £11,356 annually; Deferred pension claims, where delaying your State Pension results in higher eventual payments; Or periods of high contribution under the previous pension system. Double Taxation Agreements: the ‘tax passport’ between the UK and EU So why don’t these EU-based pensioners pay tax in the UK? It all comes down to Double Taxation Agreements (DTAs), which prevent individuals from being taxed twice on the same income in different countries. Specifically, for retirees: If a UK national resides in an EU country such as France, Spain, or Germany, And that country has a DTA with the UK, Then their UK State Pension is usually taxed only in their country of residence. If that country either doesn’t tax foreign pensions or has low rates, the pensioner can receive their full pension tax-free or with minimal tax. Examples: France has complex rules but many British retirees achieve low tax liabilities through strategic planning Portugal previously offered a 10-year zero-tax policy for foreign retirees (this has since changed) Spain does tax pensions, but allowances and deductions can result in a relatively light tax burden UK-based retirees face growing tax pressure Unlike their European-based counterparts, pensioners in the UK are increasingly subject to income tax on their pensions. Since 2021, the UK’s personal allowance (£12,570) has been frozen and will remain so until at least 2028. Meanwhile, the State Pension is rising annually under the triple lock. In April 2025, the full new State Pension increased by 4.1%, reaching £11,973 per year. This means even modest increases in pension income—or small amounts of additional income—can push individuals above the tax threshold and trigger basic rate tax of 20% or more. As of now, around 3.3 million UK-based pensioners have pension incomes above the personal allowance and are liable for tax. Is it worth moving to Europe to reduce your tax bill? As this analysis shows, tax treatment for UK pensioners no longer depends solely on income levels—but also on where they live. A person with identical work history and pension contributions may enjoy dramatically different after-tax income simply because they live in France rather than Manchester. That said, while retiring to Europe might sound attractive for tax reasons, it comes with some important caveats: Does your chosen country tax pensions? Each country has different rules—professional advice is essential. Healthcare and residency rights: post-Brexit, access to healthcare and residency in the EU has become more complex for UK nationals. Exchange rate fluctuations: The value of your pension in euros may vary with GBP/EUR rates. Cultural and lifestyle adjustments: Language, customs, and day-to-day living can pose adaptation challenges. Some advice from TB Accountants While Double Taxation Agreements can offer meaningful tax relief for British retirees abroad, they are not a perfect solution. In practice, these arrangements have raised new questions about fairness: pensioners in different locations can be subject to completely different tax regimes, even if they’ve paid into the same system. As the UK's relationship with the EU continues to evolve, DTAs may be renegotiated, and domestic tax policy may shift—potentially affecting how pensions are taxed both at home and overseas. If you are planning to claim your UK pension or are considering retiring abroad, we strongly recommend engaging in professional tax and financial planning. After all, the comfort of your retirement depends not just on how much you receive—but on how much you keep after tax. Frequently Asked Questions Can you receive your UK State Pension tax-free abroad? Many UK pensioners living in EU countries receive their State Pension with little or no UK tax liability. This is due to the UK's network of Double Taxation Agreements, which determine which country holds taxing rights over the income. How many UK pensioners live in the EU? According to August 2024 data from the Department for Work and Pensions, there are 480,906 UK State Pension recipients living in EU countries. Around 42,000 of them receive pensions exceeding the UK personal allowance of £12,570. How much State Pension do UK retirees abroad receive? Some receive up to £35,500 a year, equivalent to roughly £680 to £690 a week. What is a Double Taxation Agreement? A Double Taxation Agreement is a treaty between the UK and another country that allocates taxing rights over income such as pensions, so the same income is not taxed twice. Why TB Accountants? Professional Assurance: Our team includes ACA members and ACCA-certified professionals, delivering services to the highest industry standards. Responsive Service: We respond to your inquiries within 24 hours, ensuring efficient communication across time zones. Multilingual Support: Services available in English, Mandarin, Cantonese, Japanese, French, German, Spanish, Italian, Turkish, and more. Trusted by Clients Worldwide: Consistently praised by global clients for proactive, professional, and reliable accounting and tax support. For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information. Get in touch with us at info@tbagroup.uk or for a free one-to-one consultation. This article is intended as general guidance only, and does not replace any legal or professional advice. For enquiries, please contact TBA Group via email or WhatsApp.

As we’ve mentioned in one of our previous articles, how much State Pension you’ll receive upon retirement depends on the amount of National Insurance (NI) contributions you’ve made. We also talked about NI contributions can be purchased and applied retroactively to previous years. Did you know that you can also accumulate NI credits to help build up the number of qualifying years so that you can receive the full State Pension? What are National Insurance Credits? National Insurance Credits are a way to maintain your national insurance record when you are unable to pay national insurance contributions. They can help you build up “qualifying years for state pension,” which will count towards your entitlement to basic state pension and other benefits. How are National Insurance Credits obtained? You’ll firstly need to check whether you are eligible to receive credits. Some types of credits can be automatically applied to your record, whilst others will require an application to be made to HMRC or the relevant department. If eligible, you will receive the following types of credits: Class 1: towards the State Pension and other benefits (e.g. New Style Jobseeker’s Allowance) Class 3: towards the State Pension only Note that if you have paid NI contributions for one year (a ‘qualifying year’ for the State Pension), you can transfer the credits earned while claiming child benefit to a spouse or partner who lives with you. Who is eligible for National Insurance credits? NI credits are generally designed for circumstances where you are unable to work and pay NI contribution. Eligibility criteria include: Currently claiming or previously claimed certain benefits due to ill health or unemployment Currently or were previously on maternity, paternity, or adoption leave Currently or were previously caring for children under 12 Currently or previously participated in approved training courses Married to or in a civil partnership with a member of the armed forces and deployed overseas with your partner Currently or previously served as a juror Served a sentence for a conviction that was later overturned These criteria are applied differently and can result in different types of NI credits being issued. As we mentioned above, some are obtained automatically, whilst others require an application to made. For up-to-date information, you may visit the Government’s information page. Am I eligible? We’ll touch upon the most common situations where you may be eligible for NI credits. 1. Child Benefit Recipients If you are a parent aged 16 or above, currently receiving Child Benefit and caring for children under 12, you will automatically receive Class 3 credits. Additionally, grandparents and other family members aged 16 or above who are caring for children under 12 but have not reached State Pension age can also receive Class 3 credits. However, if you fall into this category, you need to fill out the CF411A form to apply for these credits. 2. Carers If you receive the Carer’s Allowance, your NI record will automatically be allocated Class 1 credits. Those receiving Income Support will also automatically receive Class 3 credits. If you do not receive Income Support but provide at least 20 hours or more of care per week for a sick or disabled person, you may be eligible for Class 3 credits but will need to make an application to HMRC. 3. Unemployed Individuals Individuals receiving Universal Credit will automatically qualify for Class 3 National Insurance Credits. If you are actively seeking employment, you may also qualify for Class 1 National Insurance Credits. If you are already receiving Jobseeker’s Allowance, these credits will be added automatically to your record. If you are unemployed and seeking work but not receiving Jobseeker’s Allowance, you need to apply for Class 1 credits through your local job centre. Participation in government-approved training courses of less than one year can also earn you Class 1 credits. 4. Illness and Disability If you are unable to work due to illness or disability and are applying for benefits such as the Employment and Support Allowance or the Unemployability Supplement, you will automatically receive NI credits. If you are eligible for these benefits but do not receive them, you can apply for Class 1 credits through your local job centre. In some cases, you may be receiving statutory sick pay, but your income is not enough to meet the qualifying years for NI. In such cases, you may be eligible for Class 1 credits. For this, you will need to contact HMRC. 5. Armed Forces Spouses/Partners Due to changes in State Pension rules requiring 35 years of contributions for the full pension, HMRC and the DWP have introduced NI credits for Armed Forces spouses. These credits can help maximise your State Pension. The basic principle of this system is that when you accompany your spouse or civil partner on overseas military service, you can apply for credits. This process is not automatic – you need to apply for them and can only apply for periods overseas on or after the 6th April 1975. 6. Jury Service If you have served as a juror and are not self-employed, you may be eligible to apply for Class 1 credits. However, you need to submit an application to HMRC. Supplementing your State Pension Besides from these situations, if your retirement income is relatively low, you may also be able to obtain additional retirement income through other means, such as Pension Credit. For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information. Get in touch with us at info@tbgroupuk.com or for a free one-to-one consultation. This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp. Frequently Asked Questions What are National Insurance credits? National Insurance credits are a way to maintain your National Insurance record when you are unable to pay contributions. They help build up qualifying years for the State Pension and count towards entitlement to the basic State Pension and other benefits. How do you get National Insurance credits? First check whether you are eligible. Some credits are applied to your record automatically, while others require an application to HMRC or the relevant department. What is the difference between Class 1 and Class 3 credits? Class 1 credits count towards the State Pension and other benefits, such as New Style Jobseeker's Allowance. Class 3 credits count towards the State Pension only. Can National Insurance credits be transferred to a partner? Yes. If you have paid NI contributions for one qualifying year, credits earned while claiming Child Benefit can be transferred to a spouse or partner who lives with you.

Over the past decade, HMRC (Her Majesty’s Revenue and Customs) has frequently conducted surprise audits, and the number of tax investigations has significantly increased year by year to ensure businesses remain compliant with tax regulations. Many clients facing a tax investigation need to hire accountants and other professionals to defend their case, gather evidence, and organize their accounts. The entire process can be costly, often reaching thousands of pounds in fees. But what exactly does this process entail, and how could it affect you? Can HMRC audit accounts submitted for previous years? How many years back can HMRC audit? How should you respond? Can HMRC audit accounts submitted for previous years? Yes, HMRC has the authority to audit accounts from previous years. The specific audit period will depend on your unique situation, but an audit typically begins with the most recent tax return you have submitted. Once HMRC completes an initial review, one of the following scenarios may occur: Scenario 1: If no errors are found, the investigation will be closed immediately. Scenario 2: If HMRC identifies unintentional mistakes, they can re-examine previously closed tax returns going back up to four years. Scenario 3: In cases where errors are attributed to negligence, HMRC can audit records up to six years into the past. Scenario 4: If deliberate tax evasion is discovered, HMRC may extend the audit period to as much as twenty years. How many years back can HMRC audit? At any point during an audit, HMRC has the right to extend the period under review if new information comes to light. For instance, if an initial audit covers four years but HMRC suspects negligence, they may decide to extend the audit to six years. In cases of suspected or proven tax evasion, the review can extend as far back as 20 years. In addition to your tax returns, HMRC might request access to other financial documents, such as land registry records or information on overseas bank accounts. These too can be audited for the same time periods (four, six, or 20 years), depending on the severity of the issue. How should you respond? The broader the scope of the investigation, the more concerned taxpayers tend to become. When large amounts of time have passed, it can be difficult to recall potential errors in past tax returns, or you may find that relevant documents have been lost. So, what steps should you take? Keep accurate records: Ensure that all documents, including statements and tax returns, are meticulously recorded and properly stored each year. Seek professional advice: If you are unsure about any aspect of your taxes, it is highly recommended that you consult a tax professional for guidance and support. A qualified expert can help clarify your situation and provide peace of mind during the audit process. Remaining organised and seeking advice early can help you navigate an audit with confidence and ensure that any issues are addressed promptly and correctly. Once you receive a tax audit notification, the individual or business involved must follow the instructions outlined in the letter to prepare. Since the process can be quite complex, taxpayers or businesses typically require assistance from professional accountants or tax experts to navigate through it smoothly. During the investigation phase, professionals are needed to help their clients collect and organize all the necessary documents, cross-check the accuracy of all financial data, and ensure they are fully prepared for the HMRC’s review. These steps are crucial to successfully manage the audit process. For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information. Get in touch with us at info@tbgroupuk.com or for a free one-to-one consultation. This article is intended as general guidance only, and does not replace any legal or professional advice. For enquiries, please contact TBA Group via email or WhatsApp. Frequently Asked Questions How many years back can HMRC audit? It depends on the circumstances. If no errors are found the investigation closes. For unintentional mistakes HMRC can re-examine up to four years, for negligence up to six years, and where deliberate tax evasion is found the period can extend to twenty years. Can HMRC audit accounts from previous years? Yes. HMRC has the authority to audit accounts from previous years. An audit typically begins with your most recently submitted tax return. Can HMRC extend an audit once it has started? Yes. At any point during an audit HMRC can extend the period under review if new information comes to light. An audit initially covering four years can be widened if negligence is suspected. How much does defending an HMRC investigation cost? Many people facing an investigation need to hire accountants and other professionals to defend their case, gather evidence and organise their accounts. The process can be costly, often running to thousands of pounds in fees.

Investing in property in the UK is seen by many as lucrative. Whether you are buying residential or commercial property, and whether you plan to rent or sell the property, VAT (Value-Added-Tax) is an important consideration. In one case, HMRC demanded the immediate repayment of a substantial VAT debt amounting to £4.5 million from a company. The company claims to be innocent, arguing that renting residential property should not require a VAT payment. So, who is in the right? 1. Question to landlords – residential property, or hotel? In 1989, a landlord in London established a company named Reelreed Ltd, specializing in property investment and rental. This company owns properties in various parts of the UK, with 600 properties in West London alone. The current dispute with HMRC involves over 200 residential properties in Chelsea, London. Reelreed Ltd contended that renting out these 200 properties did not fall within the scope of VAT rules, thus they did not declare VAT. However, HMRC argued that the services provided by these 200 properties were identical to those of a hotel, making them subject to VAT. Initially, HMRC issued a VAT assessment of £4.8 million for unpaid taxes, later reduced slightly. 2. What are the rules on VAT for property? It is true that most residential landlords indeed do not need to worry about VAT. According to current tax laws, HMRC does not charge VAT on ‘residential accommodation’. This exemption applies to single rentals, HMOs (House in Multiple Occupations), and rent-to-rent properties. Additionally, commercial property rentals or sales are also generally exempt from VAT. However, the issue is not that straightforward. Some residential properties, such as those used for short-term rentals or holiday accommodations, are still subject to VAT. Commercial properties offering services, like hotels, must also charge VAT at the standard rate of 20%. The rental company disputed this, arguing that their properties were equipped with essential household appliances like tumble dryers, washing machines, refrigerators, and freezers. They did not provide room service, did not charge per person, nor did they charge extra for additional guests. The company emphasized that although these apartments were for short-term rentals, their use was akin to typical residential rentals, not hotel stays. Moreover, their tenants were not tourists. The company argued that the definition of tourists should be those seeking accommodation in hotels or similar establishments, typically for leisure or short stays with comprehensive services. Their tenants stayed for relatively long periods, not fitting this tourist definition. They also presented evidence showing that these properties were registered as residential with the local council. Even though some units included converted bars, two restaurants, and attached offices, these were categorised as commercial use for council tax purposes, not involving VAT. HMRC rejected this stance, leading the company to appeal to the court for a ruling. 3. Landlord at fault? The court found that the company’s website advertised the apartments in a hotel-like manner. Promotional materials highlighted services such as maid service, hair and beauty salons, babysitting/crib rental, laundry services, and theatre ticket bookings, contradicting their claim of not being hotel-like. Additionally, the advertisements targeted those visiting London for leisure or business, claiming to accommodate ‘thousands’ of tenants annually. The court stated that the tax law’s definition of lodging for tourists refers to those staying at a specific place temporarily rather than making it their home, indicating the need for relatively short-term accommodation with some level of service. Therefore, the court determined that Chelsea Cloisters, one of ReelReed’s properties with 200 apartments, actually operated similarly to a hotel. Consequently, the company Ltd owed VAT totalling £4,572,415 – slightly lower than HMRC’s original demand, but still a major win for HMRC. 4. Some advice for landlords, from TB Accountants As previously mentioned, HMRC does not charge VAT on rental income from residential accommodation. Landlords with Assured Shorthold Tenancy (AST) agreements do not need to register for VAT, and tenants do not have to pay VAT on rent. However, VAT treatment varies for different types of residential properties. For example, income from self-catering holiday accommodation is subject to VAT. If furnished residential property is rented short-term or for holiday stays, it is subject to the standard 20% VAT rate. Serviced accommodation, like short-term rentals through Airbnb, is also not VAT-exempt. If the rental business exceeds the VAT registration threshold (now £90,000), it must register for VAT. When investing in property, various scenarios may involve VAT, including but not limited to: Commercial-to-Residential Conversions Converting commercial buildings to residential use can benefit from a 5% reduced VAT rate. The first substantial interest received will be zero-rated, allowing full VAT recovery on related costs. Changes in Residential Units Conversions altering the number of residential units can qualify for a 5% reduced VAT rate. For example, converting a house into apartments. HMO Conversions Converting single occupancy homes to HMOs can benefit from a 5% reduced VAT rate. Commercial Property Commercial property rentals or sales are generally VAT-exempt, reducing transaction costs for tenants or buyers. However, landlords can opt to charge VAT on rental income, allowing VAT recovery on related expenses. VAT rules for property are complex. To avoid surprises, seeking professional tax advice is crucial. TB Accountants offers expert guidance on property tax issues. For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information. Get in touch with us at info@tbgroupuk.com or for a free one-to-one consultation. This article is intended as general guidance only, and does not replace any legal or professional advice. For enquiries, please contact TBA Group via email or WhatsApp. Frequently Asked Questions Do landlords need to pay VAT on rental income? In most cases, no. HMRC does not charge VAT on residential accommodation. The exemption applies to single rentals, HMOs (houses in multiple occupation) and rent-to-rent arrangements. Is commercial property rental subject to VAT? Commercial property rentals and sales are also generally exempt from VAT. The rules are not absolute, however, and the specific arrangement can change the position. When can a residential letting become VAT-liable? Where the services provided resemble those of a hotel rather than ordinary residential accommodation. HMRC argued exactly this in the Reelreed Ltd case, covering more than 200 residential properties in Chelsea. What was the £4.5 million landlord VAT case about? HMRC demanded repayment of a substantial VAT debt from Reelreed Ltd, a property investment company. The company argued residential letting fell outside VAT; HMRC argued the services were equivalent to a hotel and issued an assessment initially of £4.8 million. Related guides Overseas Landlord Tax: UK Tax on Rental Income Empty Property Landlord Tax: Costs and Deductions

In recent years, an increasing number of workers in the UK have chosen to take on part-time work to earn extra income – for example, delivering food in the evenings, selling handmade crafts online, freelancing, or helping friends with various tasks. Flexible side jobs have become an important way to cope with the rising cost of living and to pursue financial independence. However, did you know that no matter how informal or temporary a side job may seem, as long as it generates income, HM Revenue & Customs (HMRC) may require you to declare it and pay tax? If handled incorrectly, you could face penalties, backdated tax bills and interest charges. The rise of part-time work in the UK – all income is taxable by default With the cost of living and inflation on the rise, combined with the growth of digital platforms such as Deliveroo, Etsy, Upwork and Airbnb, taking on a side job in the UK has never been easier. As of April 2025, there are over 1.2 million people in the UK with a second job – a number that continues to grow, with more people hoping to achieve early retirement or build wealth through extra income. Whether you are working weekends in a supermarket or selling handmade jewellery on Etsy, any financial gain you make may be subject to tax. HMRC can obtain information about your income through: Employer PAYE records Bank accounts and online payment platforms (such as PayPal) Online platforms and third-party data Transaction records from joint business activities Even cash income must be declared. HMRC now uses advanced data-matching systems, and failing to declare taxable income can be treated as tax evasion, triggering an investigation. How to pay tax on two jobs – how personal allowance is allocated For the 2025/26 tax year (6 April 2025 to 5 April 2026), the Personal Allowance is £12,570 – the amount of income you can earn tax-free in the year. Each person can only have one Personal Allowance, which means that no matter how many jobs you have, only one can benefit from it. Your Personal Allowance is usually applied to your main job – the one with the highest income – while all income from your second job is taxable from the first pound you earn. Your actual tax depends on your tax code. Your main job typically uses a standard tax code such as 1257L, meaning you receive the full annual Personal Allowance of £12,570. Your second job usually does not receive any allowance and may be taxed under the BR code (20% basic rate from the first pound), D0 (40% higher rate) or D1 (45% additional rate), depending on your total income. For example: Mr L earns £30,000 a year from his main job and £8,000 a year from a weekend job: Main job: £12,570 is tax-free, the remaining £17,430 is taxed at 20% Second job: All £8,000 taxed at 20% (BR code) This does not include National Insurance, student loan repayments, or benefits adjustments. A special case – if both jobs earn below £12,570 If each job earns less than £12,570 a year, you can apply to HMRC to split your Personal Allowance – for example, £9,000 for your main job and £3,570 for your second job. This method works best when both incomes are stable and predictable. If you are unsure of income stability, it is safer to allocate the full allowance to your main job to avoid underpaying tax and facing a bill at the end of the year. If your combined income pushes you into a higher tax bracket, you should inform HMRC so they can adjust your second job’s tax code and avoid a large bill later. Regularly checking your payslips, keeping your tax code up to date, and informing HMRC of changes are key to avoiding over- or under-payment of tax. How National Insurance is paid National Insurance (NI) is calculated separately for each employer – unlike tax, the allowance is not shared. If your earnings from each job are above £242 per week in the 2025/26 tax year, you will have to pay Class 1 NI contributions on both jobs. If your second job is self-employed or freelance If your second source of income is as a freelance writer, online seller, landlord (e.g. Airbnb), photographer, designer, consultant, or similar, the rules are different. Self-employed individuals must register for and complete a Self Assessment tax return each year. What you need to do: Register with HMRC by 5 October following the start of self-employment File your tax return on time each year Pay Class 2 and Class 4 NI contributions if applicable Keep records of your income and expenses for tax reporting and deductions For the 2024/25 tax year, first-time Self Assessment taxpayers must register with HMRC by 05 October 2025 to obtain a Unique Taxpayer Reference (UTR). Paper returns must be filed by 31 October 2025, while the online filing deadline is 31 January 2026 at 23:59. We recommend using tax software or hiring a qualified accountant to improve accuracy and reduce your tax burden. What is the £1,000 trading allowance? You might be wondering: if my side income is below the £1,000 trading allowance threshold, do I still need to pay tax? If your total gross income from self-employment, freelancing, gig work, side jobs, online sales, or short-term services in a tax year is £1,000 or less, you usually do not need to file a tax return or register as self-employed. This is known as the ‘trading allowance’. If your total self-employed or side job income exceeds £1,000 (before expenses), you must: Register as self-employed (if not already registered) File a Self Assessment tax return Either deduct your actual business expenses from income or claim the £1,000 allowance when calculating taxable profits Important reminders: If HMRC tells you to file a tax return, you must do so even if you earn less than £1,000 If you have multiple side jobs and the total income exceeds £1,000, you must file a return For property rental income, the £1,000 ‘property allowance’ may apply separately from the trading allowance, allowing up to £1,000 for each category Frequently Asked Questions Do you pay tax on a second job in the UK? Yes. Income is taxable by default, however informal or temporary the work. HMRC may require you to declare it, and handling it incorrectly can lead to penalties, backdated tax bills and interest charges. How does HMRC find out about second income? Through employer PAYE records, bank accounts and online payment platforms such as PayPal, online platforms and third-party data, and transaction records from joint business activities. HMRC uses advanced data-matching systems. Do you need to declare cash income from a side job? Yes. Even cash income must be declared. Failing to declare taxable income can be treated as tax evasion and trigger an investigation. How many people in the UK have a second job? As of April 2025 there were over 1.2 million people in the UK with a second job, and the number continues to grow. Why TB Accountants? Professional Assurance: Our team includes ACA members and ACCA-certified professionals, delivering services to the highest industry standards. Responsive Service: We respond to your inquiries within 24 hours, ensuring efficient communication across time zones. Multilingual Support: Services available in English, Mandarin, Cantonese, Japanese, French, German, Spanish, Italian, Turkish, and more. Trusted by Clients Worldwide: Consistently praised by global clients for proactive, professional, and reliable accounting and tax support. For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information. Get in touch with us at info@tbagroup.uk or for a free one-to-one consultation. This article is intended as general guidance only, and does not replace any legal or professional advice. For enquiries, please contact TBA Group via email or WhatsApp.

Do you know which supermarket is the cheapest in the UK? Aldi has once again been named the cheapest UK supermarket for a standard basket of groceries. However, according to the latest survey by consumer group Which?, Lidl briefly overtook Aldi last month, claiming the top spot as the UK’s cheapest supermarket for the first time since 2023. However, the lead didn’t last long. Aldi quickly reclaimed its position as the cheapest supermarket, pushing Lidl back into second place. Updated rankings 1. Aldi Key feature: The undisputed price champion Aldi has consistently topped the cheapest supermarket charts, focusing on own-brand goods and streamlined operations to keep costs down. It’s the go-to place for fresh produce and everyday essentials. 2. Lidl Key feature: Aldi’s toughest competitor, known for its bakery Lidl operates a similar discount model, with prices very close to Aldi’s. Its in-store bakery (bread, pastries, cakes) and weekly “middle aisle” specials are standout features. 3. Asda Key feature: Best value among the big supermarket chains Within the traditional ‘big four’ supermarket chains, Asda is the cheapest. It offers a much wider range than discount supermarkets, stocking both own-brand and major branded products, making it ideal for one-stop bulk shopping. 4. Tesco Key feature: The most convenient supermarket, with loyalty cards at its core Tesco has the largest store network, making it the easiest to access. Its Clubcard prices are key to savings—without a card, Tesco can be noticeably more expensive than discount rivals. 5. Sainsbury’s Key feature: A balance between quality and cost Often seen as offering slightly better quality and shopping experience than Asda and Tesco, though at slightly higher prices. Its own-brand range, particularly desserts, has a strong reputation. Behind the cheapest supermarket rankings Which? compared the prices of 75 popular items, including both branded and own-brand products, covering essentials like milk and bread as well as household goods. In August 2025, Aldi’s basket averaged £127.92, the cheapest of all supermarkets surveyed. Waitrose was once again the most expensive, with the same basket costing £172.61—that’s 35% more than Aldi. This means shoppers could save over £40 on the same basket simply by choosing Aldi instead of Waitrose. What about larger or branded shops? While Aldi and Lidl are unbeatable for smaller baskets of everyday essentials, things change when it comes to larger shops or branded products. Which? also analysed the cost of 190 items, including big-name brands that discount stores don’t always stock. Aldi and Lidl were excluded from this part of the survey. The results were revealing: Asda was the cheapest for the eighth month running, at £474.86. Tesco (with Clubcard savings) followed at £485.89. Waitrose was the most expensive again, at £548.14—around 15% more than Asda. For a family doing a weekly shop, the annual difference between Aldi and Waitrose could exceed £1,700. So, while Aldi and Lidl dominate for basic groceries, those who need more branded items may still find better value at Asda or Tesco—especially if they use loyalty discounts. Shopping smart Choosing a supermarket isn’t just about headline prices—here are some tricks to save even more: Mix and match: Buy everyday basics from Aldi or Lidl, then head to Asda or Tesco for branded goods. Use loyalty cards: Tesco’s Clubcard and Sainsbury’s Nectar Card can unlock significant discounts. Look for yellow ‘reduced’ stickers: Many supermarkets reduce prices on near-expiry food in the evenings (e.g. Morrisons before closing, Sainsbury’s after 7pm). Check unit prices: The price per kilo/litre/unit on shelf labels helps identify the true bargain—bigger packs aren’t always cheaper. Consider ‘wonky’ fruit and veg: These may not look perfect but are usually cheaper and just as tasty. The tax secrets behind supermarket pricing Your supermarket receipt also hides some useful tax lessons—mainly about VAT (Value Added Tax). Knowing how VAT works helps explain why some items cost more, and sometimes even helps you save. VAT is a consumption tax charged on the ‘value added’ at each stage of production and sale. In the UK, the following rates apply: 20% standard rate – applies to most goods and services. 5% reduced rate – applies to certain energy and efficiency products. 0% zero rate – applies to essentials such as most unprocessed food. How does this show up in supermarkets? Zero rate (0% VAT): Most staple foods and drinks, such as fresh fruit and veg, meat, fish, eggs, milk, bread, rice, pasta, tea, and coffee beans. Standard rate (20% VAT): Hot takeaway food, crisps, biscuits, chocolate, sweets, ice cream, fizzy drinks, bottled water, alcohol, pet food, toiletries, cleaning products, stationery, clothing, toys, appliances, and most non-food items. Exceptions: Dairy alternatives like soya milk are usually zero-rated. On your receipt, VAT is included in the product price and is often summarised at the bottom (e.g. ‘Price includes VAT @ 20%’). Other taxes which might affect what you pay Sugar Tax (Soft Drinks Industry Levy): Drinks with high sugar content are taxed at up to £0.24 per litre, encouraging manufacturers to cut sugar. Prices of high-sugar drinks are noticeably higher as a result. Alcohol Duty: Built into the price of beer, wine, and spirits, based on alcohol strength—explaining why alcohol is relatively expensive. Plastic Packaging Tax: Since April 2022, packaging with less than 30% recycled content is taxed at £200 per tonne, increasing costs for some products. Why does this matter? Understanding pricing: Explains why a bottle of water can cost more than milk (VAT on water, none on milk). Saving money: Buying zero-rated ingredients to cook at home is both healthier and cheaper than VAT-rated processed foods or takeaways. Smart choices: Recognising the impact of sugar and alcohol duties helps explain price differences between brands. Frequently Asked Questions Which is the cheapest supermarket in the UK? Aldi has again been named the cheapest UK supermarket for a standard basket of groceries. Lidl briefly overtook it, taking the top spot for the first time since 2023, before Aldi reclaimed the lead. Is Lidl cheaper than Aldi? Lidl runs a similar discount model with prices very close to Aldi's, and briefly took first place. Aldi has since reclaimed the top spot, with Lidl second. Which is the cheapest of the big supermarket chains? Asda is the cheapest within the traditional big four. It offers a much wider range than the discounters, stocking both own-brand and major branded products. Is Tesco expensive without a Clubcard? Tesco has the largest store network and is the most convenient, but Clubcard prices are central to its savings. Without a Clubcard, Tesco can be noticeably more expensive than discount rivals. Why TB Accountants? Professional Assurance: Our team includes ACA members and ACCA-certified professionals, delivering services to the highest industry standards. Responsive Service: We respond to your inquiries within 24 hours, ensuring efficient communication across time zones. Multilingual Support: Services available in English, Mandarin, Cantonese, Japanese, French, German, Spanish, Italian, Turkish, and more. Trusted by Clients Worldwide: Consistently praised by global clients for proactive, professional, and reliable accounting and tax support. For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information. Get in touch with us at info@tbagroup.uk or for a free one-to-one consultation. This article is intended as general guidance only, and does not replace any legal or professional advice. For enquiries, please contact TBA Group via email or WhatsApp.

If you have opened a personal pension account and are currently making fixed monthly contributions, you’ll want to read ahead. In this article, we’ll provide some general information on how contributions work and how to maximise your returns on withdrawal. Generally speaking, unless you choose to withdraw all the funds from your pension pot at once, there will be some money left in the pot. How should this money be utilised? In the UK, there are several options for ‘cashing in’ (withdrawing) – the two main options are a life annuity, or a pension drawdown. When you purchase a life annuity, your savings are converted into annual pension payments, providing you with either a lifetime or fixed-term income. If you opt for a pension drawdown, you can withdraw funds from your pension pot and invest the remaining portion. A pension drawdown may seem more flexible, as if investments perform well, there is significant potential for growth in the remaining funds, which could provide you with substantial income. However, this also comes with risks. We’ll explain how it works, and why you may want to choose one. 1. What is a pension drawdown? A pension drawdown is a way of withdrawing funds directly from your pension while allowing your pension fund to continue to grow. You can withdraw some money from your pension savings pool, reinvest the remainder and earn a regular income. Typically, this comes from a defined contribution pension, such as a personal or workplace pension. Before pension drawdown was first introduced in the UK in 1995, pension holders had fewer options. It was only possible to purchase an annuity before the age of 75 to ensure a stable retirement pension. The Pension Taxation Act 2014 introduced two types of pension drawdown – capped drawdown and flexible drawdown. Capped withdrawals mean there is a ‘cap’ on the income that can be received from the pension pool. With a flexible withdrawal, after you withdraw the available tax-free amount, the remainder can be used to provide regular income and/or temporary lump sum payments, with no limit on the amount. After 6 April 2015, it is no longer possible to initiate a capped drawdown. However, any drawdown initiated on 5 April 2015 or before can still be maintained. 2. How does a pension drawdown work? After 6 April 2015, the upper limit withdrawal was cancelled, and the flexible withdrawal method was officially renamed to ‘flexi-access drawdown’. Therefore, in this article, we mainly introduce Flexi-access Drawdown and its operating rules. From the age of 55, pension holders can withdraw up to 25% of their funds from their pension savings pool tax-free, and the rest of the funds (up to 75%) will be automatically moved to a drawdown account. The 25% tax-free withdrawal can be withdrawn at once, or in increments. When the remaining funds enter the drawdown account, you can then decide how to invest the money and receive a regular taxable income. You can also talk to a financial advisor who can assist with how to best manage these funds, and what investment options are available. There is no limit to how much income you can withdraw from your remaining pension savings. It can be taken all at once, or via regular withdrawals (e.g. monthly or yearly). After 6 April 2015, the flexi-access drawdown scheme allows you to withdraw unlimited amounts. 3. Some examples: Example 1: You are aged 60, and want to use your pension savings to pay off debts and for some emergency home repairs You have a total of £100,000 in your pension pot You can withdraw up to £25,000 tax-free (25%) You can invest the remaining £75,000 In this case, the investment of £75,000 will be taxed at withdrawal. However, since the investment has a chance to appreciate (or depreciate), there is a chance that the final withdrawal amount may be higher or lower after tax. Example 2: You are aged 60 You have a total of £50,000 in your pension pot You can withdraw up to £12,500 tax-free (25%) You have £37,500 remaining which can be invested and/or withdrawn as regular income You decide to withdraw £2000 per year from the remaining amount as income In this case, you can change the withdrawal amount of £2000 whenever you prefer, or you can stop making withdrawals entirely. As in the above example, the remaining amount that is not withdrawn is invested, and the amount can appreciate or depreciate. 4. Benefits and risks There are many advantages to using a pension drawdown as part of your retirement plan, but there are also some limitations and potential risks. Advantage 1: Flexibility Pension Drawdown gives you the flexibility to arrange how you want to use your pension to suit your retirement plans and circumstances. Advantage 2: Control of Taxes You’re usually entitled to a 25% tax-free lump sum, and any withdrawals above this are taxed at your marginal tax rate. However, you have control and can time your withdrawals. For example, if you are currently a high-rate taxpayer but will soon become a basic-rate taxpayer, you can wait before making any further withdrawals. Advantage 3: Investments Investing remaining funds makes it possible for your funds to continue to grow. Risk 1: Market volatility Your remaining pension in a drawdown account will continue to fluctuate in value, depending on your investments and market conditions. If you withdraw funds faster than your investments grow, your remaining funds will decrease in value and may not be sufficient to maintain the level of income you wish to withdraw. Risk 2: Money Purchase Annual Allowance (MPAA) The amount you can contribute to a pension each year is £60,000. However, if you draw down your pension (more than the 25% tax-free cash lump sum), your annual allowance will be reduced to £10,000. If you want to semi-retire but continue to contribute to your pension, this could significantly impact your long-term retirement plans. Risk 3: Persistence While you have its flexibility and options, it’s your responsibility to ensure that your money can live as long as you do. Many of us underestimate how long we are likely to live, so judging how much money to withdraw sustainably can be difficult. 5. Tax rules The first 25% of your pension is tax-free. After, any subsequent earnings you withdraw from the drawdown account pool will be subject to personal income tax (at the time of writing, 2023-24 rates): If you have no income from any other source, the first £12,570 is tax-free. You pay tax at 20% on the next £37,700 above this. You pay 40% tax on all income over £50,270 (£12,570 + £37,700) You pay 45% tax on everything above £125,140. So if you took out £50,270 and had no other income from private pensions and state pensions, your tax bill would be £7540, after taking into account your tax-free allowance of £12,570. These income tax rates apply to England, Wales and Northern Ireland. There are different income tax rates in Scotland. 6. How do I pick the best option for myself? TB Accountants recommends that you should always seek professional advice to determine whether a pension drawdown is the right choice for your needs. If you do decide to use a pension drawdown, you will also need to decide how much to leave in your drawdown account. It is best to seek professional advice regarding the relevant tax rules for withdrawing the remainder, and see how best to maximise the benefits. Any investment strategy must be best suited for your investment purposes. If you are still unsure how to proceed, contact TB Accountants for more advice. For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information. Get in touch with us at info@tbgroupuk.com or for a free one-to-one consultation. This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp. Frequently Asked Questions What are the options for withdrawing a UK pension? The two main options are a life annuity, which converts your savings into annual payments for life or a fixed term, and a pension drawdown, which lets you withdraw funds while the remainder stays invested. What is a pension drawdown? A pension drawdown is a way of withdrawing funds directly from your pension while the remaining fund continues to be invested and grow. It typically applies to defined contribution pensions, such as a personal or workplace pension. Is drawdown better than an annuity? Drawdown is more flexible and offers significant growth potential if investments perform well, but it carries investment risk. An annuity provides a more predictable income with less flexibility. When was pension drawdown introduced in the UK? Pension drawdown was first introduced in the UK in 1995. Before that, it was generally only possible to purchase an annuity before the age of 75. Related guides UK Retirement Age: When Can You Retire and How Much? State Pension Age Rises to 67: What Changes in 2026

The UK property market has always been attractive to investors, including not just new residents in the UK but also many overseas landlords who live elsewhere but still want to invest in UK rental properties. But are you aware that overseas landlords are subject to the Non-Resident Landlord Scheme (NRLS)? In most cases, the UK does not tax non-residents. However, if non-residents earn income from the UK, they are required to pay taxes on it. To address this, the government introduced the Non-Resident Landlord Scheme (NRLS) in 1996. This scheme allows HMRC to collect taxes in advance from landlords living outside the UK. The scheme applies not only to landlords themselves, but also to those managing properties in the UK on behalf of overseas friends or family members. 1.How does the NRLS work? The Non-Resident Landlord Scheme (NRLS) applies to ‘non-resident landlords’ (also referred to as overseas landlords) and places responsibilities on both the tenant and letting agents. The tax year for NRLS runs from April 1 to March 31. If you live abroad but earn income from renting property in the UK, this income is typically subject to UK tax, just like any other income sourced from the UK. However, as it is difficult for HMRC to track individuals living overseas, the NRLS is designed to deduct taxes in advance. 2.Who qualifies as a ‘non-resident landlord’? Under the NRLS, if you spend six months or more per year outside the UK but own rental property in the UK, you are considered a ‘non-resident landlord’. This is different from the broader tax definition of a ‘non-resident’. In practice, HMRC considers people who have left the UK for six months or more as having a habitual residence outside the UK. Even if you are a UK citizen, you are still classified as a non-resident landlord if you do not meet the residency conditions. Furthermore, the NRLS applies not only to individuals but also to companies and trustees that own rental properties in the UK but are based abroad. If you qualify as a non-resident landlord, you must register with the NRLS to manage your tax obligations. Here are the steps: Fill out the NRL form: Individuals use form NRL1, companies use NRL2, and trustees use NRL3. Provide documents: Submit evidence of living abroad, such as utility bills, rental agreements, or bank information. Submit to HMRC: Send the completed forms and documents for approval. 3.Letting agents and tenants’ responsibilities If you do not manage your UK property yourself, you may hire a letting agent or ask friends or family to help, who will then act as your letting agent. Alternatively, you may manage the property directly from abroad by liaising with tenants. In these cases, your letting agent or tenant has a legal responsibility under the NRLS. They must send quarterly reports to HMRC and handle the paperwork. Additionally, they are responsible for deducting the required tax from your rental income before forwarding it to HMRC. 4.How is tax deducted? UK tax law mandates that 20% (the basic rate of income tax) be deducted from rental income paid to a non-resident landlord before the landlord receives it. For example, if a letting agent is managing a property and needs to pay the landlord £1,000 in rent, they must deduct £200 (20%) in tax, pay £800 to the landlord, and send £200 to HMRC. The purpose of this rule is to prevent rental income from flowing overseas and eroding the UK tax base. However, non-resident landlords can request to receive the full rental income without tax being deducted in advance by applying for ‘full rent receipts’ from HMRC. If granted, the landlord can manage their tax obligations themselves, but they must ensure they pay taxes on time. 5.What if you don’t apply for full rent receipts? If non-resident landlords do not apply for or receive approval for full rent receipts, 20% tax will automatically be deducted from their UK rental income. Any pre-deducted tax must be paid to HMRC within 30 days after each calendar quarter ends. Letting agents or tenants are responsible for making these deductions, submitting payments, and filing quarterly and annual tax returns. Tenants must also deduct tax if there is no letting agent involved and the weekly rent exceeds £100. 6.What if there are multiple landlords? If multiple landlords co-own a property, each landlord must individually register for the NRLS and submit their self-assessment tax returns. Tax deductions under the NRLS will be calculated and paid based on each landlord’s ownership share in the rental income. Some advice from TB Accountants It’s important to note that even if a non-resident landlord applies for full rent receipts, this does not reduce their tax obligations. Overseas landlords must review their tax situation in their country of residence and pay any owed taxes on time. Additionally, if letting agents or tenants are responsible for managing the property, you must ensure that they fully understand the NRLS rules. Non-compliance can have serious consequences. At TB Accountants, we offer a range of services to help non-resident landlords register for and comply with the NRLS. We’ve assisted many overseas landlords with tax returns, dual tax treaties, and personal allowances. If you need help, feel free to contact us for professional advice. For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information. Get in touch with us at info@tbgroupuk.com or for a free one-to-one consultation. This article is intended as general guidance only, and does not replace any legal or professional advice. For enquiries, please contact TBA Group via email or WhatsApp. Related guides VAT on Rental Income: Do Landlords Need to Pay VAT? Empty Property Landlord Tax: Costs and Deductions