JUNE - ISSUE 29
C O N T E N T S | J U N E 2 0 2 6 -14-13-10-09-06-16-19-20-22-
REPORTING A RESIDENTIAL PROPERTY GAIN
SDLT AND MIXED-USE PROPERTIES
REPORTING INCOME FROM FHLS IN THE 2025/26 TAX RETURN
EMPLOYMENT ALLOWANCE – CAN YOU CLAIM IT?
USING YOUR ISA ALLOWANCE IN 2026/27
BENEFITS OF AN ALPHABET SHARE STRUCTURE
BENEFITS OF FILING YOUR 2025/26 TAX RETURN EARLY
MAKING QUARTERLY RETURNS FOR MTD FOR ITSA
WORKING FROM HOME – THE NEW/OLD TAX RULES
A chargeable gain may arise on the disposal of a residential property which has not been the owner’s only or main residence throughout This may be the case where the property is a second home or an investment property which has been let out Unlike other capital gains, residential property gains are not reported in the capital gains tax pages of the SelfAssessment return which must be submitted no later than 31 January after the end of the tax year. Instead, separate rules apply which govern how and when the gain is reported and the associated capital gains tax is paid.
A capital gains tax liability arising on the disposal of a UK residential property must be reported to HMRC within 60 days of the completion date Where the property is jointly owned, each co-owner must report their own gain
There is a dedicated online service for reporting residential property gains, and the seller will need to set up an account to report the gain and pay the tax This can be done online at wwwgovuk/report-and-payyour-capital-gains-tax/if-you-sold-aproperty-in-the-uk-on-or-after-6-april-2020
The following information is required:
· address and postcode of the property;
· date of acquisition;
· date of exchange of contracts on the sale;
· date of completion of the sale;
· purchase price (or market value where relevant);
· sale price (or market value where relevant); costs of purchase and sale; cost of any improvements; and details of any available tax reliefs or exemptions.
In the event that the seller is unable to use the online service to report the gain, they can instead contact HMRC and request a paper form
The capital gains tax due on the residential property gain must also be paid within 60 days of completion This is the best estimate of the capital gains tax due at the time, taking account of any available annual exemption or capital losses. Capital gains on residential property gains are taxed at 18% to the extent that the seller’s income and gains do not exceed the basic rate band (£37,700 for 2026/27) and at 24% thereafter. The rates are now the same as for other gains. Payment can be made online through the online account using a debit or corporate credit card or by approving a payment through an online bank account Payments can also be made by bank transfer or by cheque The 14-character capital gains tax payment reference should be quoted There may be an adjustment once the overall capital gains tax position for the year is known For example, the realisation of losses later in the tax year may give rise to a repayment The position will be finalised in the Self-Assessment tax return Interest and penalties Interest and penalties will be charged where a taxpayer fails to report and pay capital gains tax on a residential property gain within the required 60-day window
Stamp duty land tax (SDLT) applies where a property in England or Northern Ireland is sold for valuable consideration There are different rates for residential properties and non-residential properties Nonresidential properties include: · commercial property; property that is not suitable to be lived in and cannot be made suitable (for example, where there is a high risk that the property will collapse); forests; agricultural land that is part of a working farm or used for agricultural reasons; any other land or property that is not part of a dwelling house or garden; and six or more residential properties purchased in a single transaction
A property may comprise both residential and non-residential elements This would be the case, for example, for a shop with a flat above it Where a mixed-use property is purchased, it is not necessary to value the different parts and apply the residential and non-residential rates accordingly Instead, the non-residential rates apply to the whole purchase This can be beneficial as the non-residential rates are considerably lower Further, there is no second-property supplement
The residential and non-residential rates are shown in the tables below
Consideration SDLT Rate
Up to £125,000 Zero
The next £125,000 (the portion from £125,001 to £250,000) 2%
The next £675,000 (the portion from £250,001 to £925,000) 5%
The next £575,000 (the portion from £925,001 to £15 million) 10%
The remaining consideration above £15 million 12%
A supplement of 5% applies to second and subsequent homes where the consideration is £40,000 or above (other than an exchange of the main residence) Non-residential rates
Consideration SDLT rate
Up to £150,000 Zero
The next £100,000 (the portion from £150,001 to £250,000) 2%
The remaining consideration above £250,000 5%
Bill and Jane buy an equestrian property comprising a house, stables and paddocks of three acres from which they run their business providing riding lessons and liveries The property cost £1 2 million As the equine facilities are used commercially, the property is a mixed-use property and the commercial SDLT rates apply Therefore, SDLT of £49,500 is payable Had they not used the equine facilities commercially, HMRC would treat the property as a residential property. Assuming that it is their main residence, the SDLT payable at the residential rates would be £63,750 – £14,250 more than for a mixed-use property costing the same.
The special tax regime for furnished holiday lettings came to an end on 6 April 2025. From that date, furnished holiday lettings are treated in the same way as other residential lets and form part of the same property rental business.
As a result of the changes, the UK property pages of the 2025/26 Self-Assessment return (SA105) have been simplified and there is now only one section for all UK property income where previously there was a separate section for furnished holiday lettings. Landlords who have income from UK furnished holiday lettings will need to complete the UK property supplementary pages If they also have other income from UK property, whether from letting residential and/or commercial properties, they will need to amalgamate the income and expenses with that from their furnished holiday lets and calculate the taxable profit for their property business as a whole
Following the end of the furnished holiday lettings regime, interest and finance costs in relation to holiday lets are now relieved as a basic rate income tax reduction, rather than by deduction. Capital allowances are no longer available for expenditure on domestic items incurred on or after 6 April 2025; instead, relief is given under the replacement of domestic items rules. However, the landlord can continue to claim writing down allowances where the furnished holiday letting had a balance on a capital allowances pool as at 6 April 2025. Under the old furnished holiday lettings regime, losses on furnished holiday lets could only be set against future profits from furnished holiday lettings. However, any losses brought forward in respect of holiday lets on 6 April 2025 can be used against the profits of the amalgamated property business, as can losses brought forward in respect of lets other than holiday lets.
Employment Allowance – Can you claim it?
The Employment Allowance is a very valuable allowance which allows eligible employers to reduce their secondary Class 1 National Insurance bill by up to £10,500 in 2026/27 The allowance is not given automatically and must be claimed
Who can claim
Employers can claim the allowance if they are a business or a public body and they do less than half their work in the public sector However, the allowance is not available to companies which only have one employee liable for secondary contributions who is also a director. This means that most personal companies where the same person is the director and the only employee do not benefit.
The Employment Allowance can also be claimed by charities and those who employ a care or support worker.
The Employment Allowance is no longer restricted to employers whose Class 1 National Insurance liability in the previous year was £100,000 or less
How it works
The allowance is set against the employer’s secondary Class 1 National Insurance liability each month until it is used up If the employer’s secondary Class 1 National Insurance liability is less than £10,500 in 2026/27, their allowance is capped at their secondary Class 1 National Insurance liability for the year
A Ltd is a family company Its secondary Class 1 National Insurance liability is £3,000 a month It claims the Employment
for 2026/27
The allowance shelters their secondary Class 1 liability in months one, two and three, leaving £1,500 available to set against their secondary Class 1 liability for month four, reducing it to £1,500 As the allowance has now been used up, the company must pay their secondary Class 1 liability in full for months five to 12
A claim can be made at any time in the tax year However, the earlier the claim is made, the sooner the employer can start to benefit from it
The claim is made through the employer’s payroll software (or by using HMRC’s Basic PAYE Tools package if the software does not facilitate a claim) by clicking ‘yes’ in the Employment Allowance indicator box in the Employer Payment Summary (EPS). A claim can also be made for any of the previous four tax years in which the employer was eligible but did not claim. Where an employer has more than one PAYE scheme, they are only entitled to one Employment Allowance rather than one per PAYE scheme If a claim is made late and the Employment Allowance is not used against the employer’s secondary Class 1 National Insurance liability for the year, the employer can ask HMRC to set any unclaimed allowance against any tax or National Insurance that they owe, including VAT and corporation tax If they do not owe anything, they can ask HMRC for a refund
Individual Savings Accounts (ISAs) are taxfree savings accounts
There are four different types of ISAs:
· cash ISAs;
· stocks and shares ISAs;
· innovative finance ISAs; and
· lifetime ISAs
Individuals must be at least 18 to invest in an ISA.
Cash ISAs may be with a bank or building society or with National Savings and Investments. Stocks and shares ISAs can include shares in companies, unit trusts and investment funds, corporate bonds, government bonds and long-term asset funds.
Lifetime ISAs can include cash and stocks and shares They can only be used to save for a deposit for a first home or for retirement
Innovative finance ISAs can hold peer-topeer loans, crowdfunding debentures, funds where the notice or redemption period means that they cannot be held in a stocks and shares ISA or crypto-asset exchange traded notes
A separate ISA, the junior ISA, allows a parent or a guardian with parental responsibility to save for a child who is under the age of 18 and living in the UK
There is no tax to pay on interest on a cash ISA or on income and capital gains from investments in a stocks and shares ISA
For adults, the ISA allowance is £20,000 for 2026/27. This is the total amount that can be invested in ISAs of any type. However, the maximum that can be deposited in a lifetime ISA is capped at £4,000 a year and an individual can only have one lifetime ISA.
John wishes to invest £20,000 in ISAs in 2026/27 He is using a lifetime ISA to save for retirement and can invest £4,000 of his allowance in his lifetime ISA He also invests £10,000 in a cash ISA and £6,000 in a stocks and shares ISA
The savings limit for Junior ISAs is set at £9,000 for 2026/27.
Although the ISA limit will remain at £20,000 for 2027/28, individuals under the age of 65 will only be able to invest a maximum of £12,000 in a cash ISA. To use their full allowance, individuals under 65 will need to make non-cash investments of at least
£8,000 in other types of ISA (stocks and shares, lifetime or innovative finance) The £12,000 cap will not apply to individuals aged 65 and over who will continue to be able to invest their full allowance in a cash ISA if they so wish
Individuals under the age of 65 who wish to make the most of the opportunity to invest in cash ISAs may wish to consider investing the full £20,000 limit in a cash ISA in 2026/27 while they still can
Where a business is operated through a limited company, profits need to be extracted if they are to be used personally. Where the personal allowance remains available, it is generally beneficial to pay a salary equal to the personal allowance and to extract any further profits needed outside the company in the form of dividends
In a family company, there may be a number of shareholders
Paying dividends is not as straightforward as paying a salary or a bonus as there are company law rules which must be adhered to The first point to note is that dividends are paid from retained profits These are profits on which corporation tax has already been paid, and which have yet to be distributed A company can only pay a dividend if it has sufficient retained profits from which to pay it
The second point to note is that where there is more than one shareholder for a class of share, dividends must be paid in proportion to the shareholdings, which can be very limiting and may not give a tax-efficient result This is where an alphabet share structure comes in Under an alphabet share structure, each shareholder has their own class of share, for example, A ordinary shares, B ordinary shares, etc This allows different dividends to be paid for each class of share, making it possible to tailor the dividends to the shareholder’s personal circumstances For example, a company may tailor dividends to mop up any unused dividend allowances and basic rate bands
Albert and Anna are shareholders in A Ltd. They each own 50% of the ordinary share capital. The company has profits of £50,000 it wishes to distribute Neither Anna nor Albert have used their dividend allowance Albert has no other income in 2026/27, whereas Anna has income of £200,000 from her property portfolio
As Anna and Albert each own 50% of the shares, each will receive a dividend of £25,000 Albert can set his dividend allowance and personal allowance against his dividend so £13,070 is tax-free The remaining £11,930 is a taxed at 10 75% – a tax bill of £1,282 47 Anna will also receive a dividend of £25,000, of which £500 is sheltered by her dividend allowance The remaining £24,500 is taxed at 39 35% – a tax bill of £9,640 75 Their combined tax bill is £10,923 22
If instead they had adopted an alphabet share structure whereby Albert owned one ordinary A share and Anna owned one ordinary B share, they could have tailored the dividends to their personal circumstances Instead of each receiving a dividend of £25,000, a dividend of £49,500 could be declared for the A share and a dividend of £500 for the B share Albert would receive a dividend of £49,500 on which tax of £3,916 25 would be payable, while Anna would receive a dividend of £500 which would be sheltered by her dividend allowance Their combined tax bill is over £7,000 lower where an alphabet share structure is used
The 2025/26 Self-Assessment tax return must be filed online by midnight on 31 January 2027 However, you do not have to wait until the deadline is approaching to file your return and there can be advantages in filing early Before filing your return, it is important to check that you have all the information you need If you have employment or pension income to include on your return, you may need to wait until you have your P60 You should have that by 31 May 2026 Likewise, you may also need details of payrolled benefits and those reported on your P11D Here are seven reasons why filing your tax return early may be a good idea:
1. You will get it out of the way and avoid the stress of having to file it at the last minute.
2. If you have trading and/or property income, you will know whether you will need to start complying with MTD for ITSA from 6 April 2027 if you are not already in it. This will be the case if your combined trading and property income before deduction of expenses is £30,000 or more in 2025/26 The earlier you know, the longer you have to prepare
3 You will know what tax you have to pay in advance and can ensure that you have the funds available to meet the tax bills, rather than being caught out at the last minute
4 If you are owed a tax refund, you can claim the money back sooner
5 If you make payments on account, once you know your 2025/26 tax liability you can check whether you need to reduce them
6 If you file your return before 30 December 2026 and owe £3,000 or less, you can opt to have the tax that you owe collected through your 2027/28 tax code This is equivalent to an interest-free instalment option
7 If you are looking to get a mortgage and need proof of your income, filing your tax return will provide this
For many years, employees required to work from home could claim tax relief for additional household expenses incurred personally, even where not reimbursed by their employer This relief recognised that certain expenses (e g increased heating, electricity or business-related telephone use) arose directly from the performance of employment duties However, the relief was tightly defined and was not available where homeworking was undertaken by personal choice or for convenience rather than necessity.
During the pandemic, for the tax years 2020/21 and 2021/22 only, HMRC temporarily extended eligibility to reflect the exceptional circumstances in which large numbers of employees were required to work from home Under this relaxation, employees could claim relief where they worked from home due to government guidance or workplace restrictions, even if not required under their employment contracts This significantly broadened access to the relief and led to a substantial increase in claims
When these temporary measures ended, the stricter pre-pandemic rules technically resumed. However, in practice, many employees continued to submit claims under the more relaxed pandemic rules Subsequent compliance reviews by HMRC indicated that more than half of these claims failed to meet the original statutory criteria As a result, HMRC decided not only to withdraw the pandemic concession but also remove entirely the ability for employees to claim tax relief directly for additional household expenses where those costs are not reimbursed by their employer
Changes effective from 6 April 2026
From 6 April 2026, employees cannot claim tax relief directly from HMRC for unreimbursed additional household costs, regardless of whether homeworking is voluntary or a requirement of employment Even where employment contracts mandate homeworking, or where no alternative office accommodation is available, employees cannot claim relief independently Any tax-efficient support must be provided through employer arrangements
Employer-provided support
Although the removal of employee claims represents a significant change, there are other taxefficient mechanisms employers can use to support homeworking staff
· Flat-rate homeworking allowance
Employers may pay a flat-rate allowance of £6 per week (£26 per month) free of income tax and National Insurance contributions without requiring employees to evidence their actual costs. Two conditions must be satisfied:
1 there must be an agreement permitting the employee to work from home; and 2 the employee must do so on a regular basis such that there is a pattern of home working (e g , one day a week)
In practice, emails notifying employees of their requirement to work from home should be sufficient to confirm a 'homeworking agreement'
Employers may provide equipment and services necessary for homeworking, such as computers, office furniture or other work-related items In contrast to the flat-rate allowance, there is no requirement for the employee to work from home regularly or for a formal agreement to be in place The tax exemption applies provided any private use of the equipment is not significant, a condition that HMRC generally interprets flexibly There is no prescribed financial limit, but the employee must have a genuine business need for the items. The employer must either provide the equipment directly (retaining ownership) or, from 6 April 2026, reimburse the employee where the employee has incurred the expenditure on the employer's behalf
Employers may reimburse employees’ actual additional household expenses, including increased utility costs or business-related telephone charges, free of tax and National Insurance contributions, provided the expenses are necessarily incurred in the performance of employment duties. Any excess will be treated as taxable income. Usually, HMRC requires a high level of proof that payments are no more than the employee’s additional household expenses
· Broadband
Broadband costs may be reimbursed on a tax-free basis where no prior broadband connection existed, the employee is required to work from home and the service is used primarily for business purposes. Where these conditions are not met, reimbursement may give rise to a taxable benefit in kind
The key practical implication of these changes is that support for homeworking expenses must now be delivered exclusively through employer arrangements Employers should review their existing policies, employment contracts and staff handbooks to ensure compliance.