News & Insights

The latest tax developments and VAT round-up for the month.

Our monthly tax update covers the developments most likely to affect individuals, trusts, estates and businesses. If you would like to discuss anything here in more detail, please get in touch with your usual contact.

1. Private client

1.1 APR and BPR allowance raised to £2.5 million

The government has announced that the allowance for 100% agricultural and business property relief (APR and BPR) will be £2.5 million, rather than the £1 million originally announced, when the new rules start on 6 April 2026.

Above the allowance, relief will be given at 50%, giving an effective inheritance tax rate of 20% on the excess. Any unused allowance can be transferred between spouses and civil partners. The higher figure will take many more family farms and businesses out of the charge, but larger estates should still review their succession plans before April.

1.2 SDLT overpayment claim succeeds at the Upper Tribunal

The Upper Tribunal has allowed a property fund’s claim for overpayment relief of more than £3 million of SDLT.

HMRC argued that the claim was excluded because the overpayment arose from a mistake in a claim or election. The UT disagreed. The decision may help other buyers who paid too much SDLT and are within the time limit to claim it back.

BTR Core Fund JPUT v HMRC (UT, January 2026)

1.3 Self Assessment deadline: 31 January

2024/25 Self Assessment returns filed online, and the balance of tax due, must reach HMRC by 31 January 2026, along with the first payment on account for 2025/26.

Missing the filing deadline brings an automatic £100 penalty, with more after three months. Interest runs on late payments, and a 5% penalty applies to tax still unpaid 30 days after the deadline. Anyone who cannot pay in full should contact HMRC about a Time to Pay arrangement.

2. PAYE and employment

2.1 Host employer liable for NICs on offshore workers

The FTT has confirmed that a UK company was liable as the host employer for NICs on workers supplied by an overseas employer.

The host employer rules can make a UK business responsible for NICs where workers employed overseas work for it in the UK. Oil and gas and engineering businesses using overseas staffing companies should check their position.

Wood Group Engineering (North Sea) Ltd v HMRC [2026] UKFTT 1607 (TC)

2.2 Preparing for April 2026

Several employment tax changes take effect from 6 April 2026, so employers should start preparing now.

They include joint liability for agencies and end clients where umbrella companies fail to pay over PAYE, statutory sick pay from the first day of sickness, and the National Living Wage increase. Payroll software and contracts should be checked before the new tax year starts.

3. Business tax

3.1 Licence to use a client list was an intangible asset

The FTT has held that a company’s licence to use a client list was an intangible fixed asset, and that HMRC’s discovery assessments were not valid.

The company had described the asset wrongly in its return, but the tribunal found this did not lead to a loss of tax. Businesses that buy client lists, customer relationships or similar assets should make sure the purchase is documented and described correctly in the accounts and tax return.

Ripe Ltd v HMRC [2026] UKFTT 1606 (TC)

3.2 Construction Industry Scheme: simplification consultation

HMRC has launched a consultation on simplifying the Construction Industry Scheme (CIS).

Contractors and subcontractors have long found parts of CIS burdensome, especially the monthly returns. Businesses in the construction sector should consider responding, and should watch for the changes to the CIS regulations due from April 2026.

3.3 Mixed partnerships: Upper Tribunal upholds assessments in part

The Upper Tribunal has applied the mixed partnership rules and partly upheld HMRC’s discovery assessments.

These rules can reallocate profits from a corporate partner to individual partners for tax purposes. Partnerships and LLPs with corporate members should review their profit-sharing arrangements against the rules.

Holden & Ors v HMRC [2026] UKUT 25 (TCC)

4. VAT and indirect taxes

4.1 Linked goods concession withdrawn

HMRC has confirmed in Revenue and Customs Brief 1 (2026) that the extra-statutory concession for low-value linked goods in promotions has been withdrawn.

The concession allowed some low-cost items sold with other goods to share their VAT treatment. Retailers and manufacturers running promotions that combine items with different VAT rates should review how they account for VAT.

4.2 Hair loss treatment zero-rated for disabled people

The Upper Tribunal has held that a hair loss treatment could be zero-rated under the reliefs for goods and services adapted for disabled people.

The decision turned on the specific facts and the conditions of the relief. Businesses supplying goods or services to disabled customers should make sure they hold the declarations and evidence the relief requires.

Mark Glenn Ltd v HMRC [2026] UKUT 34 (TCC)

4.3 Input VAT on product photography fully recoverable

The FTT has held that a retailer could recover all the input VAT on product photography.

The tribunal accepted that the costs related to the business’s taxable activities. Partly exempt businesses should consider carefully which activities their costs actually relate to before applying a restriction.

Littlewoods Ltd v HMRC [2026] UKFTT 1602 (TC)

5. Key dates

The Self Assessment deadline is 31 January, and late payment penalties start on 3 March for unpaid 2024/25 tax.

6. And finally

6.1 Thirty years of Self Assessment

Self Assessment was introduced for the 1996/97 tax year, so this month marks around thirty years of taxpayers working out their own bills. Before then, HMRC’s predecessor, the Inland Revenue, calculated the tax due for most people.

Online filing has made the process faster, but the 31 January deadline still brings a last-minute rush every year. Our advice is the same as ever: start early, keep good records, and leave time to deal with anything unexpected.