Budget 2025: Key Changes Affecting the Most People

a man in red shirt covering his face

On 26 November 2025, the Chancellor delivered a Budget that will impact almost every household and business over the coming years. While billed as a stabilising Budget, many of the measures announced will increase the tax burden for working people, savers, homeowners, landlords and business owners.

At Bicknell Business Advisers, we have reviewed the full report to highlight the changes that will affect the largest number of people — in practical, jargon-free terms. Download a 20 page report from our website www.bicknells.net

Frozen Income Tax Thresholds Until 2031

One of the most far-reaching changes is the decision to freeze income tax thresholds for an additional three years, now running until 2030/31. This means:

  • Your personal allowance stays at £12,570
  • Higher-rate and additional-rate thresholds are fixed until 2031
  • As incomes rise, more people will drift into paying higher tax bands

This “fiscal drag” will increase the tax paid by employees, pensioners and the self-employed over time.

Higher Taxes on Savings, Dividends and Property Income

From 2026–2027, several significant rate increases will affect investors, company directors and landlords.

Dividend Tax Increases (from April 2026)

  • Basic rate: 10.75%
  • Higher rate: 35.75%
    (an increase of 2 percentage points)

Savings & Property Income Tax Increases (from April 2027)

  • Basic rate: 22%
  • Higher rate: 42%
  • Additional rate: 47%

For many people, this will mean higher tax bills on rental income, interest, and dividends extracted from a company.

New High-Value Property “Mansion Tax”

From April 2028, a new council tax surcharge will apply to properties worth more than £2 million.

  • Annual charge: £2,500 to £7,500
  • Applies to the homeowner, not the occupier
  • Valuation will be set before the tax is introduced

This will particularly affect landlords, holiday let owners and those with high-value main residences.

ISA Changes: Cash Limit for Under-65s

The overall ISA limit stays at £20,000, but major changes arrive in April 2027:

  • Under-65s can only place £12,000 each year into a cash ISA
  • Over-65s retain the full £20,000 cash ISA allowance

This will be a significant shift for regular savers who rely on tax-free returns.

Minimum Wage Increases (April 2026)

Millions of UK workers will receive a pay rise:

  • National Living Wage (21+): £12.71
  • 18–20 Rate: £10.85
  • 16–17 & apprentices: £8.00

This change benefits workers but increases payroll costs for employers — something business owners should factor into 2026/27 planning.

Electric Vehicle Road Charge Introduced

From April 2027, the UK will introduce a mileage-based road charge:

  • 3p per mile for electric cars
  • 1.5p per mile for hybrids

This marks the beginning of a new era in EV taxation as the government seeks to replace lost fuel duty revenue.

Corporation Tax: No Change to Rates

Corporation tax remains unchanged into 2026/27:

  • 19% small profits rate
  • 25% main rate for profits over £250,000

However, combined with increased dividend taxes, company directors should review their remuneration strategies.

Making Tax Digital (MTD) Moves Forward

For sole traders and landlords with turnover above £50,000, MTD for Income Tax becomes mandatory from April 2026:

  • Quarterly digital submissions required
  • No penalties for late quarterly filings in year one
  • Annual submissions still required

This is a major shift for property landlords and small businesses.

Stamp Duty: No Changes for Homebuyers

There were no changes to Stamp Duty Land Tax (SDLT) in England or Northern Ireland:

  • Threshold remains £125,000
  • First-time buyer relief unchanged
  • Additional property surcharges continue to apply

This stability will be welcomed by buyers and landlords planning acquisitions.

How Bicknell Business Advisers Can Help

These Budget changes mean many individuals and businesses will face higher tax bills and greater compliance obligations. Early planning is essential.

We can support you with:

  • Personal tax planning for 2026 and beyond
  • Dividend and remuneration strategies
  • Property and landlord tax reviews
  • Business planning for wage and NIC changes
  • Preparing for Making Tax Digital
  • Inheritance tax and estate planning

If you’d like personalised advice, please get in touch.
We’re here to help you plan with confidence.

https://www.bicknells.net/meet-the-team

Could taxes go up in the Autumn Budget? How to be ready

Budget impact

At the last general election, the Labour party pledged to not raise taxes for ‘working people’,with assurances that there will be no changes to income tax, national insurance (NI) and VAT.

While this pledge may appeal to UK workers, it does limit what the Chancellor, Rachel Reeves, can do when it comes to raising taxes and reducing the UK’s current economic deficit.

With individual taxes protected, some commentators have argued that it’s UK businesses that will bear the brunt of any hikes in taxation.

But what tax changes are most likely? And could any changes impact you and your business?

Possible changes that could be announced in the Autumn Budget

Let’s take a look at some of the potential changes we could see being announced by Rachel Reeves on the 26th November.

Remember, these are speculative outcomes from the Budget and nothing has yet been confirmed by the Chancellor or the Labour party.

Here are the areas most likely to see amendments

Personal taxes

Capital Gains Tax:

Capital gains tax (CGT) is widely tipped for changes. The government may raise the rates of CGT or reduce the annual tax-free allowance, which has already been significantly cut in recent years. There’s also speculation about extending CGT to high-value homes as an easy way to raise more tax revenue when property owners sell more expensive properties.

Inheritance Tax (IHT):

Reforms to IHT are being considered. This could include lowering the current tax-free threshold of £325,000, which has been frozen since 2009, or tightening rules around gifting to prevent large estates from avoiding tax.

Income Tax Thresholds:

While the government has pledged not to raise the rate of income tax, a common ‘stealth tax’ is to freeze tax thresholds. It’s possible the current freeze on income tax thresholds could be extended. This would pull more people into higher tax brackets as wages rise, generating more tax revenue for HMRC.

Pensions:

Changes to pensions are possible, with a focus on areas like the tax-free lump sum that can be taken from a pension, or restricting the tax efficiency of salary sacrifice schemes.

Business taxes

VAT changes:

It’s possible that widening the scope of VAT could raise significant tax revenue. There’s also speculation that the Chancellor may reduce the VAT registration threshold, currently set at £90,000 p.a. This would require many more businesses to register for VAT and charge the tax on goods and services.

Business rates:

Although not part of the Autumn Budget, changes to business rates could have a major impact for some businesses. Businesses are already facing new business rate burdens, but some commentators are warning of an ‘unavoidable double hit’ that could push UK business rates bills up by £2.5bn.

Business Asset Disposal Relief (BADR):

For business owners who plan to sell their company, changes to CGT on these sales have already been announced. The rate for BADR rose from 10% to 14% in April 2025, and there’s a further increase to 18% planned for April 2026. Changes to the rate, or the period of availability of BADR are additional possibilities.

Property Taxes: A Likely Target Area

Stamp Duty Land Tax (SDLT) Reform

The Chancellor is considering replacing SDLT with a national property tax or sale-based levy on homes worth over £500,000.
This could reduce costs for first-time buyers but increase tax for luxury properties.

Council Tax Reform

Council tax may finally be revalued after more than 30 years, with proposals to:

Link bills to current market values

Shift liability to property owners rather than occupants

Give local councils rate-setting powers

CGT on High-Value Homes

Homes worth over £1.5 million may lose full CGT exemption — a move aimed at capturing untaxed gains from the wealthiest property owners.

Landlords and Rental Income

The government could extend National Insurance Contributions to rental income and revisit mortgage interest and loss relief rules, increasing costs for private landlords.

We’ll be summarising the key points of the Autumn Budget once the Chancellor delivers her speech.

HMRC Update: New Evidence Rules for £312 Working From Home Allowance (Effective 14 October 2024)

Directors and business owners who claim the £312 flat rate per year (£6 per week) for working from home should be aware of a key policy change from HMRC, effective 14 October 2024. Going forward, claims for this relief must be supported by a formal obligation to work from home, such as a clause in a service agreement, contract, or board resolution.

This change represents a shift from previous practice, where many directors and employees could claim the relief on a discretionary or informal basis. HMRC is now tightening its stance — and the lack of documented obligation will invalidate claims.

🔍 What’s Changed?

From 14 October 2024, HMRC will only accept P87 claims for homeworking expenses if there is written evidence that the employee or director is contractually required to work from home.

The key requirements include:

  • A written agreement (e.g., employment contract, service agreement, or board resolution).
  • A regular and frequent homeworking pattern, typically as a guide at least two days per week, though not necessarily on the same days. The days are not specified in Evidence required to claim PAYE (P87) employment expenses – GOV.UK
  • Voluntary or informal homeworking arrangements no longer qualify.

✅ What Does This Mean for Directors?

If you’re a limited company director working from home, you should:

  1. Update your service agreement or contract to include a homeworking clause.
  2. Pass a board resolution confirming the homeworking requirement.
  3. Ensure the arrangement is regular and necessary for business purposes.
  4. Retain all documentation as part of your company’s formal records.

✍️ Sample Wording for Compliance

To help you stay compliant, below is a model clause that can be included in a service agreement or board resolution:

📄 Homeworking Requirement – Example Clause

“The Company requires the Director to work from their home address at [insert address] for a minimum of [insert number] days per week. This arrangement is a condition of employment and is necessary for the proper performance of the Director’s duties. The Director’s home is deemed an official workplace for the purposes of fulfilling their role and responsibilities. The Company will review this arrangement annually, but it will remain in place unless varied in writing by mutual agreement. The Director must ensure that their homeworking environment is suitable for conducting business and agrees to be available and contactable during normal business hours on homeworking days.”

🗂️ Supporting Board Resolution – Example

“At a meeting of the Board of Directors held on [insert date], it was resolved that [Name of Director] is contractually required to work from home at least [insert number] days per week as part of their duties for the Company, with effect from [insert date]. This resolution is to be retained with the Company’s records as evidence of the homeworking requirement.”

💡 Claims Above £312?

If actual costs exceed the £6 per week flat rate, higher claims may be allowable, but these will require:

  • Strong supporting documentation, and
  • In some cases, pre-approval from HMRC.

🛠️ Next Steps

If you currently claim the flat rate and do not have documented homeworking requirements in place:

  • Review your existing contracts.
  • Draft a resolution or contract amendment now.
  • Contact Bicknell Business Advisers for assistance in formalising the arrangement.

Tax Benefits of Incorporating Your Property Portfolio

Many UK landlords are exploring the idea of holding their buy-to-let properties in a limited company structure. This trend has accelerated in recent years as tax reforms have made traditional personal ownership less profitable for higher-rate taxpayers. By incorporating a property portfolio, investors can potentially reduce their tax bills, take advantage of business tax treatment, and plan more effectively for the future. Below, we outline the key tax advantages of operating through a limited company – from lower tax rates on rental profits to full mortgage interest relief, inheritance tax planning, and deferring personal taxes. We also highlight some important drawbacks (like added costs and Stamp Duty) that need to be weighed in any decision.

Lower Corporation Tax on Rental Profits

One of the main reasons landlords incorporate is to pay Corporation Tax on rental profits instead of Income Tax. Rental income received by an individual is added to their other income and taxed at their marginal income tax rate (which for higher earners is 40% or even 45%). In contrast, profits in a company are subject to Corporation Tax – currently 19% for small profits, up to 25% for larger profits (as of April 2023). Even at the new 25% rate, this can be significantly lower than personal tax rates for many landlords. For example, a higher-rate taxpayer with £20,000 of annual rental profit would face around £8,000 of Income Tax, whereas a company paying the small profits rate might owe just ~£3,800 in Corporation Tax – leaving much more after-tax profit to reinvest. Put simply, paying 19–25% Corporation Tax instead of 40–45% Income Tax can dramatically lessen a landlord’s tax bill. This is especially beneficial if you’re already in a high tax bracket or if the rental profits push you into one.

It’s important to note that the tax advantage exists at the company level. If you want to draw the profits out for personal use, you’ll then pay personal tax (for example, dividend tax) on those withdrawals. We’ll discuss this more under “retained profits,” but the key idea is that keeping profits inside the company is taxed more lightly up front than taking them personally. In summary, operating via a company converts rental income into corporate profits, taxable at generally lower rates than personal income – a fundamental tax saving for many property investors.

Full Mortgage Interest Deductibility

Another major driver for incorporation is the mortgage interest relief treatment. In recent years, individual landlords have lost the ability to fully deduct mortgage interest from their rental income. Under Section 24 rules (phased in from 2017), individual buy-to-let owners can only claim a basic-rate tax credit (20%) on their finance interest, rather than deducting it as an expense. This means higher-rate taxpayers effectively pay tax on part of their mortgage interest, significantly increasing their tax bills on geared properties. For example, an individual landlord paying £10,000 in mortgage interest annually only gets a £2,000 tax credit now, even if they are in the 40% tax band (whereas prior to Section 24 they would have deducted the £10k and saved £4,000 in tax). This change has turned many geared portfolios barely profitable or even loss-making on a post-tax basis for higher-rate landlords.

Limited companies are not subject to Section 24. When you hold property in a company, the mortgage interest is treated as a business expense – it can be deducted in full against rental income before calculating taxable profit. The company’s tax bill is thus based on net profit after interest, just like any other business. All the interest costs provide tax relief at the Corporation Tax rate. In practice, this restores the old tax treatment: the full mortgage interest offset can result in substantial tax savings for highly leveraged investors. For instance, if your rental property earns £15,000 in rent and has £10,000 in mortgage interest, an individual higher-rate landlord would still be taxed on the full £15,000 (with only a £2k credit), whereas a company landlord is taxed only on the £5,000 net profit – a far smaller taxable base.

This difference is a key reason 69% of landlords plan to buy new rental properties via limited companies. By using a company, landlords can maintain interest as a deductible expense and avoid the punitive effective tax rates that Section 24 created for personally owned properties. In short, incorporation can preserve interest relief and keep your financing costs fully tax-deductible – critical for those with mortgages on their rentals.

Inheritance Tax Planning via Company Structures

Using a company can also open up inheritance tax (IHT) planning opportunities for landlords who want to pass their property wealth to the next generation. If you own properties personally, it can be complicated and costly (in terms of IHT and Capital Gains Tax) to transfer bits of property to your children or other heirs during your lifetime. However, with a company, you have much more flexibility in transferring ownership gradually by way of shares. You can bring family members in as shareholders or directors, and gift or sell shares in the company over time, rather than having to slice up the property titles themselves. Small transfers of shares can potentially be done within annual gift allowances or via trust planning, helping to reduce the taxable value of your estate bit by bit.

More sophisticated planning is also possible. Many advisers use Family Investment Companies with special share classes (sometimes called “freezer shares”) to control how future growth in the company is allocated between generations. For example, parents can retain a class of shares that hold the current value of the portfolio, and issue a new class of shares to their children that will accrue all future growth in value. This effectively “freezes” the parents’ estate at today’s value for IHT purposes, while any appreciation in the property portfolio from this point forward happens in the children’s shares. As a result, if the properties continue to grow in value, that growth can bypass the parents’ estate (and thus avoid inheritance tax) and belong to the next generation. Crucially, when set up correctly, this does not trigger immediate tax – the new shares have only nominal value initially, so parents aren’t making a taxable transfer of substantial value at the time of structuring.

It should be noted that standard buy-to-let companies are usually considered investment companies for tax purposes, which currently do not qualify for Business Property Relief (BPR) – a relief that can make certain business assets IHT-free after two years. (BPR is generally available for trading businesses, not passive investment portfolios.) However, with careful planning, some landlords restructure activities to become more active property businesses (e.g. development or holiday lets) or use the share structuring techniques mentioned above to mitigate IHT. In any case, holding properties in a company gives greater flexibility to plan for inheritance, allowing strategies like gifting shares, issuing growth shares, or using trusts. This can substantially reduce the inheritance tax eventually due on the portfolio, compared to simply holding properties until death and leaving them in a will with a 40% IHT exposure. Given that property values often far exceed the IHT nil-rate bands, this kind of planning can save heirs a significant tax bill in the long run.

Retaining Profits and Deferring Personal Tax

A less immediate but powerful benefit of a company structure is the ability to retain profits within the company, deferring any personal tax liability. If you own properties personally, any profit (after expenses) is yours – which also means it gets taxed as part of your personal income each year. But within a company, you have a choice: you can pay out profits to yourself (as salary or dividends) or you can simply leave the profits in the company to reinvest or pay down debt. The profits that are retained in the company only suffer Corporation Tax in that year. No further tax is due until you decide to extract the money for personal use. This creates a valuable tax-deferral advantage.

For example, suppose your property company makes £50,000 in profit this year. The company will pay, say, 19% Corporation Tax (if within the small profits limit), leaving about £40,500 after tax. If you don’t need that money personally right away, you can reinvest the £40k into buying another property or improving existing ones. No personal tax is triggered because you haven’t taken a dividend or salary from those profits. In contrast, if you owned the portfolio personally and earned £50,000 net profit, you’d pay income tax on it in the same tax year – possibly £20,000 (40%) if you’re a higher-rate taxpayer – leaving you only £30k to reinvest. Over time, this ability to reinvest a larger portion of your earnings (since only the lower corporate tax is taken out) can accelerate the growth of your portfolio.

Another way to view this is that a company lets you time your personal tax events for when it’s most efficient. You might choose to take dividends in years when your other income is low, or spread dividends over time to stay in lower tax bands. Or you might retain profits until retirement, using them to fund a future income when you stop other work. There is also the possibility of extracting some profit as a modest salary (which can be set to use your personal allowance tax-free) and some as dividends, achieving a tax-efficient mix. The key point is flexibility – a company gives you much more control over when and how you take income, allowing you to defer or minimize personal taxes in a way an individual landlord cannot.

Of course, whenever you do draw the profits out, you’ll pay personal tax at that point (dividend taxes, which are currently 8.5% basic rate, 33.75% upper rate, etc., after a small allowance). This means incorporation isn’t about avoiding personal tax altogether, but about delaying it and potentially reducing it. For many investors, the strategy is to use retained earnings for growth and only take out what they need when they need it – thereby maximising the funds kept in the low-tax company environment. This can be especially useful if your goal is to build a larger portfolio for the long term, or if you already have other income and don’t require the rental profits immediately.

Potential Drawbacks of Incorporating

Incorporating a property portfolio isn’t a one-way ticket to tax savings; it comes with its own costs and complications. It’s crucial to weigh these drawbacks against the benefits discussed above. Here are some key considerations to keep in mind before you rush to set up a property company:

  • Upfront Transfer Costs (Stamp Duty and CGT): If you are moving existing properties from personal ownership into a new company, it isn’t as simple as “re-registering” them – you typically have to “sell” the properties to your company at market value. This can trigger Stamp Duty Land Tax (SDLT) on the transfer, as well as potential Capital Gains Tax (CGT) on any increase in value of the properties. The company will pay SDLT just like any buyer (including the 5% additional rate), and you, as the seller, could face CGT on the gain (18% or 28% for residential property, depending on your tax band). There are some reliefs available – for instance, Incorporation Relief under certain conditions – but many landlords find that incorporating an existing portfolio can come with a hefty upfront tax bill. It’s essential to calculate these costs to see if the long-term tax savings justify the immediate hit.
  • Ongoing Compliance and Administration: Running a limited company means more paperwork and expense. You’ll need to file annual accounts and confirmation statements at Companies House, submit Corporation Tax returns to HMRC, keep proper company books, and likely pay an accountant to ensure all this is done correctly. If you pay yourself a salary or take dividends, there are additional reporting requirements (PAYE payroll filings, dividend documentation, etc.). In short, the administrative burden is higher than just declaring rental income on a personal Self-Assessment. These compliance costs will eat into the financial benefits of incorporation. Landlords should factor in accountancy fees and the value of their time. For a single property or small portfolio, the savings may not outweigh these extra costs – incorporation tends to make more sense as the portfolio (and the tax saving) grows larger.
  • Double Tax when Extracting Profits: As discussed, while profits inside the company are taxed at a lower rate, when you take money out for personal use you’ll face personal tax. Typically this is via dividends (since most buy-to-let company owners don’t put themselves on a large salary). Dividend tax rates are lower than income tax rates, but they still apply. For example, after the first £500 of dividends (2024–25 allowance), a basic-rate taxpayer pays 8.5% and a higher-rate taxpayer 33.75%. This second layer of tax can reduce the overall advantage, especially if you withdraw most of the profits each year. In a scenario where a landlord wants to live off the rental income fully, the combined Corporation Tax + Dividend Tax might not be much better than simply paying Income Tax personally. The benefit is greatest when you reinvest or hold profits in the company. If you need all the cash out, the benefit shrinks (though you could still gain some advantage up to the basic-rate band, etc.). It’s important to plan distributions carefully. In other words, the “tax deferral” only helps if you actually defer taking the income; otherwise, you end up with two layers of tax. (On the plus side, if you plan to eventually sell the company or its properties, having paid down debt with retained profits, you might take profits via a capital route or at a time when tax rates are different. It adds strategic options, but requires foresight.)
  • Mortgage Availability and Costs: Many landlords don’t realize that getting a mortgage through a company can be a bit more involved. Fewer lenders cater to limited company buy-to-lets (often these are considered Special Purpose Vehicles (SPVs)), and interest rates can be slightly higher to account for perceived additional risk. Lenders will almost always require personal guarantees from the directors/shareholders for small property companies, effectively tying your personal liability to the debt anyway. You might also find arrangement fees higher or loan-to-value ratios slightly lower. This isn’t a tax issue per se, but it does affect the overall profitability of the investment. It’s worth checking with mortgage brokers what rates/terms your company could get versus personal mortgages. With interest rates currently higher than they’ve been in recent years, even a small rate difference can outweigh some tax savings. Always factor in financing costs under a company structure.
  • Loss of Personal Allowances/Reliefs: Holding property in a company means you personally no longer get certain perks. For instance, individuals each have a Capital Gains Tax annual exemption (£3,000 for 2024–25) that can be used against property sales – companies do not get this; every pound of gain is taxed. Likewise, if you have any personal rental losses carried forward, those can’t be used by the company. A company also doesn’t benefit from your personal tax-free allowance (though you could use that via a salary). These trade-offs are usually minor compared to the big-ticket items above, but they are part of the picture. If you anticipate selling properties, remember a company’s sale profits are taxed at Corporation Tax rates (which could be higher than the 18% basic-rate CGT for individuals, for example).

In summary, incorporation has pros and cons. The tax benefits – lower tax on profits, full interest deductibility, potential IHT advantages, and flexibility of profit withdrawal – need to be balanced against the costs and practicalities – immediate taxes on transferring in, ongoing administrative costs, double taxation on extraction, and financing considerations. For some landlords (especially higher-rate taxpayers with multiple properties they plan to hold long-term), the scales tilt in favor of incorporation. For others (small-scale or basic-rate landlords, or those planning to sell in the short term), staying as an individual may be simpler and more cost-effective.

Conclusion

Choosing whether to hold your property investments through a limited company is a significant decision that should be evaluated case by case. This structured approach can offer substantial tax savings and planning flexibility for the right investor profile – particularly those looking to grow portfolios and pass on wealth efficiently. We’ve seen that lower corporate tax rates, unrestricted mortgage interest relief, and the ability to reinvest profits can make a compelling case for incorporation. Real-world scenarios bear this out: it’s no coincidence that the number of buy-to-let companies has surged fourfold since mortgage interest relief was curtailed for individuals. However, incorporation is not a one-size-fits-all solution. The compliance responsibilities, upfront costs (SDLT/CGT), and the need for careful profit extraction planning mean that professional advice is essential.

Often forming a company for new acquisitions (while leaving existing properties as they are) can be the best option.

Ultimately, operating via a limited company is a powerful tool in the landlord’s tax planning arsenal, but like any tool, it must be used in the right circumstances. By understanding the tax benefits – and the pitfalls – outlined above, property investors can make an informed choice about whether incorporation is the best route for their portfolio. As always, consult us first before making any decisions we can tailor the advice to your specific situation and help navigate the process if you decide to proceed. With the proper planning, incorporating your property business can be a savvy move that pays dividends (quite literally) in the years ahead.

Comparing Investment Property Valuation under FRS 102 and FRS 105 Micro Entity Accounts

Investment property valuation is a critical aspect of financial reporting, influencing stakeholders’ perceptions and strategic decisions. In the UK, two primary financial reporting standards—FRS 102 and FRS 105—offer differing approaches to investment property valuation. Understanding these differences is essential for entities to make informed choices aligning with their financial reporting objectives

FRS 102: Fair Value Measurement

FRS 102 mandates that investment properties be measured at fair value at each reporting date, with changes recognized in profit or loss. This approach reflects current market conditions, providing stakeholders with up-to-date information on the property’s value.​

Key Features:

  • Fair Value Requirement: Investment properties must be revalued to fair value annually.​
  • Profit or Loss Impact: Gains or losses from revaluation are recognized in the income statement.​
  • Deferred Tax Consideration: Revaluation gains may necessitate recognizing deferred tax liabilities.​Steve Collings

Implications:

  • Enhanced Transparency: Fair value accounting offers a realistic view of asset values, aiding stakeholders in decision-making.​
  • Volatility in Earnings: Fluctuations in market value can introduce volatility in reported profits.​
  • Credit Assessment: Up-to-date valuations can positively influence credit ratings by reflecting the current financial position.​

FRS 105: Historical Cost Measurement

FRS 105, applicable to micro-entities, requires investment properties to be measured at historical cost less accumulated depreciation and impairment. Revaluation to fair value is not permitted under this standard.​

Key Features:

  • Cost-Based Measurement: Assets are recorded at purchase price, adjusted for depreciation and impairment.​
  • No Revaluation: Fair value adjustments are not allowed, even if market values change significantly.​
  • Simplified Reporting: The standard aims to reduce the reporting burden for small entities.​

Implications:

  • Stability in Earnings: Absence of revaluation leads to more stable profit figures over time.​
  • Potential Understatement: Asset values may be understated compared to current market conditions, possibly affecting business valuation.​
  • Limited Insight for Stakeholders: Lack of fair value information may hinder stakeholders’ ability to assess the entity’s financial health accurately.​

Comparative Analysis: FRS 102 vs. FRS 105

AspectFRS 102FRS 105
Valuation BasisFair value with annual revaluationHistorical cost; no revaluation permitted
Impact on EarningsPotential volatility due to market fluctuationsStable earnings; no market-driven adjustments
Asset Valuation AccuracyReflects current market conditionsMay not represent true market value
Stakeholder InsightProvides transparent, up-to-date informationLimited visibility into asset appreciation
Credit Rating InfluencePositive, due to realistic asset valuationsNeutral or negative, due to outdated valuations
Business Valuation ImpactEnhanced, reflecting true asset worthPotentially diminished, due to conservative valuations

Strategic Considerations

Entities must weigh the benefits of transparency and accurate asset valuation against the simplicity and stability offered by each standard. FRS 102’s fair value approach may be advantageous for entities seeking to provide stakeholders with current financial information, potentially improving credit ratings and business valuations. Conversely, FRS 105’s cost-based approach simplifies reporting but may not capture the true economic value of investment properties.​IAS Plus

Recommendations:

  • Assess Entity Size and Complexity: Micro-entities may opt for FRS 105 for its simplicity, while larger entities might prefer FRS 102 for comprehensive reporting.​
  • Consider Stakeholder Needs: Entities aiming to attract investors or secure financing may benefit from the transparency of FRS 102.​
  • Evaluate Financial Strategy: Align the choice of standard with long-term financial goals and reporting objectives.​

Conclusion

The choice between FRS 102 and FRS 105 significantly impacts how investment properties are reported, influencing stakeholders’ perceptions and financial decision-making. Entities should carefully consider their specific circumstances, stakeholder requirements, and strategic objectives when selecting the appropriate financial reporting standard.​

Corporate Holiday Lets/Serviced Accommodation and the End of FHL Tax Benefits: Key Implications

In the Spring Budget 2024, the Chancellor announced a significant change that will directly impact companies owning furnished holiday lets/Serviced Accommodation (SA): the Furnished Holiday Lettings (FHL) tax regime will be abolished from April 2025.

This change marks the end of a beneficial tax regime that has been in place for decades, and it carries important implications for tax planning, particularly for companies that have structured their property investments to take advantage of FHL rules.

📌 What Is Changing?

From 6 April 2025, the FHL regime will no longer apply. This means:

  • No more capital allowances on items like furniture and fittings.
  • No Business Asset Disposal Relief (BADR) on the sale of FHL properties (previously allowing 10% CGT rate).
  • No rollover relief when reinvesting proceeds into other trading assets.
  • Section 24 applies to individuals and partnerships

👨‍💼 Why Does It Matter for Companies?

While the FHL regime was originally designed with individuals in mind, many companies have also benefited from the enhanced deductions and CGT treatment. With its removal, companies will now be taxed in the same way as other property businesses.

This will particularly affect:

  • Profit extraction strategies – if profits reduce, dividends and director remuneration may need to be reassessed.
  • Incorporation plans – some landlords may reconsider moving personally owned FHLs into companies now that the tax advantages are disappearing.

🔍 What Should Companies Do Now?

  1. Review planned disposals: If you’re an individual planning to sell a holiday let, the three-year rule allows disposals of holiday let properties up to April 2028 to qualify for BADR, provided the FHL business ceased before 6 April 2025, and all other conditions for BADR are satisfied. This includes ensuring that the disposal is made in good faith without a primary purpose of obtaining tax advantages. Clear evidence and statements may be required to support the claim for relief. BADR can apply to the sale of shares if the above conditions are satisfied. For example:
    • The individual must hold at least 5% of the shares in a trading company or group.
    • The shares must have been held for at least two years, and the individual must have been an employee or officer during this time.
    • The total gains eligible for BADR must not exceed the lifetime limit of £1 million for disposals made after 11 March 2020.
  2. Capital allowances: From 6 April 2025, existing capital allowances related to furnished holiday lettings can generally be carried forward under transitional rules. These allowances will be transferred to the appropriate pool for the corresponding property activity (UK or overseas property business). Elections and short-life asset treatments made before this date will remain valid, without a deemed disposal event as of 5 April 2025. However, capital allowances will not apply to new expenditure on former FHL properties after the regime’s abolition. Owners should carefully review their existing allowances and consider the transitional rules to maximise available relief.
  3. Profit forecasts: Update business plans and tax projections to reflect reduced tax efficiency from 2025.

📝 Final Thoughts

This change underscores the government’s broader aim to simplify property tax treatment and reduce the favourable treatment of short-term letting. For corporate landlords operating holiday lets, this is a key moment to reassess tax strategy and ownership structure.

We are here to help, please book a meeting if you want to discuss the changes

How Section 24 Affects Property Investors – What You Need to Know

Property investment remains one of the UK’s most popular routes to building long-term wealth—but recent tax changes have significantly impacted profitability. One of the most important changes affecting landlords is Section 24 of the Finance (No. 2) Act 2015, commonly referred to as the “mortgage interest relief restriction.”

This restriction now affects Furnished Holiday Lets as well as Buy to Lets and HMO’s.

The changes to Holiday Lets and Serviced Accommodation are covered in this blog.

Holiday Lets – Good news for Capital Allowances – Steve J Bicknell Tel 01202 025252

More details on Section 24 are in this blog

Residential Letting – What is the Finance Cost Allowance and how are Unused Finance Costs used up? – Steve J Bicknell Tel 01202 025252

If you’re a portfolio landlord or considering property investment, understanding Section 24 is essential for financial planning and compliance.

❓ What is Section 24?

Introduced in 2017 and phased in over four years, Section 24 removes the ability for individual landlords to deduct all of their mortgage interest from rental income before calculating their income tax.

Instead of full relief, landlords now receive a basic rate tax credit (20%) on their finance costs.

💡 Why It Matters

If you own property in your personal name, this change can push you into a higher tax bracket—even if your real profits haven’t changed.

Example:

  • Rental income: £40,000
  • Mortgage interest: £25,000
  • Before Section 24: You paid tax on £15,000
  • Now: You pay tax on the full £40,000, then receive a 20% credit on the £25,000 mortgage interest

This could increase your tax bill substantially, especially for:

  • Higher rate taxpayers
  • Portfolio landlords with significant debt
  • Those receiving child benefit or working tax credits, where higher income triggers a clawback

🏛️ Company Ownership as an Alternative

Many investors are now considering buying property through a limited company, which is not affected by Section 24.

Key benefits:

  • Mortgage interest remains fully deductible
  • Corporation tax applies (currently 19–25%)
  • Potential long-term inheritance tax planning advantages

But it’s not right for everyone—incorporation involves costs, complexity, and potential capital gains tax (CGT) or stamp duty implications.

🔎 What Should You Do?

A professional review is essential. At Bicknell Business Advisers, we help landlords and property investors across the UK understand:

  • How Section 24 affects your tax position
  • Whether incorporation is right for you
  • How to structure your investments tax-efficiently
  • Planning strategies to reduce your tax exposure

📞 Book a Free Consultation Today

If you’re unsure how Section 24 is impacting you, or want to explore your options, get in touch today.


📞 Call: 01202 025252
🌐 Visit: www.bicknells.net

At Bicknell Business Advisers, we specialise in helping landlords and property businesses navigate complex tax legislation with clarity and confidence.

Getting ready for MTD for Income Tax and Self Assessment

HM Revenue & Customs’ (HMRC) Making Tax Digital initiative has been gradually evolving for several years now. But did you know that it will soon be mandatory for landlords and small businesses that pay tax through self-assessment to use HMRC’s digital tax system.

Under MTD ITSA, taxpayers are required to submit five returns per tax year: four quarterly updates and a final declaration. The deadlines for the quarterly submissions are 5 August, 5 November, 5 February, and 5 May, with the final declaration due by 31 January following the tax year. While the final declaration effectively replaces the traditional Self Assessment return, taxpayers must still use it to report additional information and finalise their tax liability. Ensuring compliance with these obligations will require the use of compatible software and adherence to the prescribed deadlines.

Making Tax Digital for Income Tax & Self Assessment (or MTD for ITSA, as it’s more commonly known) is likely to be a major change for some taxpayers.

So, are you ready for the upcoming MTD for ITSA rules?

What is MTD for ITSA?

Making Tax Digital (MTD) aims to bring tax into the digital age, moving from annual paper and online tax submissions to quarterly digital uploads of your tax information.

Having to keep detailed digital records sits at the heart of MTD. Taxpayers will need to record all incoming and outgoing transactions using compatible accounting software, and then share this information in an approved digital format with HMRC.

Who will be affected by the MTD for ITSA rules?

MTD for ITSA is already at the beta testing stage and some self-assessment taxpayers have opted in to the system already.

But if you’re a landlord or sole trader who falls into the following categories, MTD for ITSA will soon become a mandatory requirement:

  • From April 2026, for those with qualifying income over £50,000
  • From April 2027, for those with qualifying income over £30,000

How do you get ready for MTD for ITSA?

If you’re already using cloud accounting software to manage your finances, MTD for ITSA won’t be a major challenge. You’re already recording your numbers in a digital format and most of the popular accounting platforms will have MTD for ITSA templates you can fill out.But if you’ve not embraced the latest in accounting tech, it’s important to upgrade ASAP.

To stay compliant, you’ll need to:

  • Keep your records in a digital format
  • Provide digital quarterly updates to HMRC
  • Be able to provide your ITSA return information to HMRC through MTD-compatible software.
  • Talk to us about preparing for MTD for ITSA

If you’re concerned about how MTD for ITSA may affect your finances, come and talk to us

We’ll advise you on the best accounting software and give you guidance on upgrading and preparing your bookkeeping, accounting and tax procedures for MTD for ITSA.

steve@bicknells.net

Companies House – Identity Checks – what you need to know

The Economic Crime and Corporate Transparency Act 2023 introduces significant reforms to UK company law, notably the implementation of identity verification requirements for individuals involved with UK companies. These measures aim to enhance transparency, deter fraudulent activities, and bolster trust in the corporate sector.

Transition Period and Compulsory Nature

Starting 8 April 2025, individuals can voluntarily verify their identity with Companies House. By autumn 2025, this verification becomes mandatory for new directors and Persons with Significant Control (PSCs) upon incorporation or appointment. Existing directors and PSCs will have a 12-month transition period, commencing in autumn 2025, to comply with these requirements, making verification compulsory for them by autumn 2026.

Identification Requirements

To verify identity directly with Companies House via GOV.UK One Login, individuals will need one of the following forms of photo identification:

  • Biometric passport from any country
  • UK photo driving licence (full or provisional)
  • UK biometric residence permit (BRP)
  • UK biometric residence card (BRC)
  • UK Frontier Worker permit (FWP)

Alternatively, verification can be conducted through an Authorised Corporate Service Provider (ACSP).

Role of Authorised Corporate Service Providers (ACSPs)

ACSPs are entities such as accountants, solicitors, and company formation agents that are supervised under anti-money laundering regulations. From 18 March 2025, these firms can apply to become ACSPs. Once registered, ACSPs can verify the identities of their clients and file information on their behalf. The verification process conducted by ACSPs must meet the same standards as those conducted directly with Companies House.

Applicability to Company Filings

The identity verification requirements apply to individuals who set up, run, own, or control a company in the UK, including directors and PSCs. While the verification is primarily associated with roles and appointments, it extends to those filing documents on behalf of a company. Therefore, individuals responsible for submitting filings, such as company secretaries, will also need to verify their identity. However, once an individual has been verified, they are not required to verify their identity each time they file a document.

Individuals Required to Verify Identity

The following individuals are required to verify their identity:

  • Directors (including equivalents such as LLP members)
  • Persons with Significant Control (PSCs)
  • Individuals filing documents on behalf of a company (e.g., company secretaries)

Shareholders who are not PSCs are not required to undergo identity verification under the current regulations.

These reforms represent a significant shift in UK company law, aiming to enhance the integrity of the corporate register and combat economic crime. Companies and individuals involved should prepare to comply with these new requirements within the specified timelines.

We will be applying to become an ACSP as soon as we are licenced by CIMA for this activity, the licences will be available later this year.

steve@bicknells.net

Sources:

Timeline for Companies House ID changes | ICAEW

Verifying your identity for Companies House – GOV.UK

TOMS for Rent to SA – Reducing the Fallout of the Sonder Europe Upper Tribunal Decision

a bedroom with an open terrace

The Upper Tribunal’s decision has significant implications for businesses that lease residential properties and rent them out as serviced apartments. It suggests that such activities may not fall within the scope of TOMS, potentially requiring these businesses to account for VAT at the standard rate on the full value of their supplies, rather than just on their profit margin. This shift could impact the VAT treatment of supplies made by similar operators in the serviced accommodation sector.​

As of March 22, 2025, Sonder Europe Ltd has applied for permission to appeal the Upper Tribunal’s decision regarding the applicability of the Tour Operators’ Margin Scheme (TOMS) to its serviced apartment operations. The Upper Tribunal had previously overturned the First-tier Tribunal’s ruling, siding with HMRC in determining that Sonder’s activities did not qualify for TOMS. We are currently awaiting the court’s determination on whether the appeal will be allowed.​

First-tier Tribunal (FTT): The decision was released on 5 July 2023. ​GOV.UK

Upper Tribunal (UT): The decision was released on 14 January 2025. ​GOV.UK

Discretionary Relief from Retrospective VAT Registration

If you didn’t register for VAT because you believed TOMS applied and the margin was below the VAT threshold, you would be required to do a back dated registration, however you could ask HMRC for Discretionary Relief.

Retrospective registration may not always be imposed if exceptional circumstances exist. HMRC may exercise discretion to waive backdating if it would be unreasonable to do so, or if the trader demonstrates a genuine misunderstanding or error at the time of registration

To make a compelling case to HMRC for discretionary relief from retrospective VAT registration, based on a genuine misunderstanding tied to the Sonder Europe case, you would need to write a detailed explanation highlighting the following points:

1. Establish the Context of the Misunderstanding

  • Explain that the decision to not register for VAT was based on reliance on the First Tier Tribunal (FTT) decision in favour of Sonder Europe. Emphasise that this decision created a reasonable belief that the application of TOMS to similar business operations was lawful and acceptable.
  • Reference the FTT’s decision, explaining how it shaped the industry practice and created precedent for similar businesses to believe TOMS was the correct VAT treatment for their supplies.Example: “The company relied on the First Tier Tribunal decision in the case of Sonder Europe, which ruled that TOMS applied to specific supplies. This ruling was widely understood in the industry as legitimate guidance for similar businesses. Consequently, the company believed that its operations fell within the scope of TOMS, and its taxable margin did not exceed the VAT threshold under this scheme.”

2. Demonstrate Good Faith

  • Establish that the business acted in good faith and sought to comply with VAT rules based on the prevailing interpretation at the time.
  • If applicable, include any evidence of professional advice or guidance sought (e.g., from accountants or tax advisors) that corroborated the decision to apply TOMS.Example: “The company sought professional advice from its tax advisor, who confirmed that the interpretation of TOMS, as outlined in the Sonder Europe FTT decision, was appropriate for the company’s operations. At no point did the company knowingly seek to avoid VAT registration or misapply the rules.”

3. Highlight the Impact of the Upper Tribunal Decision

  • Explain that the Upper Tribunal’s (UT) decision against the application of TOMS has now significantly changed the legal interpretation of VAT treatment for similar businesses. Emphasise that this decision was unforeseen and altered the business’s understanding of its VAT obligations.Example: “The Upper Tribunal’s decision to overturn the FTT ruling in the Sonder Europe case has fundamentally changed the interpretation of VAT law regarding TOMS. This decision was unexpected and directly affected the company’s prior understanding of its VAT obligations.”

4. Request for Discretionary Relief

  • Argue that it would be unreasonable to impose retrospective VAT registration under these circumstances, as the misunderstanding was genuine and based on a credible legal precedent at the time.
  • Highlight that forcing retrospective registration would impose undue financial and operational burdens on the business, particularly as the business acted reasonably and in good faith.Example: “In light of the genuine misunderstanding arising from reliance on the FTT decision and the subsequent unforeseen overturning of that decision by the Upper Tribunal, we respectfully request that HMRC exercise its discretionary care and management powers to waive retrospective VAT registration. We believe it would be unreasonable to impose retrospective liabilities in this instance, given the company’s good faith reliance on prevailing legal precedent.”

5. Propose Future Compliance

  • Reassure HMRC that the business is now fully committed to complying with the revised VAT treatment as clarified by the UT decision. Include a commitment to register for VAT moving forward (if required).Example: “The company is committed to ensuring full compliance with VAT obligations and will immediately register for VAT in accordance with the revised interpretation of the law. We are prepared to work with HMRC to ensure all future VAT returns are accurate and up to date.”

Should VAT Registered Business restate previous returns using Standard VAT?

The key issues include whether VAT must be restated retrospectively on the standard VAT scheme from the date of TOMS adoption or whether adjustments may be limited to future VAT returns. Additionally, if Sonder’s appeal proceeds should you keep using TOMS until thats ruled on?

Restating VAT Retrospectively
The UT ruling against the application of TOMS does not inherently require VAT to be restated retrospectively unless the UT decision explicitly mandates such action. Since HMRC policy typically supports prospective application of changes, operators may not need to restate VAT using the standard VAT scheme for prior periods unless exceptional circumstances apply 

Rules explicitly stating that the Upper Tribunal mandates retrospective action in VAT compliance are not absolute but situational. Retrospective compliance is only required:

  1. When the Upper Tribunal explicitly mandates such action in its decision.
  2. When the decision constitutes a reinterpretation of the law, which inherently requires retrospective application, as per HMRC Brief 24/11.

The relevant excerpt from HMRC Brief 24/11 is as follows:

“HMRC usually announces changes in its policy or its interpretation of the law in advance. Whilst changes in policy are given a future implementation date, a change in interpretation of the law will mean that the law should always have been applied in a certain way, so the change is retrospective. On this basis, HMRC has stated that it: will not require a correction of past errors, based on the old interpretation of the law, so the new interpretation can be applied from a current or future date; will accept a correction of past errors if the business will not be better off and HMRC no worse off than if the correction was not made; and may exercise its discretion not to collect outstanding VAT where the business has been misdirected by an HMRC officer (who gave a clear ruling when in possession of all the facts).” (11)

Adjustments for Future VAT Returns
HMRC is likely to require compliance with the UT’s ruling from the date of the decision. Future VAT returns should reflect the standard VAT scheme unless the UT ruling is overturned upon appeal

Effect of Sonder’s Appeal Request
Sonder’s request to appeal the UT decision may temporarily delay the implementation of the ruling until the appeal is resolved. However, unless a stay of execution is granted, the UT ruling remains binding during the appeal process. Businesses relying on the FTT decision should comply with the UT’s ruling unless the appeal is successful. The tribunal system allows for appeals to the Court of Appeal on points of law only.

Conclusion

When the decision first came out many advisors were of the opinion that retrospective corrections were needed, in the same way that many businesses which adopted TOMS retrospectively made reclaims as TOMS saved them significant amounts of VAT. This may still be required, as HMRC may now reject the switch to TOMS, however, as it hasn’t been mandated this would give the option to change to standard going forward, pending further developments.

steve@bicknells.net