Forgot to Declare Rental Income? What to Do Before HMRC Contacts You

Forgot to Declare Rental Income? HMRC Let Property Campaign 2026

HMRC’s Let Property Campaign Explained – Undeclared Rent, Penalties, Interest and How Far Back HMRC Can Go

By Steve Bicknell FCMA, CGMA

Have you received rental income that you haven’t declared to HMRC?

Perhaps you:

inherited a property and started letting it;
became an accidental landlord;
own a rental property jointly with somebody else;
assumed your letting agent dealt with the tax;
thought there was no profit because the rent only covered the mortgage;
spent substantial amounts repairing or improving the property;
live abroad but rent out a UK property;
or simply didn’t realise the income needed to be reported.

If so, ignoring the problem is unlikely to make it disappear.

HMRC operates the Let Property Campaign, which gives many individual residential landlords an opportunity to disclose previously undeclared rental income and bring their tax affairs up to date. HMRC’s current guidance was updated on 6 April 2026.

And there is an important reason to deal with the problem sooner rather than later:

IT CAN BE BETTER TO APPROACH HMRC BEFORE HMRC APPROACHES YOU

HMRC specifically distinguishes between unprompted and prompted disclosures. A disclosure is unprompted where, at the time it is made, you have no reason to believe HMRC has discovered or is about to discover the failure. Otherwise it is prompted.

Let Property Campaign – Quick Answer

If you have undeclared rental income, don’t simply put several years of old rent on your next Self Assessment return and assume the problem is fixed.

The correct route depends on the circumstances, but for many individual residential landlords the process is broadly:

1. Establish what has not been declared

Identify the property, ownership, rental periods and affected tax years.

2. Notify HMRC

Tell HMRC that you intend to make a disclosure.

3. Receive HMRC’s disclosure reference

HMRC provides a Disclosure Reference Number and payment reference.

4. Calculate what is owed

This can include:

TAX + INTEREST + PENALTIES

5. Submit the disclosure

HMRC currently gives you 90 days from its acknowledgement of the notification to submit the disclosure.

6. Pay HMRC

Payment is normally due by the same deadline. If you cannot pay in full, HMRC says you should discuss the position with it before submitting the disclosure.

What Is HMRC’s Let Property Campaign?

The Let Property Campaign has been operating since 2013.

It is aimed at individual landlords who owe tax from letting residential property, including property in the UK and overseas.

It can potentially cover people who:

rent one residential property;
own several rental properties;
rent a room above the Rent a Room threshold;
have relevant holiday letting income;
live abroad and rent UK residential property;
or have inherited a property and subsequently rented it out.

This means the campaign is not just for professional landlords with large portfolios.

Some of the people most likely to get into difficulty are those who never really regarded themselves as landlords in the first place.

The underlying property-sector material also reflects this: examples include inherited property, joint ownership and landlords who misunderstood the effect of mortgage payments or improvements on taxable profit.

Who Cannot Use the Let Property Campaign?

The campaign is primarily for individual residential landlords.

It is not the disclosure route for:

COMPANIES

or:

TRUSTS

and other disclosure routes may be needed for different types of taxpayer or income.

That does not mean undeclared income can simply be ignored. It means the correct HMRC disclosure mechanism needs to be identified.

Common Ways Landlords End Up With Undeclared Rental Income

Not every case begins with somebody deliberately deciding not to pay tax.

The Accidental Landlord

Sarah moves in with her partner but keeps her previous home and rents it out.

She has always been taxed through PAYE and has never normally completed a Self Assessment return.

Three years later she discovers that the rental income should have been considered for tax.

The Inherited Property

John inherits his mother’s house.

Rather than sell it immediately, he rents it out.

He assumes that because the property was inherited and much of the rent is being spent maintaining it, there is nothing to report.

That assumption may be wrong.

Inherited residential property can still generate taxable rental income.

Joint Owners

Two siblings jointly own a rental property.

The rent goes into one bank account and neither has correctly declared their share.

Each individual’s tax position needs to be considered separately.

“The Mortgage Used All the Rent”

David receives £18,000 a year in rent.

His mortgage payments, repairs and other costs come to almost £18,000.

He concludes:

“I haven’t made any money, so there can’t be any tax.”

Unfortunately:

CASH FLOW AND TAXABLE RENTAL PROFIT ARE NOT THE SAME THING

Can HMRC Find Out That I Own a Rental Property?

You should not assume that because HMRC has not contacted you yet, it does not know about the property.

HMRC can compare information it holds with information from other sources.

The more important point is:

DON’T BASE YOUR DECISION TO DISCLOSE ON WHETHER YOU THINK HMRC WILL FIND OUT

If you know there is undeclared rental income, investigate the position.

Waiting for HMRC to contact you may also affect whether the disclosure is treated as prompted or unprompted.

How Far Back Can HMRC Go for Undeclared Rental Income?

This is one of the first questions landlords usually ask.

And the answer is not simply:

“HMRC can always go back 20 years.”

The period depends heavily on what happened and why the tax was underpaid.

Broadly, different time limits can apply depending on whether the taxpayer took reasonable care, was careless, acted deliberately, or failed to notify HMRC of the tax liability.

The practical message is:

THE REASON FOR THE ERROR MATTERS

not just the number of years the property has been rented.

That is why preparing a clear chronology of what happened is so important.

Reasonable Care, Careless or Deliberate?

You should not simply choose whichever description produces the lowest penalty.

The facts need to support the position.

There can be a significant difference between someone who:

tried to get their affairs right but still made an error;
failed to take reasonable care;
or knew tax was due and deliberately failed to report the income.

Those circumstances can affect:

HOW FAR BACK HMRC CAN GO

and:

THE PENALTY POSITION

The underlying disclosure guidance also distinguishes careless, deliberate and deliberate-and-concealed behaviour, with increasingly serious penalty consequences.

Prompted vs Unprompted Disclosure – Why It Matters

This distinction can be very important.

Unprompted Disclosure

HMRC says a disclosure is unprompted where the taxpayer has no reason to believe HMRC has discovered or is about to discover the failure.

Prompted Disclosure

Otherwise the disclosure is prompted.

HMRC expressly says it wants to encourage taxpayers to come forward voluntarily.

So if you already know there is a problem:

DON’T WAIT FOR THE HMRC LETTER SIMPLY BECAUSE IT HASN’T ARRIVED YET

Does an Unprompted Disclosure Mean No Penalty?

Not necessarily.

But the timing and quality of the disclosure can influence the penalty outcome.

HMRC considers matters including:

TELLING

HELPING

GIVING ACCESS

The source material describes these as providing a full explanation, helping HMRC establish the correct liability and providing access to supporting records.

A carefully prepared disclosure is therefore very different from simply sending HMRC a rough estimate.

Worked Example – Five Years of Undeclared Rental Income

Consider a deliberately simplified example.

A landlord discovers that rental income has not been correctly declared for five years.

After reconstructing the records:

	Illustrative amount
Gross rental income	£38,000
Allowable property expenses	(£12,000)
Taxable rental profits	£26,000
Estimated additional Income Tax	£7,000
Estimated late-payment interest	£1,400
Illustrative penalties	£1,200
Illustrative total payable	£9,600

This is only an illustration.

An actual disclosure should be calculated tax year by tax year, taking account of:

the landlord’s other income;
allowances;
applicable tax rates;
finance-cost rules;
losses;
interest;
behaviour;
and the appropriate penalty rules.

The source working example illustrates the same underlying principle: unpaid tax, penalties and late-payment interest are separate components of the eventual liability.

“But My Mortgage Cost More Than the Rent – Surely There Is No Tax?”

This is a very common misunderstanding.

Imagine:

Rent received: £18,000
Mortgage payments: £14,000
Other costs: £3,000

Cash remaining:

£1,000

That does not automatically mean taxable property profit is £1,000.

Mortgage payments may include:

CAPITAL REPAYMENT

and:

INTEREST

Repaying borrowed capital is not an ordinary deductible property expense.

And for individual residential landlords, qualifying finance costs are subject to specific rules rather than being treated like an ordinary expense deduction. HMRC confirms that the full mortgage payment is not deductible and that residential mortgage interest is subject to the finance-cost restriction rules.

Therefore:

CASH PROFIT ≠ TAXABLE RENTAL PROFIT

“I Spent Thousands Renovating the Property – Can’t I Deduct It?”

Again, it depends on the nature of the expenditure.

There is a major distinction between:

REPAIRS

and:

CAPITAL IMPROVEMENTS

HMRC allows qualifying repairs and maintenance as property-business expenses, but improvements and other capital expenditure are not ordinary deductions against rental income.

So do not simply total every builder’s invoice and deduct it from the rent.

What Expenses Can Potentially Be Claimed?

Depending on the year and the circumstances, qualifying expenses can include items such as:

letting agent fees;
accountants’ fees;
buildings and contents insurance;
repairs and maintenance;
utilities paid by the landlord;
service charges;
ground rent;
cleaning and gardening;
and other direct costs of letting the property.

The source checklist similarly identifies agent statements, repairs, insurance, service charges, mortgage-interest information and replacement domestic items as useful disclosure records.

What If I Don’t Have All the Old Records?

This is extremely common, particularly where the problem goes back many years.

But:

MISSING RECORDS DON’T MEAN YOU SHOULD SIMPLY ACCEPT A GUESS

Historic property accounts can often be reconstructed from:

bank statements;
letting-agent statements;
tenancy agreements;
mortgage statements;
credit-card statements;
insurance records;
invoices;
service-charge statements;
council tax records;
emails;
deposit information;
and other evidence.

The source material specifically anticipates reconstructing missing rental history from estimates, emails and tenancy-deposit information where necessary.

And this can make a very substantial difference.

Real Case Study – HMRC Assessment Reduced by £32,085

In one previous case, HMRC contacted a landlord about undeclared property income going back to 2010/11.

HMRC’s original assessment was:

£54,798

We reconstructed the historic records using:

bank statements;
letting records;
expenses;
credit-card statements;
and other supporting information.

The work became effectively a forensic reconstruction exercise, with information and questions going backwards and forwards with HMRC over many months.

HMRC ultimately issued a revised assessment of:

£22,713

The reduction was:

£32,085

The case demonstrates an important principle:

DON’T ASSUME HMRC’S FIRST FIGURE IS NECESSARILY THE FINAL ANSWER

The objective is not to invent expenses or artificially reduce the liability.

It is to establish the correct position supported by the best available evidence.

Read the full £32,085 Undeclared Property Income case study

Free Download – Let Property Campaign Checklist

We have prepared a practical checklist to help landlords identify the records and information likely to be needed.

It covers:

property ownership;
letting history;
rent received;
allowable expenditure;
mortgage information;
missing records;
other taxable income;
circumstances surrounding the omission;
and the HMRC disclosure process.

Use this CTA button on the blog:

FREE DOWNLOAD

Free Checklist Download

Let Property Campaign – Landlord Disclosure Checklist

Download the Let Property Campaign Landlord Disclosure Checklist

What Information Should You Gather?

Before calculating a disclosure, I would normally want to establish:

Property

full address;
date acquired;
ownership percentages;
changes in ownership;
whether the property has now been sold.

Letting History

date letting commenced;
tenancy periods;
void periods;
gross rents for each tax year;
letting-agent statements.

Expenses

repairs;
insurance;
agent fees;
service charges;
professional fees;
replacement items;
mortgage interest/finance costs;
other property expenditure.

Wider Tax Position

employment income;
self-employment income;
pensions;
other property income;
previous Self Assessment returns;
losses brought forward.

Explanation

Prepare a chronology explaining:

when the property was first let;
what you understood the tax position to be;
whether advice was obtained;
why the rent was not declared;
when the issue was discovered;
and what happened afterwards.

What If the Property Is Jointly Owned?

Do not automatically report all the rental income on one person’s disclosure.

The ownership and tax treatment need to be established.

This is particularly important for:

spouses and civil partners;
siblings;
unmarried couples;
unequal ownership;
and situations where all rent happened to be paid into one person’s bank account.

What If the Property Has Already Been Sold?

Selling the property does not make historic rental income disappear.

There may also be a separate:

CAPITAL GAINS TAX

position to review.

The disposal and the historic rental income should therefore both be considered.

What About Overseas Rental Property?

The Let Property Campaign can potentially cover undisclosed residential rental income from overseas property as well as UK property.

Offshore cases can be more complex because of:

residence;
foreign tax;
double-taxation relief;
and potentially different penalty rules.

Professional advice is especially sensible where overseas property is involved.

How Is Interest Calculated?

Interest is separate from the penalty.

HMRC charges late-payment interest because the tax was paid later than it should have been.

A multi-year disclosure therefore often requires a separate interest calculation for each affected tax year.

The source working illustrates just how much the interest can build across several historic years.

The 90-Day Let Property Campaign Process

STEP 1 – NOTIFY HMRC

Tell HMRC that you intend to disclose.

↓

STEP 2 – RECEIVE THE DISCLOSURE REFERENCE

HMRC provides the relevant reference numbers.

↓

STEP 3 – RECONSTRUCT THE PROPERTY ACCOUNTS

Calculate the correct result for every relevant year.

↓

STEP 4 – CALCULATE TAX

Take account of other income, allowances, losses and year-specific tax rules.

↓

STEP 5 – CALCULATE INTEREST

Calculate late-payment interest.

↓

STEP 6 – CALCULATE PENALTIES

Consider:

behaviour

prompted vs unprompted

quality of disclosure

↓

STEP 7 – SUBMIT THE DISCLOSURE

Normally within:

90 DAYS

↓

STEP 8 – PAY HMRC

or agree an appropriate payment arrangement.

The source material sets out the same broad sequence: notification, calculation and submission within the 90-day window, followed by payment.

What If I Can’t Afford to Pay HMRC?

Do not let inability to pay immediately stop you from addressing the tax problem.

HMRC has a dedicated Let Property Campaign contact route and advises taxpayers who need help with the campaign to contact it.

The sensible approach is to establish the correct liability and discuss affordability rather than ignoring the disclosure altogether.

Will HMRC Automatically Accept My Disclosure?

No.

HMRC can review the disclosure and request further information.

That is another reason why accurate calculations and supporting evidence matter.

A properly prepared disclosure should be capable of explaining:

how the figures were calculated;
what assumptions were made;
why the omission occurred;
and what records support the position.

Should I Just Wait and See Whether HMRC Contacts Me?

In my view:

NO

If you have identified undeclared rental income, investigate it now.

Waiting can:

increase interest;
leave you dealing with the problem on HMRC’s timetable;
and potentially turn an unprompted disclosure into a prompted one.

HMRC’s own guidance says it wants to encourage unprompted disclosures.

Let Property Campaign – Decision Tree

Have you received rental income?

→ The Let Property Campaign probably is not relevant.

YES

↓

Was all taxable rental income correctly reported?

YES

→ A historic disclosure may not be needed.

NO / NOT SURE

↓

Has HMRC already contacted you about the rent or property?

INVESTIGATE AN UNPROMPTED DISCLOSURE NOW

YES

TAKE ADVICE BEFORE RESPONDING

↓

Establish:

YEARS + RENT + EXPENSES + FINANCE COSTS + OTHER INCOME

↓

Calculate:

TAX + INTEREST + PENALTIES

↓

Submit the appropriate disclosure and make sure current reporting is brought fully up to date.

Frequently Asked Questions

I forgot to declare rental income. What should I do?

Establish the tax years and amounts involved and consider whether HMRC’s Let Property Campaign is the correct disclosure route.

Can HMRC go back 20 years?

Potentially, depending on the circumstances. The reason for the underpayment and whether you failed to notify HMRC are important.

What if the rent only covered my mortgage?

That does not necessarily mean there is no taxable profit. The full mortgage payment is not an allowable rental expense.

What if I spent thousands renovating the property?

Repairs may potentially be deductible. Improvements and other capital expenditure generally are not ordinary deductions against rental income.

What if I have no records?

Historic accounts can often be reconstructed using bank statements, letting-agent statements, mortgage records and other available evidence.

What if HMRC’s estimate looks too high?

Check it carefully. Our previous property case resulted in a £54,798 HMRC assessment being reduced to £22,713 after the historic records were reconstructed.

Can my accountant make the disclosure?

Yes, an agent can assist with the disclosure process.

Can a limited company use the Let Property Campaign?

The campaign is aimed at individual landlords; other disclosure routes are used for companies.

What if HMRC has already written to me?

Do not ignore the letter. The prompted/unprompted position and the correct response need to be considered carefully.

How long do I get to complete the disclosure?

HMRC currently gives 90 days from acknowledgement of notification.

How Bicknell Business Advisers Can Help

A Let Property Campaign disclosure involves much more than adding up rent received.

We can help:

1. Establish the history

Identify the properties, ownership, letting dates and years affected.

2. Reconstruct the rental accounts

Using bank statements, letting records, mortgage statements, credit cards and other available evidence.

3. Identify allowable expenses

Including repairs versus improvements and the correct treatment of finance costs.

4. Calculate each tax year

Taking account of other income, allowances, tax rates and losses.

5. Calculate interest and penalties

Including consideration of behaviour and whether the disclosure is prompted or unprompted.

6. Prepare the explanation

Set out what happened and why.

7. Deal with HMRC

Assist with notification, submission and queries.

8. Get the current position right

Make sure ongoing rental income is correctly reported going forward.

Don’t Wait for HMRC to Find the Problem

Discovering that several years of rental income have not been declared can be worrying.

But the sensible response is to establish:

WHAT SHOULD HAVE BEEN DECLARED

then:

HOW MANY YEARS NEED CORRECTING

then:

WHAT TAX, INTEREST AND PENALTIES ARE ACTUALLY DUE

And as our £32,085 case study demonstrates, properly reconstructing the records can make a very significant difference.

The objective is not to produce the lowest possible figure.

It is to produce the:

CORRECT, EVIDENCED FIGURE

and make a complete disclosure.

If you have undeclared rental income, inherited a property that has been let, received an HMRC letter or are simply unsure whether historic rental income was correctly reported, Bicknell Business Advisers can review the position and help you decide the appropriate next step.

Useful Blogs

Making Tax Digital for Income Tax – Understanding Quarterly Updates

How Landlords Can Legally Reduce Tax by Changing the Split of Rental Income

ATED Revaluation 2027 – Could Your Property Company Be Caught by the £500,000 Tax Trap?

Landlords Face Higher Tax Rates from April 2027 – How Much More Will You Pay?

About the Author

Steve Bicknell FCMA, CGMA is Managing Director of Bicknell Business Advisers Limited, specialising in property taxation, landlord tax planning, SDLT, Capital Gains Tax and property company structures throughout the UK.

Should Your Limited Company Buy a New or Second-Hand Electric Car?

New or Second-Hand Electric Car Through Your Limited Company?

New vs Used EV Tax Explained – Capital Allowances, BIK, VAT, Grants and Mileage for 2026/27

By Steve Bicknell FCMA, CGMA

You have found two electric cars.

One is brand new.

The other is two or three years old.

The second-hand car may be thousands of pounds cheaper — but the new car could potentially qualify for 100% First-Year Capital Allowances.

So which is actually better?

For a limited company in 2026/27, the answer is more complicated than simply comparing the purchase prices.

You need to consider:

100% capital allowances on qualifying new EVs;
14% writing-down allowances on second-hand EVs;
the 4% electric company-car Benefit in Kind rate;
the original list price of a second-hand car;
Corporation Tax;
VAT;
government EV grants;
charging costs;
business mileage;
depreciation;
Vehicle Excise Duty;
finance;
and what happens when you eventually sell the car.

And there is a third option which shouldn’t be overlooked:

BUY THE EV PERSONALLY AND CLAIM 55P PER BUSINESS MILE.

Let’s compare them.

Quick Answer – New EV, Used EV or Personal Ownership?

	New EV – Company	Used EV – Company	Personally Owned EV
Company funds purchase	Yes	Yes	No
100% zero-emission FYA	Potentially yes	No	No company CA
Capital allowances	Potentially 100%	Normally 14% WDA	—
2026/27 EV BIK	4%	4%	None
BIK based broadly on original list price	Yes	Yes	—
Electric Car Grant	Potentially	No	Potentially on eligible new EV
AMAP – first 10,000 business miles	No	No	55p
Company owns car	Yes	Yes	No
VAT on purchase with private availability	Usually blocked	Usually blocked	—
Initial depreciation	Potentially high	Often substantially absorbed already	Personal cost

The biggest tax difference between buying a new and second-hand EV through your company is generally the timing of the:

CAPITAL ALLOWANCES.

Why Are New Electric Cars So Tax-Efficient?

A qualifying new and unused zero-emission car can currently qualify for a:

100% FIRST-YEAR ALLOWANCE

That potentially allows the company to deduct the entire qualifying cost from taxable profits in the relevant accounting period.

For Corporation Tax purposes, the current relief runs until:

31 MARCH 2027

and for Income Tax purposes until:

5 APRIL 2027.

This relief is particularly valuable because cars are excluded from:

Annual Investment Allowance;
Full Expensing;
and the general 40% First-Year Allowance.

A qualifying new zero-emission car has its own specific 100% FYA.

Example – £50,000 New Electric Car

Suppose Consultancy 4 Business Ltd buys a qualifying brand-new zero-emission car for:

£50,000

Potential First-Year Allowance:

£50,000 × 100% = £50,000

If the company obtains tax relief at 25%, the simple illustrative Corporation Tax reduction is:

£50,000 × 25% = £12,500

POTENTIAL CT SAVING: £12,500

That is an extremely valuable timing advantage.

But it does not mean a £50,000 EV really costs £37,500.

The company has still spent £50,000 and needs to consider depreciation, finance, running costs, BIK and eventual disposal.

The actual Corporation Tax benefit also depends on the company’s taxable profits and applicable Corporation Tax rate.

What Counts as New and Unused?

Don’t assume that:

“new to me”

means:

“new and unused”

for capital allowance purposes.

The conditions need to be checked.

Limited mileage arising from matters such as delivery, testing, customer test drives or demonstrator use does not necessarily mean a vehicle is second-hand.

Similarly, pre-registration does not automatically prevent qualification.

So if you’re considering a:

PRE-REGISTERED EV

or:

DEMONSTRATOR

it is worth checking the facts before assuming the 100% allowance has been lost.

What About a Second-Hand Electric Car?

A second-hand EV does not qualify for the special 100% zero-emission car FYA.

Instead, a zero-emission car will generally fall within the:

MAIN-RATE CAPITAL ALLOWANCE POOL.

The main writing-down allowance rate reduced from 18% to:

14%

from 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax.

Accounting periods spanning the change can have a hybrid rate.

Example – £50,000 Second-Hand EV

Suppose Consultancy 4 Business Ltd instead pays:

£50,000

for a second-hand zero-emission car.

Using a simple full-year 14% illustration:

£50,000 × 14% = £7,000

At an illustrative 25% Corporation Tax rate:

£7,000 × 25% = £1,750

Compare that with our qualifying new car:

	New EV	Used EV
Purchase price	£50,000	£50,000
Illustrative first-year CA	£50,000	£7,000
Illustrative CT reduction @25%	£12,500	£1,750
Difference in first-year CT relief		£10,750

That is a very substantial difference.

But it is primarily a difference in the timing of tax relief.

The second-hand EV hasn’t necessarily lost all the remaining capital allowances — they are generally obtained more slowly.

But the Used EV Could Be £20,000 Cheaper

This is where tax relief can distract from the real commercial decision.

Suppose the choice is:

Brand-new EV

£50,000

versus:

Three-year-old equivalent

£30,000

The new EV may potentially produce a £50,000 FYA.

The £30,000 used EV would have an illustrative first-year 14% WDA of:

£30,000 × 14% = £4,200

At 25% CT, that’s an illustrative first-year tax reduction of:

£1,050

But the used car required:

£20,000 LESS CASH

to buy.

That’s considerably more than the difference in our illustrative first-year Corporation Tax savings.

So remember:

DON’T SPEND £1 SIMPLY TO SAVE 25P OF TAX.

Tax is only part of the calculation.

Are There Still Government Grants for Electric Cars?

YES.

The Government’s Electric Car Grant currently gives discounts on qualifying new zero-emission cars.

There are two grant bands:

Band 1

UP TO £3,750

Band 2

UP TO £1,500

You don’t normally claim the grant yourself.

The seller applies the grant as a discount to the purchase price.

But not every electric car qualifies.

The scheme applies to approved vehicles satisfying conditions including zero tailpipe emissions, minimum range, warranties, sustainability requirements and price limits.

The main Electric Car Grant price cap is currently £37,000 RRP, although particular rules can allow certain variants in the same interpolation family up to £42,000.

That means our hypothetical £50,000 new EV would not ordinarily qualify for the standard Electric Car Grant.

This is important — don’t add £3,750 to the tax saving on a £50,000 car unless the particular vehicle actually qualifies.

The list of eligible vehicles changes, so check the current Government list before ordering.

New EV – Potential Double Advantage

For an eligible qualifying new EV, there could therefore be:

ELECTRIC CAR GRANT

plus:

100% FIRST-YEAR ALLOWANCE

plus the low:

4% EV BIK RATE.

That can significantly narrow the economic difference between a new and nearly-new EV.

Benefit in Kind – New and Used EVs Get the Same Percentage

The low Benefit in Kind rate remains one of the biggest attractions of putting an EV through a limited company.

For a zero-emission company car, the appropriate percentage is:

2026/27

4%

2027/28

5%

2028/29

7%

2029/30

9%

So a second-hand EV doesn’t suffer a higher percentage simply because it is used.

But there is a trap.

BIK Uses List Price – Not What You Paid Second-Hand

Suppose your company buys a three-year-old EV for:

£30,000

but its relevant original list price was:

£50,000.

The company-car BIK is broadly based on the relevant list price and taxable accessories — not the £30,000 your company paid.

At 4%:

£50,000 × 4% = £2,000 taxable benefit

So the BIK could broadly be the same as on a brand-new £50,000 EV.

THE USED PRICE FALLS.

THE BIK LIST PRICE DOESN’T FALL WITH IT.

This is an important consideration when looking at heavily depreciated premium EVs.

What Does a £2,000 EV Benefit Actually Cost?

For a £50,000 relevant list price and a 4% BIK percentage:

TAXABLE BENEFIT = £2,000

Illustratively, the employee/director’s Income Tax could be:

Tax rate	Illustrative tax
20%	£400
40%	£800
45%	£900

The company will also normally pay Class 1A National Insurance.

Even after allowing for that, the BIK can remain dramatically lower than on many petrol or diesel company cars.

New £50,000 vs Used £30,000 – The Interesting Comparison

	New EV	Used EV
Company purchase price	£50,000	£30,000
Original list price	£50,000	£50,000
2026/27 BIK rate	4%	4%
Illustrative taxable benefit	£2,000	£2,000
Potential first-year CA	£50,000	£4,200*
Illustrative CT reduction @25%	£12,500	£1,050*
Cash purchase difference	—	£20,000 cheaper

*Simple 14% full-year illustration.

Now the decision is much less obvious.

The new car wins on immediate tax relief.

The used car wins on purchase price.

And both have the same illustrative BIK because they originally had the same list price.

Depreciation May Matter More Than Tax

This is probably the most important commercial point in this article.

Imagine a new EV costs:

£50,000

and is worth:

£25,000

three years later.

That’s a:

£25,000 LOSS IN VALUE.

Receiving accelerated Corporation Tax relief doesn’t eliminate that economic loss.

A two or three-year-old EV may allow you to buy after somebody else has absorbed much of the initial depreciation.

So the real comparison is closer to:

PURCHASE PRICE

minus:

EXPECTED RESALE VALUE

plus:

FINANCE AND RUNNING COSTS

plus:

PERSONAL BIK TAX

minus:

COMPANY TAX RELIEF.

What Happens When the Company Eventually Sells the EV?

Don’t look at the 100% FYA in isolation.

Capital allowance disposal rules apply when the company eventually sells the vehicle.

So claiming £50,000 upfront doesn’t mean the proceeds received when the car is sold are ignored.

A proper whole-life calculation should therefore consider:

PURCHASE + OWNERSHIP + DISPOSAL.

What About VAT When Buying an Electric Car?

This is one of the most misunderstood EV tax rules.

ELECTRIC DOES NOT MEAN VAT-FREE.

An electric car is still a car for VAT purposes.

VAT on buying a car is generally blocked where the vehicle is available for private use.

Full VAT recovery is normally only possible where the relevant conditions are satisfied — for example, where the car is not available for private use or is acquired for certain qualifying activities.

So if a director buys an electric car through the company and uses it both privately and for business:

DO NOT ASSUME THE COMPANY CAN RECLAIM THE PURCHASE VAT.

What About VAT on Leasing an EV?

Leasing is different.

Where a VAT-registered business leases a car that has private use, it can normally recover:

50% OF THE VAT ON THE LEASE RENTAL

subject to the normal rules.

VAT on separately charged maintenance can potentially have different treatment.

This is one reason why a proper comparison between:

cash purchase;
HP;
PCP;
and lease

is worthwhile before signing the agreement.

What About VAT on Charging an Electric Car?

This is another area where the rules differ from petrol and diesel.

HMRC says VAT incurred by a business on charging an EV can be recovered to the extent it relates to business use where charging takes place:

at the workplace; or
at a public charging point,

subject to the normal VAT rules.

Mileage records should be maintained to identify business and private use where necessary.

But home charging by an employee is different.

Where an employee charges an EV at home, HMRC’s published position is that the electricity is supplied to the employee, not the employer.

The employer therefore cannot currently recover VAT on that home electricity under HMRC’s published guidance.

Does the VAT Fuel Scale Charge Apply to an Electric Car?

This needs particular care.

Businesses with petrol or diesel cars sometimes reclaim VAT on road fuel and account for private use using HMRC’s:

VAT ROAD FUEL SCALE CHARGE.

For 1 May 2026 to 30 April 2027, the lowest CO₂ band — 120g/km or less — has an annual VAT-inclusive scale-charge value of £657.

But:

DON’T SIMPLY APPLY THE £657 SCALE CHARGE TO AN EV BECAUSE IT HAS 0G/KM CO₂.

HMRC’s VAT Notice deals with electricity for charging EVs separately from its rules on road fuel and fuel scale charges.

HMRC says businesses should identify business/private electricity use through mileage records where appropriate.

The practical VAT treatment therefore depends on:

where the EV is charged;
who receives the supply of electricity;
who pays for it;
whether the business has incurred recoverable VAT;
and the business/private mileage split.

This is another reason to keep good mileage and charging records.

Are There Still Grants for EV Chargers?

YES.

The Workplace Charging Scheme currently contributes towards the purchase and installation of EV chargepoints at eligible workplaces.

The scheme can cover up to:

75% OF THE COST

subject to a maximum of:

£500 PER SOCKET

and:

40 SOCKETS

across all sites per applicant.

The current scheme closes on:

31 MARCH 2027.

Eligibility conditions apply, so check them before committing to the installation.

Can the Company Also Claim Tax Relief on a Charger?

Potentially.

Qualifying expenditure on new and unused electric vehicle chargepoints can currently qualify for:

100% FIRST-YEAR ALLOWANCES.

The current relief is available until:

31 March 2027 – Corporation Tax

5 April 2027 – Income Tax

So a business considering workplace charging should potentially investigate both the grant and the capital allowance position.

The interaction with grant funding needs to be taken into account when determining the qualifying expenditure.

What About Charging at Home?

The tax position shouldn’t be confused with the VAT position.

For a fully electric company car, HMRC says an employer does not have to report charging provided for the employee’s company EV as a taxable benefit.

For reimbursement of business mileage in a company EV, HMRC now publishes separate advisory electric rates.

From:

1 SEPTEMBER 2026

these are:

Home charging

7P PER MILE

Public charging

15P PER MILE.

These rates relate to company electric cars.

They should not be confused with the 55p AMAP rate for personally owned cars.

What If I Buy the EV Personally?

This has become significantly more interesting in 2026/27.

If you personally own the vehicle and use it for qualifying business journeys, your company can pay Approved Mileage Allowance Payments of:

First 10,000 business miles

55P PER MILE

Thereafter

25P PER MILE.

The increase from 45p to 55p was backdated to:

6 APRIL 2026.

So if you drive 10,000 qualifying business miles:

10,000 × 55p = £5,500

£5,500

can potentially be reimbursed under the AMAP rules.

That rate applies to electric cars as well as petrol, diesel and hybrid cars.

£30,000 Used EV Personally vs Company Owned

Suppose you buy a used EV personally for:

£30,000

and drive:

10,000 QUALIFYING BUSINESS MILES.

Your company could potentially reimburse:

£5,500

under the AMAP rules.

There is no company-car BIK because:

IT IS YOUR CAR.

But you personally had to fund the £30,000 purchase.

If the company buys it instead:

the company provides the £30,000;
it owns the vehicle;
it potentially obtains capital allowances;
it can pay relevant running costs;

but private availability will normally create a company-car BIK.

Neither answer is automatically better.

Don’t Confuse the EV Mileage Rates

There are now some very different numbers being quoted for electric cars:

Situation	2026/27 rate
Personally owned car – first 10,000 qualifying business miles	55p/mile
Personally owned car – thereafter	25p/mile
Company EV – home charging advisory rate from 1 Sept 2026	7p/mile
Company EV – public charging advisory rate from 1 Sept 2026	15p/mile

These rates do completely different jobs.

55P DOES NOT APPLY TO A COMPANY CAR.

What About Vehicle Excise Duty?

Electric cars are no longer generally exempt from Vehicle Excise Duty.

There is also the Expensive Car Supplement to consider.

From 1 April 2026, the Expensive Car Supplement threshold for zero-emission cars increased from:

£40,000

to:

MORE THAN £50,000.

So an EV’s list price can affect:

company-car BIK; and
potentially VED.

That’s another reason to look beyond the discounted price you actually pay.

What About Salary Sacrifice?

EVs can also remain particularly attractive through properly structured salary-sacrifice arrangements because low-emission cars benefit from special treatment under the Optional Remuneration Arrangement rules.

But salary sacrifice introduces additional considerations including:

National Minimum Wage;
pensionable pay;
statutory payments;
early termination charges;
maternity and other leave;
employees leaving;
insurance;
damage;
and excess mileage.

For an owner-managed limited company, straightforward company ownership may often be easier to compare first.

So Which Option Is Best?

A NEW COMPANY EV MAY BE BEST IF:

your company has sufficient taxable profits;
the car qualifies for the 100% FYA;
immediate Corporation Tax relief is valuable;
an eligible vehicle qualifies for the Electric Car Grant;
you value a full manufacturer/battery warranty;
you want the latest battery and charging technology;
you expect to keep the car for a reasonable period.

A SECOND-HAND COMPANY EV MAY BE BEST IF:

somebody else has already absorbed substantial depreciation;
the purchase price is significantly lower;
preserving company cash is important;
immediate capital allowance relief is less important;
the battery condition and warranty are good;
you are comfortable with the original list price used for BIK.

PERSONAL OWNERSHIP MAY BE BEST IF:

you can buy a relatively inexpensive used EV personally;
you drive significant business mileage;
the 55p AMAP rate is valuable;
you want to avoid company-car BIK;
you prefer personal ownership and flexibility.

The Comparison I Would Make Before Buying

For an owner-managed limited company, don’t just ask:

“Should the company buy an electric car?”

Compare:

OPTION 1

NEW EV BOUGHT BY THE COMPANY

Potential 100% FYA
Low 4% BIK
Potential grant on qualifying lower-priced models
Potentially highest depreciation

OPTION 2

SECOND-HAND EV BOUGHT BY THE COMPANY

Much lower purchase price possible
14% main-rate capital allowances
Same 4% BIK percentage
BIK still based broadly on original list price

OPTION 3

EV BOUGHT PERSONALLY

No company capital allowances
No company-car BIK
Company can potentially pay 55p/mile for first 10,000 qualifying business miles
You personally fund the vehicle

10 Questions to Ask Before You Order an EV

Is it genuinely new and unused?
Does it qualify for the 100% EV FYA?
Does the particular new model qualify for the Electric Car Grant?
What was the original list price for BIK?
How much has an equivalent used EV already depreciated?
What is the expected resale value in three or four years?
How many business miles will I actually drive?
Should I buy it personally and claim 55p mileage instead?
Should the company buy, HP, PCP or lease it?
Where will I charge it and what are the VAT and reimbursement consequences?

Answer those questions before choosing the car.

Frequently Asked Questions

Does a new electric car get 100% tax relief?

A qualifying new and unused zero-emission car can currently qualify for 100% First-Year Allowances. For Corporation Tax purposes, the current relief runs to 31 March 2027.

Does a second-hand electric car get 100% capital allowances?

No. A second-hand zero-emission car will generally receive main-rate writing-down allowances instead.

What is the capital allowance rate for a used EV in 2026?

The main WDA rate reduced to 14% from 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax. Hybrid rates can apply to accounting periods spanning the change.

Can I claim AIA on an electric car?

No. Cars are excluded from AIA.

Can I claim Full Expensing on an electric car?

No.

Does the general 40% FYA apply to cars?

No.

The 100% relief for qualifying new EVs comes from the specific zero-emission car FYA.

What is the EV BIK rate for 2026/27?

4%.

Is BIK lower if I buy the EV second-hand?

Not simply because it is second-hand. The calculation is broadly based on the relevant original list price rather than the second-hand price paid.

Can my company reclaim VAT when it buys an electric car?

Usually not where the car is available for private use. EVs don’t receive a special exemption from the normal VAT rules for cars.

Does the VAT fuel scale charge apply to electricity?

Don’t automatically apply the conventional road-fuel scale charge to an EV. HMRC deals with EV charging electricity separately in its VAT guidance, and business/private use and the identity of the recipient of the electricity supply need to be considered.

Can my company recover VAT on home charging?

Under HMRC’s currently published position, where an employee charges an EV at home, the electricity is supplied to the employee rather than the employer, so the employer cannot recover that VAT.

Are EV grants still available?

Yes. Eligible new cars can currently qualify for the Electric Car Grant, with maximum discounts of £3,750 or £1,500, depending on the vehicle’s grant band.

Are charger grants still available?

Yes. The Workplace Charging Scheme currently offers up to 75% of eligible costs, capped at £500 per socket for up to 40 sockets, subject to eligibility.

Can my company pay 55p per mile if I own an EV personally?

Yes, for the first 10,000 qualifying business miles in 2026/27 under the AMAP rules. The rate then falls to 25p.

New Doesn’t Automatically Mean Better

There is a very compelling tax case for a qualifying new company EV:

100% FIRST-YEAR ALLOWANCE

4% BIK

POTENTIAL EV GRANT

POTENTIAL CHARGEPOINT SUPPORT.

But:

TAX RELIEF DOESN’T MAKE DEPRECIATION DISAPPEAR.

A two or three-year-old EV might cost £15,000 or £20,000 less than its new equivalent.

And personal ownership has become more competitive because the first 10,000 qualifying business miles can now potentially be reimbursed at:

55P PER MILE.

So the right question isn’t:

“Which option gives me the biggest tax deduction?”

It is:

“WHICH OPTION GIVES ME THE LOWEST WHOLE-LIFE AFTER-TAX COST?”

Bicknell Business Advisers

For owner-managed limited companies, electric cars remain one of the most tax-efficient company-car options available in 2026/27.

But new, second-hand and personally owned EVs can produce very different results.

Before ordering a car, we can compare:

new vs second-hand;
company vs personal ownership;
cash vs HP vs PCP vs lease;
Corporation Tax;
capital allowances;
Benefit in Kind;
Class 1A NIC;
VAT;
grants;
charging;
business mileage;
and expected disposal value.

When you’re spending £30,000, £40,000 or £50,000 on a vehicle, doing the calculation before you buy it can be considerably more useful than working out the tax consequences afterwards.

More Company Car & Vehicle Tax Guides

Buy, HP, PCP or Lease a £50,000 Car Through Your Business?

Compare cash purchase, finance, PCP, leasing and personal ownership.

Hire Purchase, PCP & Leasing – Capital Allowances & Tax

How the method of finance changes the tax and accounting treatment.

Is It a Van or a Car for Tax?

Double-cab pickups, crew vans, Benefit in Kind, capital allowances and VAT explained.

About the Author

Buy, HP, PCP or Lease a £50,000 Car Through Your Business?

Buying a £50,000 business car? Compare cash, HP, PCP, leasing and personal ownership, including EV tax relief, VAT, BIK, salary sacrifice and 2026 mileage rates.

Limited Company vs Self-Employed – Tax, VAT, Benefit in Kind & Capital Allowances Explained for 2026/27

By Steve Bicknell FCMA, CGMA

Business owners ask us about cars all the time.

You have found the car you want.

It costs:

£50,000

Now comes the difficult question:

WHAT IS THE MOST TAX-EFFICIENT WAY TO GET IT?

Should your limited company:

buy it outright?
use Hire Purchase?
take a PCP?
lease it?
buy a new electric car?
buy a second-hand electric car?

Or would you actually be better buying the car personally and claiming business mileage?

The answer isn’t simply:

“Put the car through the company and claim the tax.”

How the vehicle is financed, its CO₂ emissions, whether it is new or second-hand, how much private use there is, and whether you operate through a limited company or are self-employed can completely change the answer.

And the 2026/27 rules contain some important changes.

Company Cars Are Making a Comeback – And Half Are Electric

Company cars certainly haven’t disappeared.

HMRC’s latest official statistics estimate that 920,000 people received company-car benefit in 2024/25, up from 840,000 in the previous year.

That represents an increase of:

80,000 COMPANY-CAR RECIPIENTS IN ONE YEAR

But the type of company car has changed dramatically.

In 2024/25:

51% of reported company cars were fully electric
around 467,000 company-car recipients had zero-emission cars
693,000 company cars had emissions of 74g/km or less
diesel cars represented only 7% of company cars
average reported company-car emissions had fallen to 41g/km

HMRC’s figures are provisional for 2024/25, but the direction is striking.

That helps explain why the question:

“SHOULD MY COMPANY BUY ME AN ELECTRIC CAR?”

has become so common.

But before deciding which car to buy, we should first determine who should own it and how it should be financed.

£50,000 Car – Quick Answer

There is no single winner.

But some useful starting points are:

NEW ELECTRIC CAR

Potentially very attractive through a limited company because a qualifying new and unused zero-emission car can currently obtain a 100% first-year capital allowance.

The 2026/27 company-car Benefit in Kind percentage is also only:

4%

SECOND-HAND ELECTRIC CAR

Still benefits from the low electric-car BIK percentage, but it doesn’t receive the same 100% first-year capital allowance.

It instead falls into the main-rate capital allowance regime.

PETROL OR DIESEL CAR

Can be considerably less attractive through a company if there is private availability, because company-car BIK percentages can reach:

37%

in 2026/27.

HP

Normally represents acquisition of the car using finance.

The repayments themselves aren’t simply deducted as a monthly business expense: capital allowances and finance costs need to be considered separately.

PCP

The precise tax treatment depends on the actual agreement.

Don’t decide the accounting or tax treatment simply because the paperwork says PCP.

LEASE

The business normally obtains tax relief for lease rentals rather than claiming capital allowances on the car.

VAT treatment can also be more favourable than outright purchase.

PERSONAL OWNERSHIP + MILEAGE

This has become more attractive since 6 April 2026, because the approved rate for the first 10,000 qualifying business miles increased to:

55p PER MILE

The First Decision Isn’t HP or PCP

Before deciding how to finance the vehicle, ask:

WHO SHOULD OWN THE CAR?

There are really two decisions.

Decision 1

Business/company car or personally owned car?

Then:

Decision 2

Cash, HP, PCP or lease?

Those decisions are often approached in the wrong order.

Our £50,000 Example

We’ll compare:

OPTION 1

Business buys for cash

OPTION 2

Hire Purchase

OPTION 3

PCP

OPTION 4

Lease / contract hire

OPTION 5

Personal ownership + business mileage

But there is another factor capable of completely changing the result:

WHAT TYPE OF CAR IS IT?

So we also need to compare:

£50,000 NEW ELECTRIC CAR

£50,000 SECOND-HAND ELECTRIC CAR

£50,000 PETROL/DIESEL CAR

New Electric Car – 100% Capital Allowance

For qualifying new and unused zero-emission cars, the business can currently claim:

100% FIRST-YEAR ALLOWANCE

HMRC’s current business-car rules distinguish these cars from other vehicles.

So if Consultancy 4 Business Ltd buys a qualifying new EV for:

£50,000

potential qualifying first-year allowance:

£50,000

If the company is paying Corporation Tax at 25%, a simplified illustration gives:

£50,000 × 25%

£12,500 CORPORATION TAX SAVING

subject to sufficient taxable profits and the company’s circumstances.

That is a very powerful tax incentive.

Second-Hand EV – Very Different Capital Allowances

Now change just one thing.

The £50,000 electric car is second-hand.

It does not receive the special 100% first-year allowance available to a qualifying new EV.

Instead it falls into the main-rate capital allowance regime. HMRC’s current main-pool WDA is:

14%

from April 2026.

So a simple first-year illustration would be:

£50,000 × 14%

£7,000 CAPITAL ALLOWANCE

Compare:

New qualifying EV

£50,000

Second-hand EV

£7,000 first-year WDA

That is a major difference in the timing of tax relief.

It doesn’t necessarily make the second-hand EV commercially worse — depreciation and purchase price still matter — but:

ELECTRIC DOESN’T AUTOMATICALLY MEAN 100% TAX RELIEF

Higher-Emission Car

A higher-emission vehicle may fall into the special-rate pool.

The current special-rate WDA remains:

6%

So on £50,000:

£50,000 × 6%

£3,000

of first-year WDA in a straightforward illustration.

The capital allowance contrast can therefore be enormous.

£50,000 Car	Illustrative First-Year Capital Allowance
Qualifying new zero-emission car	£50,000
Second-hand electric / qualifying main-rate car	£7,000
Higher-emission special-rate car	£3,000

The actual result depends on the specific vehicle and period, but this demonstrates why the emissions and whether the car is new matter so much.

Capital Allowances Are Only Half the Story

A company might get excellent tax relief on acquiring the car.

But if it is available to the director for private use, the director can simultaneously have a:

COMPANY-CAR BENEFIT IN KIND

And private use includes ordinary commuting.

So we need to compare:

COMPANY TAX SAVING

against:

PERSONAL TAX COST

£50,000 Electric Company Car – 2026/27 BIK

For a zero-emission company car, the 2026/27 appropriate percentage is:

4%

Assume the relevant list price is £50,000.

£50,000 × 4%

£2,000 TAXABLE BENEFIT

Illustrative personal tax:

Tax rate	Annual Income Tax
20%	£400
40%	£800
45%	£900

The employer also has Class 1A NIC to consider.

That’s one reason electric company cars remain attractive.

EV Company-Car Tax Will Rise

The percentage doesn’t stay at 4%.

For zero-emission company cars:

2026/27

2027/28

The government’s published policy continues increasing the electric-car percentages thereafter.

So if you’re considering a three- or four-year finance agreement:

Don’t calculate the whole deal using today’s BIK percentage.

Compare a £50,000 Petrol Car

A sufficiently high-emission car can attract the maximum 2026/27 percentage of:

37%

£50,000 × 37%

£18,500 TAXABLE BENEFIT

For a 40% taxpayer:

£18,500 × 40%

£7,400 INCOME TAX PER YEAR

Compare that with the £800 illustrative tax on our £50,000 EV.

Same £50,000 list price.

Very different personal tax cost.

Option 1 – Buy the Car for Cash

The business pays:

£50,000

and acquires the vehicle.

Potential advantages:

no finance interest;
no monthly finance commitment;
business owns the vehicle;
potential capital allowances;
potentially 100% FYA for a qualifying new EV.

Potential disadvantages:

major immediate cash outflow;
company bears depreciation risk;
VAT on an ordinary car purchase is usually difficult to recover;
company-car BIK arises if available privately.

Can the Business Reclaim VAT When Buying a Car?

This is often misunderstood.

For an ordinary business car which is available for private use:

INPUT VAT ON PURCHASE IS NORMALLY BLOCKED

Full recovery typically requires the circumstances to meet one of the specific exceptions, including genuinely excluding private availability.

The test isn’t merely:

“I hardly use it privately.”

There needs to be a strong basis for saying that it is not available for private use.

Option 2 – Hire Purchase

Under a typical HP arrangement:

Deposit

↓

Monthly payments

↓

Ownership passes / is acquired under the agreement

For tax purposes, don’t simply put the whole HP repayment through as:

Motor expense

The capital part relates to the acquisition of the vehicle.

The relevant capital allowance treatment therefore needs considering.

The finance/interest element is treated separately.

For a qualifying new zero-emission vehicle, the capital allowance position can make HP particularly interesting because the tax relief may arise much more quickly than the corresponding cash payments.

Option 3 – PCP

PCP is popular because it can reduce the monthly payment.

Typically:

Deposit

↓

Monthly payments

↓

Large final / balloon payment

Then the customer can often:

pay the balloon and keep the vehicle;
hand it back;
or use any equity towards another car.

But:

PCP DOESN’T AUTOMATICALLY MEAN LEASE

The actual contractual terms matter.

Questions include:

Is ownership expected to transfer?
How significant is the purchase option?
Who carries residual-value risk?
Is this effectively financing an acquisition?
Or is it fundamentally a hire arrangement?

So I would always suggest giving the actual PCP agreement to your accountant rather than simply saying:

“It’s on PCP.”

Option 4 – Lease / Contract Hire

Suppose instead the business leases the vehicle.

For example:

Initial rental

£4,500

Monthly rental

£750 + VAT

Term

36 months

End

Car returned to leasing company.

The business isn’t normally claiming ordinary capital allowances on the car because it doesn’t own it.

Instead, it claims the relevant lease-rental expense.

For higher-emission leased cars, a tax restriction can apply to part of the rental cost.

Leasing Has an Important VAT Advantage

Buying and leasing can produce very different VAT outcomes.

Where a car is leased and used partly privately, the standard restriction generally blocks:

50% OF THE VAT ON THE LEASE RENTALS

meaning the remaining VAT may potentially be recovered subject to the normal rules.

That is often considerably better than buying an ordinary company car where purchase VAT is completely blocked.

So if the lease is:

£750 + £150 VAT

potentially:

£75

of the VAT may be recoverable under the normal 50% car-leasing restriction, assuming full business VAT recovery otherwise.

Don’t Treat Maintenance the Same as the Car Rental

If a lease invoice separately identifies:

maintenance;
servicing;
other charges,

those items can have different VAT consequences.

So don’t simply apply:

50% VAT RECOVERY

to everything on the invoice without checking what it relates to.

£50,000 Car – Buy vs HP vs PCP vs Lease

Issue	Cash	HP	PCP	Lease
Large upfront cash cost	High	Lower	Lower	Lower
Business ownership	Yes	Usually acquisition route	Depends on agreement	Usually no
Capital allowances	Yes	Potentially yes	Depends on substance	Usually not claimed by lessee
New EV 100% FYA	Potentially	Potentially	Depends on arrangement	Rental deduction instead
Finance cost	None	Yes	Yes	Included in rent
Purchase VAT with private use	Usually blocked	Usually blocked	Depends on structure	N/A as purchase
Lease VAT recovery	N/A	N/A	Depends	Normally 50% block
Company-car BIK	Yes	Yes	Yes	Yes
Residual-value risk	Business	Business	Contract dependent	Lessor
Own vehicle at end	Yes	Usually	Optional	No

The key point is:

FINANCE METHOD DOESN’T ELIMINATE BIK

If the company provides the car and it is available privately, changing the funding method generally doesn’t remove the company-car benefit.

Option 5 – Buy Personally and Claim Mileage

Sometimes the most tax-efficient company car is:

NO COMPANY CAR AT ALL

The director buys the vehicle personally.

Then the company reimburses qualifying business mileage.

For 2026/27 HMRC’s approved mileage rate for cars and vans is:

First 10,000 business miles

55p PER MILE

Over 10,000

25p PER MILE

At 10,000 business miles:

10,000 × 55p

£5,500

potentially reimbursable under the approved mileage regime.

And because it isn’t a company car:

NO COMPANY-CAR BIK

Limited Company vs Self-Employed

The position differs for a sole trader.

Issue	Limited Company	Self-Employed
Separate company owns car	Yes	No separate legal owner
Company-car BIK	Potentially yes	No BIK on proprietor
Private use	BIK consequence	Restricts business claim
Capital allowances	Company claims	Trader claims with private-use restriction
Personally owned mileage route	AMAP reimbursement	Simplified mileage may be available
First 10,000 miles 2026/27	55p	55p
VAT	Depends on use/transaction	Same broad VAT principles

A sole trader may therefore compare:

Actual vehicle costs + capital allowances

against:

Simplified mileage

subject to the relevant rules.

Again:

LIMITED COMPANY ≠ SELF-EMPLOYED

Salary Sacrifice – Does It Still Work for Cars?

Yes — but the rules are particularly favourable for low-emission cars.

Normally, the Optional Remuneration Arrangement rules can tax a benefit based on the higher of:

salary sacrificed; or
normal BIK value.

However, HMRC specifically excludes cars with CO₂ emissions of:

75g/km OR LESS

from those normal OpRA comparison rules.

They continue to be taxed under the normal company-car benefit calculation.

That means salary sacrifice can remain particularly attractive for electric cars.

For example:

Employee sacrifices

£600 monthly salary

in exchange for:

Electric company car

The taxable benefit can still be based on the normal EV company-car rules rather than simply taxing the £7,200 salary foregone.

But salary sacrifice must be a genuine contractual arrangement.

It needs to be put in place before the salary is earned, and employers need to consider:

National Minimum Wage;
pensionable pay;
statutory pay;
employment contracts;
employee leaving;
early termination;
insurance;
excess mileage.

It isn’t simply:

“We bought a car, so let’s retrospectively call it salary sacrifice.”

Personally Borrowing Money to Fund the Company Car?

This is another area where directors can accidentally blur the company/personal boundary.

Suppose the bank will only lend personally to the director.

The director borrows:

£50,000

personally and then puts the money into the company.

Don’t simply record the bank loan as:

Company car finance

The borrower is the individual.

The company and director are separate legal persons.

Usually, the accounting needs to reflect that the director has lent money to the company.

Could the Director Claim Tax Relief on Their Personal Interest?

Potentially.

Income Tax relief can be available where an individual borrows money and lends it to a qualifying close company for use wholly and exclusively in its business, subject to detailed eligibility conditions including the individual’s shareholding/working relationship and capital-recovery rules.

So before assuming the personal interest cost is simply lost:

CHECK QUALIFYING LOAN INTEREST RELIEF

Or Could the Company Pay the Director Interest?

Potentially.

If the director lends money to the company and charges it interest:

the interest can be a business expense for the company, subject to the usual rules;
it is personal taxable income for the director;
the company normally pays the interest net of 20% Income Tax;
and accounts for that tax quarterly using Form CT61.

This does not mean charging interest is always preferable to claiming personal qualifying-loan interest relief.

They are different structures.

The point is:

Decide what the financing arrangement actually is before putting the car through the accounts.

Private Fuel – Another Tax Charge

Company car and company fuel are separate benefits.

If the employer pays for private petrol or diesel and the employee does not fully reimburse it, a separate fuel benefit can arise.

This can be surprisingly expensive.

So:

“The company already owns the car, so it might as well pay for all my fuel.”

can be a costly assumption.

Always calculate the separate fuel-benefit position.

VAT on Fuel – Road Fuel Scale Charges

There is then a completely separate VAT issue.

Suppose a VAT-registered business pays for fuel, recovers input VAT, but the vehicle is also used privately.

One method of accounting for the private element is HMRC’s:

VAT ROAD FUEL SCALE CHARGE

The scale charge is determined by the vehicle’s CO₂ emissions and the VAT accounting period.

HMRC’s current scale applies from:

1 MAY 2026 TO 30 APRIL 2027

Examples for a 12-month VAT accounting period include:

CO₂ emissions	VAT-inclusive annual scale charge	VAT due
120g/km or less	£657	£109.50
150g/km	£1,314	£219.00
175g/km	£1,640	£273.33
200g/km	£1,971	£328.50
225g/km or more	£2,297	£382.83

The important thing is not to confuse:

Company-car fuel Benefit in Kind

with:

VAT road fuel scale charges

They are different tax regimes.

Pool Cars and “No Private Use”

A genuine pool car can avoid normal company-car BIK where all the statutory conditions are met.

But:

CALLING IT A POOL CAR DOESN’T MAKE IT ONE

Similarly, writing:

“No private use permitted.”

in a company policy is useful, but the actual behaviour must support it.

If the car is routinely:

taken home;
allocated to one director;
used at weekends;
available to family members,

the facts may undermine the label.

We will update our separate detailed guides to pool cars and no-private-use policies shortly.

Is It Actually a Car or a Van?

This question comes before much of the above.

HMRC’s tax treatment of cars and vans can differ materially.

This is particularly important for:

double-cab pickups;
crew vans;
combi vehicles;
vehicles with second rows of seats.

Don’t assume:

“The dealer calls it a commercial vehicle.”

means HMRC will necessarily treat it as a van for every tax.

That will be the subject of our next updated vehicle guide.

15 Questions to Answer Before Signing

Before buying or financing the vehicle, establish:

Is it a car or a van for tax?
Who should own it — company or individual?
New or second-hand?
Electric, hybrid, petrol or diesel?
CO₂ emissions?
Electric range if hybrid?
Relevant list price?
Actual purchase price?
Cash, HP, PCP or lease?
Is the business VAT registered?
How much business mileage?
How much private use?
What is the director’s marginal tax rate?
What is the company’s tax position?
What happens at the end of the agreement?

Only then can you properly answer:

WHICH OPTION IS BEST?

£50,000 Car – Broad Conclusions

NEW EV THROUGH LIMITED COMPANY

Often deserves serious consideration because of:

potentially 100% first-year capital allowance;
4% BIK for 2026/27;
business funding;
potentially attractive salary-sacrifice treatment.

SECOND-HAND EV

Still potentially attractive for BIK, but significantly slower capital allowances.

HIGH-EMISSION COMPANY CAR

Can become very expensive because of personal BIK.

HP

Potentially good where you want ownership but want to preserve cash flow.

PCP

Potentially attractive commercially, but the agreement needs reading before deciding its tax/accounting character.

LEASE

Can provide:

predictable cash costs;
no residual-value risk;
possible VAT recovery on rentals;
potentially deductible rentals.

PERSONAL OWNERSHIP

Should always be modelled, especially now that:

10,000 BUSINESS MILES = £5,500

under the 2026/27 approved mileage rate.

12 Common Car Tax Mistakes

Assuming every EV gets 100% first-year allowances.
Forgetting the difference between new and second-hand EVs.
Using purchase price instead of list price for BIK.
Treating all HP repayments as expenses.
Assuming all PCP agreements have identical tax treatment.
Assuming company payment means VAT is reclaimable.
Forgetting the normal 50% VAT block on leased-car rentals.
Ignoring company-car BIK because the car is “mainly business”.
Calling a director’s vehicle a pool car without meeting the conditions.
Forgetting the separate private-fuel benefit and VAT fuel rules.
Treating the director’s personal bank loan as though the company borrowed it.
Failing to compare everything with personal ownership + mileage.

Frequently Asked Questions

Can my company buy me a £50,000 car?

Yes, but whether it is tax-efficient depends on the car, finance, emissions and private use.

Does a new electric car get 100% tax relief?

A qualifying new and unused zero-emission car can currently qualify for a 100% first-year capital allowance.

What about a second-hand electric car?

It does not normally get that same 100% EV first-year allowance and instead falls into the main-rate capital allowance rules.

What is the EV company-car rate in 2026/27?

4%.

Can I claim VAT on a company car?

Usually not on a purchased car available for private use. Specific exceptions exist.

Can I claim VAT on a lease?

Where the standard car-leasing restriction applies, 50% of the VAT on the leasing charge is normally blocked.

Can PCP be claimed as a monthly expense?

Not automatically. The precise terms of the agreement need to be reviewed.

Can my company pay me mileage instead?

Yes, where you own the vehicle personally and make qualifying business journeys. The first 10,000 business miles are now 55p per mile for 2026/27.

Does electric-car salary sacrifice still work?

Yes. Cars emitting no more than 75g/km are excluded from the normal OpRA salary-foregone comparison and remain taxed under the normal company-car benefit rules.

What if I borrow personally and lend the money to my company?

Treat the personal loan and director-to-company loan as separate transactions. Qualifying loan interest relief and/or company-paid interest may need consideration depending on the circumstances.

Bicknell Business Advisers’ Car Decision

Before signing anything:

CAR OR VAN?

↓

COMPANY OR PERSONAL?

↓

NEW OR SECOND-HAND?

↓

EV / HYBRID / PETROL / DIESEL?

↓

CASH / HP / PCP / LEASE?

↓

CAPITAL ALLOWANCES OR RENTALS?

↓

VAT?

↓

PRIVATE USE + BIK?

↓

FUEL?

↓

55p MILEAGE ALTERNATIVE?

↓

END-OF-AGREEMENT POSITION?

Then:

BUY THE CAR

Bicknell Business Advisers’ Advice

The worst time to ask:

“What’s the best tax treatment?”

is after the car has already been bought.

The better approach is to send us:

vehicle quote;
list price;
CO₂ figure;
finance quotation;
PCP/HP agreement;
lease quote;
expected mileage;
estimated private use.

Then compare the options before signing.

For a £50,000 car, the tax difference between:

new EV,

second-hand EV,

high-emission company car,

lease,

and:

personally owned vehicle + mileage

can run into thousands of pounds.

How We Can Help

At Bicknell Business Advisers, we help company directors, business owners and the self-employed compare vehicle options before committing to the purchase.

We can review:

company vs personal ownership;
cash purchase;
Hire Purchase;
PCP;
leasing;
new vs second-hand EV;
petrol/diesel/hybrid;
Corporation Tax;
Income Tax;
capital allowances;
VAT;
Benefit in Kind;
salary sacrifice;
qualifying loan interest;
CT61 interest;
business mileage;
fuel; and
disposal/return of the vehicle.

For a substantial vehicle purchase, doing the calculation before signing the finance agreement can make a very significant difference.

About the Author

Should Your Limited Company Pay You Rent for a Home Office?

Tax, VAT, Planning, Capital Allowances and FRS 102 Explained

By Steve Bicknell FCMA, CGMA

If you run your limited company from home, you may already know about the familiar:

£6 per week / £312 per year

Homeworking reimbursement.

It is simple, potentially tax-free and involves very little administration.

But what if your company makes much greater use of your home?

Could you charge your company a commercial rent for using part of the property as an office?

Potentially, yes.

And the opportunity can go considerably further than simply replacing £312 with a larger payment.

Your company might also:

buy computers and office equipment;
claim capital allowances;
recover VAT where appropriate; and
obtain Corporation Tax relief on qualifying expenditure.

But creating a more formal home-office arrangement also introduces other questions:

Is the rent taxable personally?
What household costs can you claim?
Could it affect Private Residence Relief when you sell your home?
Does your mortgage lender need to agree?
Could business rates apply?
Do you need planning permission?
Would a Certificate of Lawfulness be useful?
What about insurance?
And, under the revised FRS 102 rules, does the home-office agreement need to appear on your company’s balance sheet as a lease?

That last point is particularly interesting because relatively few discussions of directors charging their companies home-office rent consider the new FRS 102 lease accounting rules.

The right question therefore isn’t simply:

“How much rent can I get out of my company?”

It is:

“What is the most tax-efficient and commercially sensible way for my company to use my home?”

Home Office Rent – Quick Answer

Yes. A director can potentially charge their limited company commercial rent for genuine business use of part of their home.

The company may obtain a Corporation Tax deduction.

The director normally reports the rent as property income and deducts allowable expenses when calculating the taxable profit.

But the arrangement can also affect:

VAT + CAPITAL ALLOWANCES + CGT + PLANNING + BUSINESS RATES + FRS 102

So it needs to be considered as a complete arrangement rather than simply another method of extracting cash.

£312 or Home-Office Rent?

Here’s the basic comparison:

	£312 Homeworking Reimbursement	Home-Office Rent
Potential amount	£312 p.a.	Potentially much higher
Tax on director	Potentially tax-free	Taxable property income
Corporation Tax deduction	Yes	Potentially yes
Household costs against rent	N/A	Potentially yes
Rental agreement	No	Advisable
Property income reporting	No	Potentially yes
CGT/PRR considerations	Minimal	Needs consideration
Planning/property issues	Usually limited	Potentially greater
FRS 102 lease issue	No	Potentially yes
Administration	Very low	Higher

For many directors, £312 wins on simplicity.

But where the company genuinely occupies valuable workspace within the home, a commercial rental arrangement may produce a significantly better overall result.

Who Should Consider Charging Their Company Rent?

This is most worth considering where:

you work predominantly from home;
your company genuinely uses a dedicated room or substantial workspace;
meaningful household costs relate to that use;
business equipment or records are stored there;
the company buys substantial office equipment; or
£312 bears little relationship to the actual commercial value of the facilities being provided.

If you occasionally answer emails from the kitchen table, a formal rental arrangement may be unnecessary.

Option 1 – Keep It Simple: £312 a Year

Where the relevant conditions are satisfied, the company can reimburse qualifying additional homeworking expenses.

HMRC’s guideline rate is:

£6 per week

or:

£26 per month

giving:

£312 per year

For many owner-managed companies this remains attractive:

Company: potential Corporation Tax deduction

Director: potentially £312 tax-free

Administration: minimal

And importantly:

No rent + no property income + no rental agreement

We’ve previously looked at this in:

HMRC Update: New Evidence Rules for £312 Working From Home Allowance

That article has been one of our most popular recent working-from-home tax guides.

But £312 is still only £312.

What if your company genuinely uses substantially more of your home?

Option 2 – Charge Your Company Commercial Rent

Suppose your company regularly uses one room within your house as its office.

You could potentially put an agreement in place allowing the company to use that space and pay you rent.

The rent should reflect:

GENUINE BUSINESS USE + A REASONABLE COMMERCIAL AMOUNT

The basic mechanics become:

YOUR COMPANY

Pays rent

↓

Potential Corporation Tax deduction

YOU

Receive property income

↓

Deduct qualifying expenses

↓

Pay Income Tax on the resulting property profit

This is fundamentally different from the £312 reimbursement.

Worked Example – £312 or £4,800 Rent?

Let’s use our fictional example:

Consultancy 4 Business Ltd

The director works predominantly from home and one room is regularly used for the company’s business.

After considering comparable local office space and the facilities being provided, a reasonable commercial rent is established at:

£400 per month

Annual rent:

£4,800

Suppose allowable household expenditure reasonably attributable to the arrangement amounts to:

£1,800

The personal property-income calculation is:

	Amount
Rent received	£4,800
Allowable expenses	(£1,800)
Property profit	£3,000

Now assume, purely for illustration, that Consultancy 4 Business Ltd obtains Corporation Tax relief at 25%.

Company tax saving:

£4,800 × 25% = £1,200

If the £3,000 property profit is taxed at the new 22% property basic rate from April 2027:

£3,000 × 22% = £660

Simplified tax difference:

£1,200 company tax saving

less

£660 personal tax

£540

before taking account of the wider circumstances.

This is deliberately simplified.

The actual result could be affected by:

the company’s Corporation Tax rate;
your other income;
property tax bands;
mortgage finance costs;
jointly owned property;
allowances;
dividends; and
your wider profit-extraction strategy.

But it demonstrates why this can be worth calculating.

Property Income Tax Changes From April 2027

There is another reason the numbers need modelling carefully.

From 6 April 2027, property income will have separate Income Tax rates of:

22%
42%
47%

in England, Wales and Northern Ireland.

So the relevant comparison isn’t simply:

£312 versus £4,800

It is:

COMPANY TAX SAVING versus PERSONAL PROPERTY TAX

How Much Rent Can You Charge?

Not:

“Whatever amount saves the most tax.”

The rent needs to be commercially supportable.

Relevant factors can include:

size of the workspace;
floor area;
facilities;
storage;
parking;
hours and days of use;
utilities provided;
broadband;
local office rents;
serviced-office alternatives; and
restrictions placed on you as homeowner.

Keep evidence.

That might include:

floor plan + local rental comparables + bills + calculation + written agreement

The target is:

REASONABLE + COMMERCIAL + EVIDENCED

How Do You Determine a Market Rent for a Home Office?

There is no HMRC table telling directors that a bedroom used as an office is worth £200, £300 or £500 per month.

The rent should instead be a reasonable commercial figure based on the space and facilities actually being provided to the company.

A sensible approach is to start by looking at comparable workspace in your area, such as:

small serviced offices;
individual office rooms;
coworking/private-office space;
small commercial units; and
similar workspace advertised locally.

Then adjust for the fact that a room within your home is not necessarily equivalent to a fully serviced commercial office.

Consider factors such as:

floor area;
location;
dedicated storage;
parking;
broadband and utilities;
access arrangements;
days and hours available to the company;
whether clients or staff can attend;
kitchen/toilet facilities; and
whether the room retains genuine domestic use.

For example, suppose comparable local office space costs £500 per month, but your company is only obtaining use of a room within your home, without independent access, reception facilities or exclusive 24-hour occupation.

A reasonable home-office rent might therefore be materially less than £500.

The important thing is to retain evidence showing how you arrived at the figure.

I would keep:

1. Local comparable rents

Screenshots or copies of local office and serviced-office advertisements.

2. Floor-area calculation

For example, the office represents 12% of the usable floor area of the house.

3. Facilities provided

Broadband, heating, electricity, furniture, parking and storage.

4. Restrictions on use

For example, no independent entrance, no client meetings or continuing domestic use.

5. A written calculation

Keep a short note with the rental agreement explaining why the agreed rent is commercially reasonable.

The aim is not to produce a formal RICS valuation for every spare bedroom.

It is to be able to demonstrate that the rent was arrived at commercially rather than simply being chosen to maximise a tax deduction.

Bicknell Business Advisers’ Tip: Review the rent periodically. A figure that was commercially reasonable when an agreement began may not remain appropriate indefinitely.

What Household Costs Can Be Considered?

Depending upon the circumstances, potentially relevant expenditure could include an appropriate share of:

electricity;
heating;
water;
council tax;
insurance;
broadband;
repairs;
cleaning; and
other appropriate household costs.

The method of apportionment needs to be reasonable.

You might consider:

ROOMS × FLOOR AREA × TIME USED

depending upon the circumstances.

Where a room has mixed use, both the business and private use need to be reflected.

Rent-a-Room Relief Doesn’t Normally Solve It

This is a common misconception.

The £7,500 Rent-a-Room Scheme relates to residential accommodation.

It doesn’t simply make business office rent paid by your company tax-free.

So:

“I’ll charge the company £7,500 and claim Rent-a-Room Relief.”

is generally not the answer for home-office accommodation.

Let the Company Equip the Office

This is an important additional opportunity.

Your company might require:

computers;
monitors;
printers;
desks;
chairs;
filing cabinets;
telephone equipment;
networking equipment; and
other business equipment.

Rather than buying everything personally from after-tax income, it may make more sense for the:

COMPANY TO BUY AND OWN THE EQUIPMENT

Capital Allowances on Home-Office Equipment

Qualifying expenditure on plant and machinery can potentially attract capital allowances.

Normal office equipment might include:

Computers

Monitors

Desks

Office chairs

Printers

Networking equipment

Depending upon the circumstances, the Annual Investment Allowance may provide 100% relief for qualifying expenditure.

But distinguish between:

EQUIPPING AN OFFICE

and:

BUILDING AN OFFICE

Buying a £2,000 computer is very different from spending £30,000 constructing a building in your garden.

That’s an important enough subject for a separate article:

Can Your Limited Company Pay for a Garden Office?

We’ll look at the tax, VAT, capital allowance, benefit-in-kind, CGT and planning issues separately.

VAT Can Make Company Purchases More Attractive

Suppose Consultancy 4 Business Ltd is VAT registered.

The company buys:

Item	Net	VAT
Computer	£2,000	£400
Monitors	£1,000	£200
Desk/equipment	£1,500	£300
Total	£4,500	£900

If the purchases relate properly to the company’s taxable business activities and the usual VAT recovery conditions are satisfied:

Potential VAT recovery = £900

There may then also be tax relief through capital allowances on qualifying expenditure.

The cleanest evidence trail is usually:

COMPANY PURCHASE → COMPANY INVOICE → COMPANY ASSET → BUSINESS USE

Where there is significant private use, VAT and benefit-in-kind implications require separate consideration.

Planning – Can You Actually Run the Business From Home?

This is one of the most easily overlooked issues.

Tax relief does not give you planning permission.

A home-office arrangement could make complete sense for:

Corporation Tax;
VAT;
property income; and
accounting

but still create a separate planning issue.

The broad question is:

Does the property remain primarily a home, or has the business activity materially changed its character?

When Could Planning Permission Become Relevant?

There isn’t a simple:

one room = fine

two rooms = planning application

rule.

It depends on the facts and degree of use.

Warning signs can include:

employees attending regularly;
customers visiting;
frequent commercial deliveries;
increased traffic;
parking problems;
signage;
noise;
substantial storage;
alterations;
unusual business hours; or
a significant part of the house ceasing to function domestically.

Compare these examples.

Example 1 – Professional Working From Home

One director.

Computer-based work.

No employees.

No clients visiting.

No signage.

No significant deliveries.

The property remains overwhelmingly a home.

Example 2 – Home Becoming Business Premises

Five employees attend every weekday.

Clients visit throughout the day.

Vans regularly make deliveries.

Several rooms are permanently offices.

There is signage and increased parking.

That is much more likely to require planning consideration.

What If You’re Unsure? Certificate of Lawfulness

Where you believe the proposed home-business use does not require express planning permission, but you want greater certainty, you may be able to apply for a:

Certificate of Lawfulness of Proposed Use or Development

often referred to as a:

Lawful Development Certificate

or:

CLOPUD

This isn’t the same as asking the council for planning permission.

Instead, you are effectively asking:

“Based on the proposed facts, would this use be lawful without a separate planning permission?”

If granted, the certificate can provide useful evidence of the planning position.

What Should the Certificate Application Explain?

A useful application may need to explain matters such as:

which part of the property will be used;
nature of the business;
number of people working there;
working hours;
whether clients visit;
deliveries;
parking;
signage;
noise;
storage;
alterations; and
whether the space remains capable of domestic use.

The important point is that the certificate relates to the facts actually described.

If you obtain confirmation based on:

One director, no staff, no customers

but the business later develops into:

Five employees and regular customer visits

you shouldn’t simply assume the original certificate covers the changed circumstances.

What About Neighbours and Planning Notices?

Lawful Development Certificates are sometimes confused with conventional planning applications.

There isn’t generally the same statutory neighbour-consultation process as for a normal planning application.

However, the planning authority can seek evidence from neighbours or other parties if it considers that information relevant to determining whether the proposed use is lawful.

So the important thing is to provide a clear and accurate description of the proposed activity.

Why Could a Certificate of Lawfulness Be Useful?

It can potentially help later when dealing with:

sale of the house;
purchaser’s solicitor;
mortgage lender;
neighbour complaint;
planning enquiry; or
possible enforcement concerns.

It may therefore be worth considering where the business use is more substantial than simply working occasionally from a spare room, but you believe it remains lawful without express planning permission.

Check Your Mortgage

Don’t forget the lender.

A residential mortgage could contain restrictions concerning:

business use;
commercial occupation;
leases or licences;
subletting;
alterations; or
granting rights over part of the property.

This becomes particularly relevant once you propose signing an agreement granting your company rights over the home.

Tax efficiency doesn’t override your mortgage conditions.

Check Your Insurance Too

Your household insurance may not automatically cover all business use.

Potential issues include:

company-owned computers;
stock;
equipment;
employees;
customers visiting; and
additional liability risks.

Make sure the insurer has enough information to ensure the appropriate cover remains in place.

Could Business Rates Apply?

Potentially.

A normal small home office does not automatically become separately rateable business premises.

But the risk increases where the area is clearly separated and used commercially.

Relevant factors could include:

exclusive business use;
physical alteration;
employees;
customers;
signage; and
separation from the domestic accommodation.

A useful general principle is:

MORE COMMERCIAL OCCUPATION = MORE PROPERTY CONSEQUENCES

Don’t Accidentally Create a CGT Problem

Private Residence Relief normally protects the gain on your main home.

But where part of the property is used exclusively for business, relief can potentially be restricted on that part.

That is why the agreement should reflect reality.

A room used:

Monday-Friday as an office and genuinely as a spare room at other times

may be very different from:

a permanently exclusive company office

The attached material similarly highlights the distinction between mixed use and exclusive business use for Private Residence Relief purposes.

Don’t manufacture artificial personal use.

But equally:

Don’t give the company more exclusive rights than it genuinely needs.

This matters for:

CGT + PLANNING + FRS 102

The New FRS 102 Home-Office Lease Issue

This is where I think the article becomes particularly distinctive.

For accounting periods beginning on or after:

1 JANUARY 2026

FRS 102 Section 20 introduced a substantially revised lessee-accounting model.

Previously, a straightforward operating lease might simply produce:

Profit & Loss Account

Rent expense

Balance Sheet

No corresponding lease asset or lease liability.

Under revised FRS 102, many qualifying leases are brought onto the lessee’s balance sheet.

The company may recognise:

RIGHT-OF-USE ASSET

and:

LEASE LIABILITY

The supporting accounting analysis identifies the same right-of-use model and replacement of straight rental expense with depreciation and interest for most FRS 102 lessee arrangements.

Calling It a Licence Doesn’t Necessarily Stop It Being a Lease

Suppose the document is headed:

Home Office Licence to Occupy

That doesn’t automatically determine the accounting treatment.

FRS 102 looks at the substance of the arrangement.

If your company obtains the right to control use of an identified asset for a period in exchange for consideration, the arrangement could contain a lease.

For example:

“The first-floor study measuring 14 square metres”

is much more clearly an identified asset than a general permission:

“The company may use suitable workspace somewhere within the house as available.”

The underlying analysis similarly notes that identifying and controlling a particular room can cause a home-office arrangement to fall within revised Section 20 even if the document is called a licence.

FRS 102 Worked Example – Consultancy 4 Business Ltd

Let’s use the same company.

Consultancy 4 Business Ltd enters into an arrangement for use of an identified room.

Assume:

Monthly payment

£400

Lease term

3 years

Number of payments

Total contractual payments:

£400 × 36 = £14,400

Now assume, purely for illustration:

Discount rate = 5% per annum

The precise rate would need to be determined under the requirements of FRS 102.

The present value of the payments is approximately:

£13,350

Assuming no material initial direct costs, incentives or prepayments, the opening accounting entry might therefore be approximately:

Debit

Right-of-use asset £13,350

Credit

Lease liability £13,350

Nothing about the monthly £400 cash payment has changed.

But the accounting has.

What Happens in Year One?

Assume the right-of-use asset is depreciated evenly over three years.

Opening ROU asset

£13,350

divided by:

3 years

gives approximate annual depreciation of:

£4,450

The lease liability also attracts interest.

Using our simplified 5% assumptions and monthly payments, first-year interest would be approximately:

£580

So instead of the Profit & Loss Account simply showing:

Rent expense £4,800

it may approximately show:

Year 1 charge	Amount
Depreciation	£4,450
Finance/interest expense	£580
Total approximate P&L charge	£5,030

Meanwhile, cash paid remains:

£4,800

This illustrates the front-loading effect of lease interest.

What Could Consultancy 4 Business Ltd’s Balance Sheet Show?

At commencement:

Right-of-use asset

£13,350

Lease liability

£13,350

After roughly one year:

ROU asset

£13,350

less depreciation £4,450

£8,900

The remaining lease liability might be approximately:

£9,130

depending on the exact amortisation calculation.

The accounts might therefore contain approximately:

Fixed / Non-Current Assets

Right-of-use property asset:

£8,900

Creditors – amounts falling due within one year

Lease liability:

approximately £4,400

Creditors – amounts falling due after more than one year

Lease liability:

approximately £4,700

The precise current/non-current split would come from the full lease amortisation schedule.

Same £400 a Month – Different Accounts

This is perhaps the simplest way of understanding the new rules.

	Old Operating Lease Treatment	Revised FRS 102
Cash rent paid	£4,800	£4,800
Rent expense	£4,800	—
Depreciation	—	~£4,450
Interest	—	~£580
Right-of-use asset	No	Yes
Lease liability	No	Yes
Rent reduces EBITDA	Yes	No

The cash flow hasn’t changed.

But:

THE PROFIT PRESENTATION AND BALANCE SHEET HAVE

Potential impacts can include:

higher reported assets;
higher liabilities;
changed EBITDA;
changed gearing;
increased finance costs; and
potentially altered lender covenant calculations.

For a very small home-office payment these figures may be immaterial.

For a larger director-owned company with a substantial multi-year arrangement, the issue deserves proper consideration.

Could a 12-Month Arrangement Be Simpler?

Potentially.

Revised FRS 102 includes a recognition exemption for qualifying:

SHORT-TERM LEASES

Broadly, where the relevant conditions are met and the exemption is elected, payments can continue to be recognised as expenses rather than creating a right-of-use asset and lease liability.

The supporting material identifies the exemption for qualifying leases with a term of 12 months or less.

But don’t create a fictional:

“12-month agreement renewed automatically forever”

simply to avoid lease accounting.

The actual rights and commercial substance need to support the accounting treatment.

What If the Company Uses FRS 105?

This distinction is very important.

Don’t automatically apply the revised FRS 102 lease model to every small owner-managed company.

Many micro-entities report under:

FRS 105

The accounting treatment can therefore be different.

The first question should always be:

FRS 102 OR FRS 105?

before calculating a right-of-use asset and lease liability.

There is another accounting point.

The director/homeowner and their own company are related parties.

A home-office rental arrangement therefore needs to be considered under the applicable related-party disclosure rules.

For FRS 102 entities, relevant matters can potentially include:

nature of the relationship;
amount paid;
outstanding balances;
lease terms; and
commitments.

The attached analysis identifies home-office rent as a related-party transaction and leases/commitments as potentially relevant disclosure matters.

Putting Everything Together

Consultancy 4 Business Ltd:

uses a room in the director’s home;
pays £400 per month;
is VAT registered;
buys its own office equipment;
and applies FRS 102.

Rent

£4,800 per year

Equipment

Computer/monitors:

£3,000 + £600 VAT

Furniture/equipment:

£1,500 + £300 VAT

Potential considerations include:

COMPANY

Home-office payment:

£4,800

Qualifying equipment expenditure:

£4,500

Potential VAT recovery:

£900

subject to the normal conditions.

DIRECTOR

Rental income:

£4,800

less qualifying expenditure.

CGT

Avoid unnecessary exclusive business rights where genuine domestic use continues.

PLANNING

Check whether the use remains incidental to residential occupation.

Consider a Certificate of Lawfulness where useful.

MORTGAGE

Check lender restrictions.

INSURANCE

Ensure business use and equipment are appropriately covered.

FRS 102

If the agreement constitutes a three-year lease:

approximately:

£13,350 opening ROU asset

and:

£13,350 opening lease liability

rather than simply £400 rent expense every month.

This is why the arrangement should be considered as:

ONE COMPLETE PACKAGE

12 Questions to Ask Before Charging Your Company Home-Office Rent

Does the company genuinely need the workspace?
What is a commercially supportable rent?
Who legally owns the home?
What household expenditure can be allocated?
Will genuine domestic use continue?
Should the company buy the office equipment?
Can capital allowances be claimed?
Can VAT be recovered?
Does planning permission need consideration?
Would a Certificate of Lawfulness provide useful certainty?
Have the mortgage and insurance conditions been checked?
Does revised FRS 102 lease accounting apply?

Frequently Asked Questions

Can my limited company pay me rent for a room in my home?

Potentially yes, where there is genuine business use and the amount is commercially supportable.

Is the rent tax-free?

No. It is generally property income, although qualifying expenses may reduce the taxable profit.

Is the £312 allowance simpler?

Yes. In many cases it is considerably simpler and involves much less administration.

Can my company buy the office computer, furniture and equipment?

Potentially yes. Qualifying expenditure can potentially attract capital allowances and, where appropriate, VAT recovery.

Will I lose Private Residence Relief?

Not necessarily. The particular CGT concern is exclusive business use of part of the home.

Do I need planning permission?

Not necessarily. Incidental homeworking may not amount to a material change of use, but more substantial commercial activity should be checked.

What is a Certificate of Lawfulness?

It can provide formal confirmation from the planning authority that the proposed use or development described in the application would be lawful.

Does a licence count as a lease under FRS 102?

Potentially. The accounting treatment depends upon the substance of the company’s rights rather than simply the title printed on the agreement.

Will the home-office arrangement appear on the balance sheet?

Where FRS 102 applies, the arrangement contains a lease and no recognition exemption is available, potentially yes.

Download Our Example Home Office Licence Agreement

If you’re considering charging your company rent, we’ve prepared an example Word template covering:

the workspace;
permitted company use;
genuine continuing domestic use;
rent;
household outgoings;
company equipment;
planning;
mortgage and insurance;
visitors and employees;
termination;
FRS 102 review; and
a pre-signing checklist.

[Download the Example Home Office Licence Agreement]

The template should be adapted to the circumstances. More substantial property rights or formal commercial occupation may require specific legal advice.

Bicknell Business Advisers’ Home Office Review

Before putting an arrangement in place:

USE → RENT → TAX → EQUIPMENT → VAT → PROPERTY → PLANNING → ACCOUNTING → AGREEMENT

USE

What does the company genuinely need?

RENT

What is the commercial value of the space and facilities?

TAX

What does the company save and what personal tax arises?

EQUIPMENT

What should the company purchase and own?

VAT

What input VAT can properly be recovered?

PROPERTY

Consider CGT, business rates, mortgage and insurance.

PLANNING

Does the use require permission or would a Certificate of Lawfulness provide useful certainty?

ACCOUNTING

FRS 102 or FRS 105?

Does the agreement contain a lease?

Does an exemption apply?

AGREEMENT

Only then document what has actually been agreed.

Bicknell Business Advisers’ Advice

The mistake is focusing only on:

“How much rent can I charge my company?”

A proper home-office review potentially involves:

CORPORATION TAX

↓

PERSONAL TAX

↓

VAT

↓

CAPITAL ALLOWANCES

↓

CGT

↓

PLANNING

↓

MORTGAGE / INSURANCE / BUSINESS RATES

↓

FRS 102

For some directors, the conclusion will be:

JUST CLAIM £312

For others, particularly where their company makes substantial genuine use of their home, a properly structured rental arrangement could be considerably more valuable.

The key is to calculate the whole position before signing the agreement.

How We Can Help

At Bicknell Business Advisers, we can help directors and owner-managed companies assess whether renting part of the home to the company makes financial and commercial sense.

We can assist with:

£312 versus rent calculations;
commercial rent calculations;
household-cost apportionments;
Corporation Tax;
property Income Tax;
VAT;
capital allowances;
CGT and Private Residence Relief;
FRS 102 lease assessment;
right-of-use asset calculations;
lease-liability schedules;
related-party accounting; and
home-office rental documentation.

Where specialist planning or property-law advice is required, those issues can be identified before documents are signed.

About the Author

Are “Free” Lease Extensions Really Tax Free? The Hidden Tax Trap for Share-of-Freehold Flats

Share of freehold flats and the tax implications of free lease extensions

Why ownership, valuation and market value need to be checked before extending a lease

If you own a flat with a share of the freehold, extending your lease to 999 years and reducing the ground rent to a peppercorn can seem like little more than an administrative exercise.

After all, if the leaseholders effectively own the freehold between them, why should anyone have to pay for a lease extension?

And if no money changes hands, surely there can’t be any tax?

Unfortunately, it isn’t necessarily that simple.

A lease extension can potentially create tax consequences even where the leaseholder pays nothing.

The key questions are:

Who actually owns the freehold?
Does a company own the freehold beneficially, or is it merely holding it as nominee for the leaseholders?
What is the existing lease worth?
What is the extended lease worth?
What is the freeholder’s reversionary interest worth?
Is value being transferred from the freeholder to the leaseholder?
Are the parties connected?
Is the transaction taking place at market value?

These questions should be answered before the leases are extended, not afterwards.

Let’s look at why.

Why Extend a Residential Lease?

Many blocks of flats have a structure where the leaseholders collectively control the freehold, often through a residents’ management or freehold company.

The individual flats remain leasehold.

The company owns the registered freehold.

Each flat owner may also own a share in that company.

Over time, the leaseholders may decide to extend their leases—perhaps to 990 or 999 years—and reduce the ground rent to a peppercorn.

Commercially, that can make perfect sense.

A longer lease may:

make the flat easier to sell;
make mortgage finance easier;
remove concerns about a diminishing lease term;
eliminate future ground rent liabilities; and
potentially increase the value of the flat.

But that final point is exactly where the tax question begins.

A “Free” Lease Extension Can Transfer Value

Suppose a flat is worth £400,000 with its existing lease.

After extending the lease and reducing the ground rent to a peppercorn, it is worth £450,000.

The obvious question is:

Where did that additional £50,000 of value come from?

Economically, at least some of that value may previously have been represented by the freeholder’s reversionary interest and its rights under the existing lease.

By granting the longer lease, value can move from the freehold interest into the leasehold interest.

If the freeholder is a company, that transfer of value may have tax consequences—even if the leaseholder hasn’t written the company a cheque.

For Capital Gains Tax purposes, HMRC generally treats an extension of a lease outside its original terms as involving a surrender of the existing lease and the grant of a new lease.

This is why describing the transaction as a “free lease extension” can be misleading from a tax perspective.

Bicknell Towers – A Worked Example

Let’s take a fictional block called Bicknell Towers.

Bicknell Towers contains eight flats.

Each flat owner owns:

the lease of their individual flat; and
one share in Bicknell Towers Freehold Limited.

Bicknell Towers Freehold Limited is shown at HM Land Registry as owning the freehold.

The existing leases have around 75 years remaining and provide for ground rent.

The residents decide that they would like to:

extend every lease to 999 years and reduce the ground rent to a peppercorn.

Nobody intends to charge anybody anything.

It sounds straightforward.

But before the solicitor prepares the lease extensions, there are two crucial questions we need to answer.

Question 1 – Who Really Owns the Freehold?

This is arguably the most important question in the whole transaction.

Are Free Lease Extensions Taxable? – Steve J Bicknell Tel 01202 025252

The fact that Bicknell Towers Freehold Limited is shown at HM Land Registry as the registered proprietor does not necessarily answer the question of beneficial ownership.

We may need to examine:

the company’s Articles of Association;
the circumstances in which the freehold was originally acquired;
shareholders’ agreements;
declarations of trust;
historic correspondence;
company resolutions; and
the company’s accounts.

Why?

Because there can be a fundamental difference between the company holding the freehold:

as nominee or trustee for the flat owners

and

beneficially in its own right.

If the company is merely holding the freehold as nominee for the leaseholders, the tax analysis may be very different.

If, however, the company owns the freehold beneficially, granting valuable 999-year leases to its shareholders for nothing could potentially represent a disposal of part of the company’s valuable freehold interest.

Bicknell Business Advisers’ Advice

Don’t assume that owning one share in the freehold company means you beneficially own one-eighth of the freehold.

Company ownership and beneficial ownership are not necessarily the same thing.

Establish the legal position before doing the tax calculation.

Question 2 – What Is the Lease Extension Actually Worth?

Once ownership has been established, the next step is normally to obtain a professional valuation.

It isn’t sufficient to say:

“We’re all shareholders, so we’ll just extend the leases for £1.”

For tax purposes, the transaction may need to be considered by reference to market value, particularly where connected parties are involved.

A suitably qualified valuer may therefore need to consider:

the value of the flat before the extension;
its value after the extension;
the remaining term of the existing lease;
the existing ground rent;
the value of the freeholder’s reversion;
the effect of extending the lease; and
the value attributable to reducing the ground rent to a peppercorn.

This isn’t simply a compliance exercise.

The valuation may drive the tax calculation.

How Could the Freehold Company’s Tax Be Calculated?

Let’s return to Bicknell Towers.

Assume, purely for illustration:

Value of flat before lease extension: £400,000

Value after lease extension: £450,000

Value potentially transferred: £50,000

The actual valuation of a lease extension is more sophisticated than simply subtracting one flat value from another, so professional valuation advice is essential.

However, these figures demonstrate the principle.

For tax purposes, the grant of a long lease out of a freehold can constitute a part disposal of the freehold interest.

That brings us to an important Capital Gains Tax calculation.

The A ÷ (A + B) Formula

Where there is a part disposal of an asset, the original acquisition cost normally needs to be apportioned.

The familiar formula is:

A ÷ (A + B)

Broadly:

A = market value of the part disposed of

B = market value of the part retained.

The resulting proportion determines how much of the freeholder’s original allowable cost can be attributed to the disposal.

That attributable cost is then taken into account when calculating the gain.

This can become particularly important where a company acquired a freehold many years ago for relatively little money.

Bicknell Towers – A Simplified Corporation Tax Example

Suppose James owns Flat 1 at Bicknell Towers and is also a shareholder in Bicknell Towers Freehold Limited.

The company grants James a 999-year lease extension and reduces his ground rent to a peppercorn.

James pays the company nothing.

For illustration, assume:

Calculation	Amount
Market value attributed to lease extension	£50,000
Less attributable allowable cost	(£5,000)
Illustrative gain	£45,000

If that £45,000 gain were chargeable at a 25% Corporation Tax rate, the illustrative tax would be:

£45,000 × 25% = £11,250

The actual tax calculation would, of course, depend on the valuation, the company’s original acquisition cost, the precise legal structure, available reliefs and the company’s Corporation Tax position.

But it demonstrates the potential problem.

James paid £0.

The residents called it a free lease extension.

Yet Bicknell Towers Freehold Limited could potentially have a taxable transaction based on market value rather than cash received.

That is why valuation and ownership need to be established before proceeding.

Could James Also Have a Tax Issue?

Potentially.

From the leaseholder’s perspective, extending a lease outside its existing terms can involve the surrender of the old lease and acquisition of the replacement lease.

That means there may potentially be a disposal for Capital Gains Tax purposes.

If Bicknell Towers is James’s main residence and the necessary conditions are satisfied, Private Residence Relief may protect some or all of the gain.

But what if Flat 1 is:

a buy-to-let;
a second home;
owned by a company; or
a property that hasn’t always been James’s main residence?

The position needs closer examination.

This is another reason why every leaseholder’s circumstances shouldn’t automatically be assumed to be identical.

What About ESC D39?

There is an important HMRC concession known as Extra-Statutory Concession D39. CG71240 – Leases: disposal: extension of lease: ESC D39 – HMRC internal manual – GOV.UK

Broadly, subject to its conditions, HMRC may allow the surrender of an existing lease and grant of a replacement lease to be treated as involving no disposal of the old lease and no separate acquisition of the replacement lease.

However, the conditions matter.

One important consideration is whether the transaction takes place on terms equivalent to those that would have been agreed between unconnected parties bargaining at arm’s length.

That creates an obvious question at Bicknell Towers.

If Bicknell Towers Freehold Limited grants James a lease extension worth £50,000 and James pays:

£0

would independent parties have agreed the same transaction?

This needs careful consideration rather than assuming ESC D39 automatically applies to every lease extension.

Could There Also Be a Distribution Problem?

This is perhaps the tax trap that will surprise readers most.

Suppose Bicknell Towers Freehold Limited beneficially owns the freehold.

The company then grants James, one of its shareholders, a valuable lease extension for nothing.

Economically, the company may have transferred value to its shareholder.

That raises a separate question:

Could the benefit provided to James amount to a distribution for tax purposes?

Potentially, yes.

The company/shareholder tax consequences therefore need to be considered alongside the company’s chargeable gain.

In the wrong circumstances, it isn’t necessarily just the company’s Corporation Tax position that needs attention.

There could potentially also be a personal tax consequence for the shareholder receiving the benefit.

What If James Pays Market Value?

You might think there is an easy answer.

Instead of giving James a £50,000 lease extension for nothing, Bicknell Towers Freehold Limited charges him £50,000.

That may help address some of the market-value and arm’s-length issues.

But it creates another practical problem.

Bicknell Towers Freehold Limited now has:

£50,000 cash

What happens to it?

If the money remains within the company, that may be fine.

But if the intention is ultimately to return it to James or distribute accumulated funds amongst the shareholders, extracting that cash may itself have tax consequences.

So simply saying:

“We’ll charge market value.”

doesn’t necessarily solve the overall problem.

You need to consider the entire transaction, not one tax in isolation.

What About SDLT?

Stamp Duty Land Tax (SDLT) should also be checked.

Extending the term of a lease can, for legal and SDLT purposes, amount to the surrender of an existing lease and the grant of a replacement lease.

There are specific SDLT rules concerning surrender and regrant transactions, consideration and overlapping leases.

In many share-of-freehold lease extension arrangements there may ultimately be little or no SDLT to pay, particularly where there is no chargeable consideration.

However, I would not assume that every lease extension is automatically outside SDLT.

Check the specific transaction.

Seven Things to Check Before Extending a Lease

Before Bicknell Towers signs anything, I would want answers to these seven questions:

1. Who legally owns the freehold?

Check the Land Registry title.

2. Who beneficially owns the freehold?

Don’t assume the registered proprietor tells the whole story.

3. Is the company a nominee or the beneficial owner?

This could fundamentally change the tax analysis.

4. What is the existing lease worth?

Obtain professional valuation advice.

5. What will the extended lease be worth?

You need to understand how much value is being transferred.

6. What would independent parties pay for the extension?

A nominal £1 consideration doesn’t necessarily mean the taxable value is £1.

7. What taxes need to be considered?

Potentially:

Corporation Tax;
Capital Gains Tax;
taxation of distributions; and
SDLT.

Only once those questions have been answered would I recommend proceeding with the legal documentation.

The Biggest Mistake – Extend First, Ask the Accountant Later

This is probably the most important point in the whole article.

Leaseholders naturally start by speaking to their solicitor.

That’s understandable—the solicitor prepares the lease extension.

But the solicitor preparing the lease may not be responsible for calculating:

the freehold company’s Corporation Tax;
the shareholder’s personal tax position;
the market value transferred; or
the wider tax implications of the structure.

Once the 999-year leases have been granted for nothing, the transaction has happened.

It can be considerably more difficult to address an unexpected tax liability afterwards.

Bicknell Business Advisers’ Advice

The correct order should normally be:

1. OWNERSHIP → 2. VALUATION → 3. TAX → 4. STRUCTURE → 5. LEGAL DOCUMENTATION

Don’t sign first and calculate the tax later.

What Does “Share of Freehold” Actually Mean?

This phrase causes enormous confusion.

Estate agents routinely advertise flats as:

“Share of Freehold”

But that description tells you surprisingly little about the underlying legal and tax structure.

You might own:

a share in a company that beneficially owns the freehold;
a direct beneficial interest in the freehold;
an interest under a trust;
a company share carrying particular contractual rights; or
some other legal arrangement.

Those aren’t necessarily the same thing for tax purposes.

So before granting a valuable lease extension for nothing, establish precisely what everyone actually owns.

A “Free” Lease Extension Isn’t Necessarily Tax Free

That is really the takeaway from Bicknell Towers.

The residents may look at the arrangement and think:

“We already own the freehold, so we’re simply extending our own leases.”

But if Bicknell Towers Freehold Limited actually owns the freehold beneficially, the tax analysis could look very different.

The company may potentially be disposing of a valuable interest in land to its shareholders.

That is why two apparently identical blocks of flats can potentially have completely different tax outcomes.

It depends on what the legal documents actually say.

Don’t Forget the Valuation

If there is one practical lesson beyond establishing ownership, it is this:

Get the property professionally valued.

Tax advisers cannot reliably calculate a market-value tax charge by guessing the value of a lease extension.

A suitably qualified surveyor or leasehold valuation specialist may need to determine the value of:

the existing lease;
the extended lease;
the freeholder’s interest before the transaction;
the retained freehold interest afterwards; and
the value being transferred.

Those numbers then allow the tax adviser to calculate the potential consequences properly.

How We Can Help

At Bicknell Business Advisers, we advise landlords, property investors, freehold companies and property businesses on the tax consequences of property transactions.

Before extending leases, we can work alongside your solicitor and professional valuer to establish:

how the freehold is owned;
whether the company owns it beneficially or as nominee;
what valuations are required;
whether the company could realise a taxable gain;
whether shareholders could receive a taxable distribution;
the Capital Gains Tax position of individual leaseholders; and
whether SDLT needs to be considered.

If you own a flat with a share of the freehold and your residents’ company is considering extending the leases, take tax advice before the new leases are signed.

A transaction that appears to be free can sometimes have a surprisingly expensive tax consequence.

About the Author

Steve Bicknell FCMA, CGMA is Managing Director of Bicknell Business Advisers Limited, specialising in property taxation, SDLT, Capital Gains Tax and tax planning for landlords, developers and property investors throughout the UK.

How Landlords Can Legally Reduce Tax by Changing the Split of Rental Income

a couple saving tax on their property investment

A Complete Guide to Form 17, Deeds of Trust and Beneficial Ownership

If you own a rental property jointly with your spouse, civil partner or partner, you could be paying more Income Tax than necessary.

Many landlords assume rental income must always be split equally between the owners. In fact, the tax position depends on who owns the property, how it is owned and whether you are married or unmarried.

Since the abolition of the Furnished Holiday Letting (FHL) tax regime from 6 April 2025, understanding these rules has become even more important. Many former holiday-let owners who never previously needed to think about Form 17 may now need to review how their rental income is taxed.

The good news is that, with the right ownership structure and careful planning, many landlords can legitimately reduce their family’s overall tax bill.

The key is getting the ownership structure right before submitting tax returns.

Harry and Megan’s Story

Let’s start with a typical example.

Harry earns £130,000 a year and pays Income Tax at the additional rate.

Megan earns £22,000 and pays tax at the basic rate.

Together they own two buy-to-let properties producing rental profits of £30,000 a year.

They assume the profits must be split equally.

Many landlords do.

But depending on their circumstances, that may not be the most tax-efficient solution.

Whether they can change the split depends on one important question…

Are they married?

The answer completely changes the tax rules.

Could You Save Tax?

Decision Tree

Why Does This Matter?

Imagine rental profits of £30,000.

Owner	Equal Split	90/10 Split
Harry	£15,000	£3,000
Megan	£15,000	£27,000

The actual tax saving depends on each person’s wider tax position, but where the legislation allows a change in beneficial ownership, the family’s combined Income Tax liability could be significantly lower.

Of course, tax should never be the only consideration. Changing ownership may also affect Capital Gains Tax, Stamp Duty Land Tax and Inheritance Tax.

Married Couples and Civil Partners

This is where many landlords are surprised.

Most people assume that tax follows ownership.

For married couples, it often doesn’t.

Where spouses or civil partners live together, HMRC normally taxes income from jointly owned property 50:50, regardless of the actual beneficial ownership, unless the statutory exception applies.

For example:

Beneficial Ownership	HMRC Default Tax Position
Husband 90%	50%
Wife 10%	50%

Many landlords don’t discover this until after filing their tax returns.

Form 17 Explained

Fortunately, HMRC allows married couples and civil partners to be taxed according to their actual beneficial ownership.

This is done by submitting Form 17. https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

If you want to change the ownership split, the beneficial ownership must first be changed and properly documented — commonly using a Deed or Declaration of Trust. Married couples and civil partners then use Form 17 to ask HMRC to tax the rental income in those actual ownership proportions.

Form 17 does not create or change beneficial ownership. It tells HMRC to recognise unequal beneficial ownership that already exists. If you currently own the property 50:50 and want a 90:10 split, the ownership must be changed first and supported by appropriate evidence.

To use Form 17:

the property must genuinely be owned in unequal beneficial shares;
those shares must be supported by legal evidence, usually a Deed of Trust;
Form 17 must normally reach HMRC within 60 days of being signed.

⚠ Important

Form 17 does not change ownership.

It simply tells HMRC how you already own the property.

Many people get this the wrong way round.

The April 2025 FHL Changes

One of the biggest changes affecting landlords has received surprisingly little attention.

Until 5 April 2025, Furnished Holiday Lettings were taxed under a separate regime.

From 6 April 2025, that regime was abolished.

Former FHL properties are now generally taxed in the same way as other residential lettings.

For many married couples this means that, if they wish to be taxed other than 50:50, they will normally need:

unequal beneficial ownership; and
a valid Form 17 declaration.

If you owned an FHL before April 2025, now is a good time to review your ownership structure.

Unmarried Couples

The rules are completely different.

This catches many landlords out.

Unmarried couples cannot use Form 17.

Instead, HMRC taxes rental income according to the actual beneficial ownership.

Suppose Harry and Megan own a rental property.

Harry owns 80%.

Megan owns 20%.

The rental profits are normally taxed:

Harry – 80%
Megan – 20%

There is no Form 17.

No declaration is sent to HMRC.

The ownership simply needs to be properly documented.

What Is a Deed of Trust?

A Deed of Trust records the beneficial ownership of a property.

It is often used where co-owners wish to hold different ownership percentages.

For example:

50/50
80/20
90/10
99/1

A properly drafted Deed of Trust can provide the evidence HMRC expects where beneficial ownership is unequal.

However, it is far more than a tax document.

Changing beneficial ownership may also affect:

Capital Gains Tax
Inheritance Tax
Stamp Duty Land Tax
divorce settlements
entitlement to future sale proceeds

Professional advice should always be taken before changing ownership.

Don’t Forget Stamp Duty Land Tax

Many landlords overlook SDLT.

Where there is an outstanding mortgage, changing ownership percentages can sometimes trigger SDLT because one owner is treated as taking responsibility for a greater share of the mortgage debt.

This can arise even where no money changes hands.

It’s another reason why tax and legal advice should be taken before signing a Deed of Trust.

Seven Expensive Mistakes Landlords Make

❌ Assuming Form 17 changes ownership.

❌ Filing Form 17 without changing beneficial ownership.

❌ Missing the 60-day deadline.

❌ Assuming unmarried couples can use Form 17.

❌ Forgetting the FHL rules changed from April 2025.

❌ Ignoring SDLT implications.

❌ Downloading a template Deed of Trust from the internet without taking advice.

The Biggest Tax Mistakes Made by New Landlords – Steve J Bicknell Tel 01202 025252

Planning Opportunity

Sometimes changing the ownership percentages is the right answer.

Sometimes it isn’t.

If:

one owner pays additional-rate tax;
you’re planning to build a larger property portfolio; or
you’re buying more rental properties,

it may be worth considering whether holding future properties through a limited company would be more tax-efficient.

This isn’t the right solution for everyone, but reviewing the options before purchasing another property can avoid expensive restructuring later.

For more information, read our article:

Tax Benefits of Incorporating Your Property Portfolio https://stevejbicknell.com/2025/05/03/tax-benefits-of-incorporating-your-property-portfolio/

Married or Unmarried? At a Glance

Question	Married / Civil Partners	Unmarried Couples
Default tax split	50:50	Beneficial ownership
Form 17 available?	Yes	No
Deed of Trust useful?	Yes	Yes
Can ownership percentages differ?	Yes	Yes
SDLT implications possible?	Yes	Yes

Frequently Asked Questions

Can Form 17 be backdated?

No. HMRC requires the declaration to be submitted within the statutory time limit.

Can unmarried couples use Form 17?

No.

Does Form 17 change ownership?

No.

Does a Deed of Trust change ownership?

Yes, it records the beneficial ownership between the parties.

Can changing ownership trigger SDLT?

Yes, particularly where a mortgage exists.

How We Can Help

At Bicknell Business Advisers, we regularly advise landlords and property investors on:

Form 17
Beneficial ownership
Deeds of Trust
SDLT planning
Capital Gains Tax
Property ownership structures
Incorporation planning

The best time to seek advice is before ownership changes are made.

A short planning meeting today could save tax for many years to come.

About the Author

Property Investor or Property Trader? The 9 Factors HMRC Uses

Property investor calculating tax on a property purchase

Many property investors assume that if they buy and sell property, any profit will automatically be subject to Capital Gains Tax (CGT). Unfortunately, it isn’t that simple.

One of the most common areas of dispute between landlords, developers and HMRC is whether a property has been held as an investment or whether the owner was actually trading in property.

The difference can be extremely expensive.

If HMRC decides that you were trading rather than investing, your profits could be taxed as income rather than capital gains. Depending on your circumstances, this could significantly increase your tax bill.

So how does HMRC decide?

The answer lies in a long-established set of principles known as the “badges of trade”, together with the overall facts surrounding each transaction.

Why Does It Matter?

The distinction affects almost every aspect of taxation.

A property investor will normally pay Capital Gains Tax when selling an investment property.

A property trader will generally pay Income Tax (or Corporation Tax if trading through a company), and individuals may also be liable to National Insurance.

If you hold property personally, you may also wish to read Tax Benefits of Incorporating Your Property Portfolio.

Tax Benefits of Incorporating Your Property Portfolio – Steve J Bicknell Tel 01202 025252

The classification can also affect:

loss relief
inheritance tax reliefs
business asset disposal relief
tax planning opportunities

Getting it wrong can prove costly.

The 9 Factors HMRC Looks At

No single factor determines the answer. HMRC considers the overall picture.

1. What Was Your Intention When You Bought the Property?

This is often the most important question.

Ask yourself honestly:

Did you intend to rent the property for many years?
Or did you always hope to renovate and sell it quickly for a profit?

HMRC will often review:

business plans
finance applications
correspondence
emails
board minutes
mortgage applications

to establish what your intention was when you purchased the property.

2. How Long Did You Own It?

Generally speaking:

Long ownership periods tend to support investment.

Very short ownership periods can suggest trading.

Selling shortly after completion of refurbishment may raise questions, particularly if there was never any genuine intention to let the property.

Of course, life changes. A genuine change in circumstances does not automatically make someone a trader.

3. Did You Carry Out Significant Development Work?

Buying a tired property, renovating it and immediately selling it is one of the classic indicators of property trading.

This doesn’t mean every renovation creates a trading business.

However, repeated refurbishment followed by quick sales is far more likely to attract HMRC’s attention.

4. How Frequently Do You Buy and Sell?

One isolated sale rarely causes concern.

But a pattern such as:

Buy
Renovate
Sell
Repeat

starts to resemble a property development business rather than long-term investment.

The more frequently transactions occur, the greater the likelihood that HMRC will argue you are trading.

5. How Was the Property Financed?

Finance tells a story.

For example:

Investment indicators

Buy-to-let mortgage
Long-term repayment strategy
Rental income covering repayments

Trading indicators

Bridging finance
Short-term development loans
Repayment dependent on selling the property

The type of borrowing often reflects your original intention.

6. Does the Property Produce Rental Income?

Investment properties normally generate rental income.

If a property has never been marketed for letting and has always been prepared for resale, HMRC may question whether it was ever genuinely intended to be an investment.

Keeping evidence of:

tenancy agreements
letting agent instructions
advertising
rental business plans

can be extremely helpful.

7. What Business Are You Already In?

If you’re already:

a builder
developer
construction company
estate agent

HMRC may naturally scrutinise property purchases more closely.

That doesn’t mean you can’t own investment properties.

However, you’ll need stronger evidence showing which properties are investments and which are trading stock.

8. How Is the Property Recorded in Your Accounts?

Many people overlook this.

The way a property appears in your accounts can provide important evidence.

For example:

Investment properties are usually shown as fixed assets.

Properties intended for resale are often treated as trading stock.

Changing the accounting treatment after purchase is rarely persuasive if it doesn’t reflect the original commercial reality.

If you’re a landlord, you may also find our guide to The Biggest Tax Mistakes Made by New Landlords helpful.

The Biggest Tax Mistakes Made by New Landlords – Steve J Bicknell Tel 01202 025252

9. Why Did You Sell?

Sometimes genuine circumstances change.

Examples include:

divorce
ill health
relocation
unexpected financial pressure
receiving an unsolicited offer

A genuine change of circumstances doesn’t necessarily turn an investment into trading stock.

The important point is being able to demonstrate why the original plan changed.

Good documentation can make all the difference.

No Single Factor Decides the Outcome

Many people ask:

“How many properties can I sell before HMRC considers me a trader?”

Unfortunately, there isn’t a simple answer.

HMRC looks at the overall picture.

You might sell one property and still be trading.

Equally, you might sell ten investment properties over many years without ever becoming a property trader.

Each case depends on its own facts.

Practical Tips

If your intention is genuinely long-term investment, keep evidence that supports your position.

Useful records include:

business plans
mortgage offers
letting agent instructions
tenancy agreements
board minutes (for companies)
rental income records
correspondence showing investment intentions

These documents can become invaluable if HMRC opens an enquiry several years later.

How We Can Help

At Bicknell Business Advisers, we specialise in advising:

Property investors
Landlords
Developers
Property companies
Family Investment Companies
Property entrepreneurs

Whether you’re buying your first buy-to-let, building a development portfolio, or unsure whether your activities could be treated as trading, obtaining advice before you buy—or before you sell—can often prevent costly tax problems later.

If you’d like to discuss your property portfolio or future plans, we’d be delighted to help.

ATED Revaluation 2027 https://stevejbicknell.com/2026/08/15/ated-revaluation-2027-could-your-property-company-be-caught-by-the-500000-tax-trap/

About the Author

Steve Bicknell FCMA, CGMA is Managing Director of Bicknell Business Advisers Limited, a specialist property and construction accountancy practice. Steve advises landlords, developers and property investors across the UK on tax planning, company structures, capital gains tax and Making Tax Digital, helping clients build profitable property businesses while remaining fully compliant with HMRC.

Making Tax Digital for Income Tax – Understanding Quarterly Updates

From 6 April 2026, Making Tax Digital for Income Tax (MTD for Income Tax) is mandatory for sole traders and landlords with annual income over £50,000.

Under MTD for Income Tax, taxpayers are required to keep digital records and submit quarterly updates to HMRC using MTD-compatible software. But what are quarterly updates, and when is the first filing for 2026/27 due?

What is in a quarterly update?

MTD for Income Tax requires sole traders and landlords to report on a quarterly basis to HMRC.Each update is cumulative across the year. That means that, for each update period, you will report:

your self-employment or property income and expenses from the previous three months,
plus the total of your previously reported trade or property income and expenses for the tax year,
and any corrections made to those figures.

No accounting or tax adjustments are necessary before sending a quarterly update to HMRC.

What are the update periods?

There are two update periods under MTD for Income Tax. The standard update period is based on the tax year, and looks as follows:

However, if a taxpayer chooses (and if their MTD software has the capability) it’s possible to send quarterly updates on a calendar basis instead. This can be particularly useful for businesses that prepare accounts to 31 March.

The submission period for a calendar update period is:

In both cases, the submission deadline is the same. This means a business using a calendar update period actually has a few extra days each quarter to prepare their update.

Do I need to submit anything other than quarterly updates?

Yes. After the fourth quarterly update has been filed, you should make any tax or accounting adjustments to your figures, as well as add in any additional income sources that aren’t reported as part of MTD for Income Tax (e.g. pension income, employment income, interest income etc), and claim any tax reliefs to which you’re entitled, such as capital allowances.

This is known as the ‘final declaration’ and works as the MTD version of your self-assessment tax return. The deadline to submit a final declaration is the same as the online filing deadline for self-assessment tax returns – 31 January following the tax year end.

I am a sole trader and also receive property income. Do I need to submit multiple quarterly updates?

Yes. Separate quarterly updates need to be submitted for each trade or property business. That means if you earn trading income as well as rental income, you will need to send 8 quarterly updates across the tax year.

Need help with Making Tax Digital for Income Tax?

Looking for more information on what you need to include in your quarterly updates? Book some time to speak with a member of our team today – we’d be happy to guide you through the Making Tax Digital filing process.

The Biggest Tax Mistakes Made by New Landlords

Get Expert Help

Becoming a landlord can seem like a straightforward way to generate additional income and build long-term wealth. However, many first-time landlords quickly discover that property taxation is far more complex than expected.

HMRC has increased its focus on property income in recent years, and simple mistakes can lead to unnecessary tax bills, penalties, and costly investigations.

Here are some of the most common tax mistakes new landlords make — and how to avoid them.

1. Not Registering for Self Assessment

One of the biggest misconceptions among new landlords is assuming that HMRC will automatically know about their rental income through mortgage companies, letting agents, or the Land Registry.

Unfortunately, that is not how it works.

If you receive rental income from a property, you are generally required to register for Self Assessment and submit annual tax returns. HMRC register-for-self-assessment

When Must You Register?

You normally need to register if:

Your rental income exceeds £1,000 in a tax year
You make taxable profits from property
You already complete tax returns for other reasons

https://www.gov.uk/renting-out-a-property/paying-tax

The Risks of Not Registering

Failing to register can result in:

Late filing penalties
Interest charges
HMRC investigations
Higher penalties for deliberate non-disclosure

HMRC now receives increasing amounts of data from:

Letting agents
Deposit schemes
Airbnb and online rental platforms
Mortgage providers

As a result, undeclared rental income is becoming much easier for HMRC to identify.

Practical Tip

If you have recently started renting out a property and have not yet informed HMRC, it is usually better to make a voluntary disclosure before HMRC contacts you. We have help many new client with voluntary disclosures.

2. Missing Allowable Expenses

Many new landlords end up paying more tax than necessary simply because they fail to claim legitimate expenses.

Rental tax is based on profit, not rental income. That means you should deduct allowable business expenses before calculating your tax liability.

https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income

https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

Common Allowable Expenses

Landlords can usually claim:

Letting agent fees
Insurance
Repairs and maintenance
Council tax and utilities (if paid by the landlord)
Accountancy fees
Replacement furniture and appliances
Service charges and ground rent
Advertising costs

Repairs vs Improvements

This is an area that often causes confusion.

Generally:

Repairs are deductible
Improvements are capital expenses and may only reduce Capital Gains Tax when the property is sold

For example:

Replacing a broken boiler with a similar model is normally a repair
Upgrading to a significantly enhanced heating system may be treated as an improvement

Mortgage Interest Restrictions

Many landlords are also caught out by the mortgage interest rules introduced under Section 24.

Individual landlords can no longer deduct mortgage interest in full when calculating profits. Instead, they receive a basic rate tax credit.

This means some landlords pay tax on profits that are much higher than their actual cash surplus.

3. Joint Ownership Issues

Couples often purchase rental properties together, but many fail to consider how ownership structure affects taxation.

By default, HMRC usually assumes rental income for married couples is split 50:50, regardless of actual ownership proportions.

https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

This can create unnecessary tax exposure if:

One spouse is a higher-rate taxpayer
One spouse has unused personal allowances or lower tax rates

The Importance of Beneficial Ownership

In some cases, couples can structure ownership differently to improve tax efficiency.

However, this must be properly documented.

Simply deciding between yourselves how to split the income is not enough.

Where appropriate, couples may need:

A declaration of trust
Form 17 submitted to HMRC
Legal advice regarding ownership arrangements

A Common Mistake

Many landlords assume that because one person “manages the property”, all income can be declared on their tax return.

HMRC looks at legal and beneficial ownership, not who deals with the tenants.

4. Poor Record-Keeping

Good record-keeping is essential for landlords, yet it is one of the most overlooked areas.

https://www.gov.uk/self-assessment-tax-returns/records

Many landlords:

Lose receipts
Mix personal and rental spending
Fail to track mileage or expenses
Cannot evidence repairs carried out years earlier

This becomes a serious issue if HMRC opens an enquiry.

What Records Should Landlords Keep?

You should retain:

Rental statements
Bank records
Invoices and receipts
Mortgage interest certificates
Tenancy agreements
Mileage logs
Purchase and legal documents

Records should generally be kept for at least:

5 years after the 31 January filing deadline

Digital Record Keeping

With Making Tax Digital expected to expand further in future years, digital record-keeping will become increasingly important.

https://www.gov.uk/guidance/check-if-you-need-to-use-making-tax-digital-for-income-tax

Using:

Cloud accounting software
Separate bank accounts
Digital receipt storage

can save significant time and reduce errors.

Final Thoughts

Property can be a strong long-term investment, but many new landlords underestimate the importance of proper tax planning and compliance.

The most common mistakes — failing to register with HMRC, missing expenses, structuring ownership incorrectly, and poor record-keeping — can all become expensive problems later.

Taking advice early and setting up good systems from the start can help landlords:

Reduce tax liabilities legitimately
Avoid penalties
Improve profitability
Stay compliant with HMRC

If you are a new landlord and want to ensure your property affairs are structured correctly, professional advice can often save far more than it costs.

Book a meeting to discuss how we can help

We also have the following useful resources

Property Fact Sheets | Bicknell Business Advisers

Monthly Property Newsletter | Bicknell Business Advisers

Budget 2025: Key Changes Affecting the Most People

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

Bicknell Business Advisers Limited

40 Broadway Lane, Bournemouth

5.0 39 reviews

Pablo Alonso ★★★★★ 5 years ago
I have known Steve for a couple of years and he has always been very helpful. He is pro-active and very knowledgeable. His advice is certainly top and I completely recommend him
Steve Upton ★★★★★ 5 years ago
As is often the case, the most valuable business relationships are generated by word of mouth. Working as a Director of the Southern Electric Traction Group C.I.C in London, Bicknell Business Advisers Limited were recommended to me by a … More fellow business owner. I am truly grateful for that recommendation. I can honestly say that the guidance and support we have received from the team have been instrumental to our work and we would be in a considerably lesser position without them.
I haven't the words to fully express Bicknell's input, but perhaps the phrase "no question goes unanswered, no effort is spared" best sums up their approach to client support. I would wholeheartedly recommend Steve and his colleagues in any advisory capacity and am delighted that we have found such a professional, efficient and courteous company with which to do business.
Simon Clarke ★★★★★ 6 years ago
Where do I start? Steve, Kate, and their team are professional and tenacious. They go above and beyond to make sure you file correctly and file on time, as well as advising on anything financial. If you're looking for a top quality … More accountant, look no further, they're right here.
Izan Coomonte Suárez ★★★★★ 6 years ago
I would recommend Steve 100% to anyone! He's the best advisor and tax professional I've found in many years. As a Spanish citizen, he has helped me a lot not only become very efficient with my taxes but also understand how the … More UK Tax system works!
He is friendly, professional and delivers a lot of value to the people he works with.
Mutaz Qubbaj ★★★★★ 7 years ago
Steve and his team have been an invaluable asset to Squirrel as of day 1. They never cease to hit the mark when it comes to our accounting, payroll and R&D-related needs. The depth of knowledge and expertise to address the challenges … More of running a small business on the path to becoming a growing concern has exceeded expectations. The team is extremely approachable and willing to drill into the details with myself and members of my team at every opportunity.
Gill Alder ★★★★★ 6 years ago
I have known Steve Bicknell for around 20 years and have always found
him to be an extremely knowledgeable professional, with a down to earth
approach - always able to explain technical info in a way that is easy to understand.
I always … More recommend him to friends and business acquaintances and will continue to do so, as a person of integrity and professionalism.