Author: Abbie Glew

When you’re self-employed, every expense matters.

But one of the biggest things we see time and time again is sole traders and self-employed business owners paying more tax than they need to, simply because they don’t realise what they can legitimately claim.

And usually, it’s not because they’re doing anything wrong. It’s because they aren’t sure what is available to them.

This guide is designed to give you a practical, straight-talking overview of some of the most commonly missed tax-saving opportunities for self-employed business owners, without the jargon or complicated tax speak.

Because good tax planning is not about “avoiding tax”. It’s about making sure you are only paying what you genuinely owe while running your business properly and efficiently.

First Things First: How Tax Savings Work When You’re Self-Employed

As a sole trader or self-employed business owner, you pay tax on your business profits.

So broadly speaking:

• More allowable business expenses = lower taxable profit
• Lower taxable profit = less income tax and National Insurance

For example:

• If your business earns £60,000 income
• And you have £10,000 of allowable expenses
• You’re taxed on £50,000 profit instead

Simple in principle. But where things often get confusing is understanding:

• What HMRC considers allowable
• What counts as “wholly and exclusively” for business
• Which costs are partly personal
• And how to keep proper records

Let’s go through some of the most commonly missed opportunities.

1. Business Mileage

One of the biggest missed claims for self-employed business owners.

If you use your personal vehicle for business journeys, you may be able to claim HMRC’s approved mileage rates instead of actual vehicle running costs.

Current rates include:

• 55p per mile for the first 10,000 miles
• 25p thereafter

This covers:

• Fuel
• Servicing
• Insurance contribution
• Wear and tear

For a full breakdown of the latest rates, read our guide here:

HMRC Mileage Rates 2026/27 Guide

What counts as business travel?

Typically:

• Visiting clients
• Supplier meetings
• Networking events
• Temporary workplaces
• Travel to qualifying business training

But ordinary commuting to a permanent workplace generally does not qualify.

Practical tip

Keep a mileage log including:

• Date
• Journey
• Purpose
• Miles travelled

Good records matter if HMRC ever asks questions.

2. General Business Travel

A lot of self-employed people forget how much legitimate travel can qualify.

Potentially allowable expenses include:

• Trains
• Flights
• Hotels
• Parking
• Taxis
• Congestion charges
• Meals while travelling for business

The key rule is that the expense must be wholly and exclusively for business purposes.

Commonly missed examples

• Overnight accommodation before early meetings
• Networking events
• Conferences
• Business retreats
• Travel to training related to your existing business activities

And yes, overseas travel can qualify too if there is a genuine business purpose.

3. Use of Home Costs

If you work from home, you may be able to claim a portion of household costs against your business income.

This is one of the most misunderstood areas of self-employed tax.

Potential claim areas can include:

• Electricity
• Heating
• Broadband
• Council tax
• Rent or mortgage interest (proportionally)
• Home insurance

The simpler option

Many sole traders choose to use HMRC’s simplified flat-rate method instead.

This keeps things straightforward and reduces admin.

Using actual household costs

Some business owners prefer to calculate a proportion of their actual household running costs instead, which can sometimes produce a larger claim.

The key is making sure the calculation is reasonable, proportionate, and properly evidenced.

If you are a client of Orenda Collective, we have a template calculation spreadsheet that can help you work out a sensible and supportable home office claim using this method.

Important point

You should only claim the business-use proportion of costs.

Trying to overclaim home expenses is one of the biggest HMRC red flags for sole traders.

4. Mobile Phones & Broadband

If your phone or internet is used for business purposes, you may be able to claim the business-use proportion of the costs.

For example:

• Business calls
• Client communication
• Online meetings
• Running cloud software
• Social media management

Important rule

If there is personal use too, only the business proportion should usually be claimed.

Good estimates and consistency matter.

5. Equipment & Technology

A surprisingly common mistake:
Self-employed business owners personally paying for business equipment without claiming it properly.

Potential claims include:

• Laptops
• Monitors
• Cameras
• Phones
• Printers
• Office furniture
• Software subscriptions
• Industry tools

If the business uses it, there is often a legitimate claim available.

6. Training & Professional Development

Training can often qualify where it:

• Maintains existing skills
• Updates your knowledge
• Relates to your current business activities

Examples:

• Industry courses
• Conferences
• CPD training
• Workshops
• Business coaching

What usually does not qualify?

Training for an entirely new career or trade.

For example:

• A photographer training in advanced editing may qualify
• A photographer retraining to become a plumber likely would not

7. Professional Subscriptions & Memberships

Many self-employed business owners forget these entirely.

Allowable examples may include:

• Trade memberships
• Professional bodies
• Industry associations
• Networking memberships related to business

Examples:

• Federation of Small Businesses (FSB)
• Chartered Institute of Marketing (CIM)
• Creative industry associations
• Coaching federations
• Wellness industry memberships

The key is ensuring the membership relates directly to your business activities.

8. Pension Contributions

Pension contributions remain one of the most tax-efficient long-term planning tools available.

As a self-employed business owner:

• Personal pension contributions may attract tax relief
• They can help reduce higher-rate tax exposure
• They support long-term financial planning

Many business owners focus entirely on reducing tax today and forget future planning altogether.

Pensions can help balance both.

9. Business Insurance

Some forms of business insurance may be allowable business expenses.

Potential examples:

• Professional indemnity insurance
• Public liability insurance
• Employers’ liability insurance
• Cyber insurance
• Business contents insurance

Important distinction

Personal policies such as life insurance usually do not qualify for sole traders in the same way they can through limited companies.

10. Marketing & Advertising

This is often broader than people realise.

Potentially allowable costs can include:

• Website costs
• Social media advertising
• Branding
• Graphic design
• Photography
• Business cards
• Email marketing software
• SEO services

If the purpose is promoting your business, there is usually scope for relief.

11. Staff Costs & Freelancers

If you employ staff or outsource work, these costs may be deductible.

Examples include:

• Salaries
• Employer’s National Insurance
• Pension contributions
• Freelancers
• Virtual assistants
• Subcontractors

Important reminder

Make sure worker status is correct.

HMRC pays close attention to businesses incorrectly treating employees as subcontractors.

12. Business Meals & Entertaining

This is one of the most misunderstood tax areas.

What usually is NOT allowable?

Client entertaining.

Examples:

• Taking clients for dinner
• Hospitality events
• Sporting tickets

These are generally not tax deductible.

What CAN qualify?

Staff subsistence while travelling for business.

For example:

• Meals during overnight business travel
• Food while attending qualifying business trips

The distinction matters.

13. Simplified Expenses

HMRC offers simplified expense methods for some self-employed businesses.

This can apply to:

• Vehicles
• Working from home
• Living at your business premises

For many sole traders, simplified expenses:

• Reduce admin
• Keep bookkeeping cleaner
• Lower compliance stress

Sometimes simple is best.

14. Annual Investment Allowance (AIA)

If you purchase qualifying business equipment or assets, you may be able to claim tax relief through capital allowances.

Potential qualifying assets include:

• Equipment
• Machinery
• Tools
• Office furniture
• Technology

Timing larger purchases properly before your year-end can make a meaningful difference to your tax position.

15. Pre-Trading Expenses

A really commonly missed opportunity.

If you incurred business costs before officially starting your business, you may still be able to claim them.

Potential examples:

• Equipment
• Website setup
• Software
• Professional fees
• Marketing costs

Provided the expense would have qualified after trading started, it may still be allowable.

16. Timing Matters

One of the simplest tax planning opportunities:
Timing your expenses properly.

Examples:

• Purchasing equipment before year-end
• Paying for training before year-end
• Clearing outstanding business costs promptly
• Reviewing profits before the tax year closes

Small timing decisions can create meaningful savings.

The Biggest Mistake Self-Employed Business Owners Make

The biggest issue is rarely one huge missed tax strategy.

It’s small missed opportunities adding up over years.

We regularly see business owners:

• Paying for business costs personally
• Forgetting legitimate claims
• Mixing business and personal spending
• Keeping poor records
• Or only thinking about tax once the deadline arrives

Good tax planning should be proactive, not last minute.

That’s exactly why we built our support packages to give business owners the level of support they actually need, whether that’s straightforward compliance or more proactive strategic guidance.

You can explore our services here:

Self-Employed Transformation Services

Final Thoughts

Tax efficiency is not about pushing boundaries or finding loopholes.

It’s about:

• Understanding what you can legitimately claim
• Keeping proper records
• Planning ahead
• And making your business work smarter financially

Because every pound unnecessarily lost to tax is money that could instead support:

• Your growth
• Your wellbeing
• Your future goals
• Or simply reducing financial stress

And that’s exactly the kind of straight-talking support we care about at Orenda Collective.

Want help making sure you’re not overpaying tax while keeping your finances organised and stress-free?

At Orenda Collective, we help self-employed business owners build practical, straight-talking financial strategies that support sustainable growth.

If you’d like tailored support, get in touch here:

Contact Orenda Collective

The information in this blog is for general guidance only and does not constitute accounting, tax, or business advice. Every business is unique, and we recommend seeking personalised advice before making any financial or strategic decisions. If you need tailored support, feel free to contact us at https://orendacollective.co.uk/contact/

Running a limited company comes with plenty of responsibilities. But one thing we see time and time again is directors paying more corporation tax than they need to, simply because they don’t realise what they can legitimately claim.

And most of the missed opportunities are not complicated tax schemes. They’re practical, everyday business expenses and director benefits that often get overlooked.

This guide is designed to be a practical checklist to help you understand some of the most common tax-saving opportunities available to limited company directors, and the rules you need to be aware of to use them properly.

Because good tax planning is not about avoiding tax. It’s about making sure you are not paying more than necessary while still investing back into yourself, your wellbeing, and your business.

First Things First: What Actually Reduces Corporation Tax?

Your limited company pays corporation tax on its taxable profits.

In simple terms, allowable business expenses reduce your company’s profit before tax is calculated. The actual tax saving depends on your company’s marginal rate of corporation tax.

For example:

• If your company incurs a £1,000 allowable expense, this does not mean your tax bill reduces by £1,000.
• Instead, it reduces your taxable profit by £1,000.
• The tax saving is therefore the corporation tax rate applied to that £1,000.

So if your company pays corporation tax at 25%, a £1,000 allowable expense could save £250 in corporation tax.

Simple in principle. But where things get interesting is understanding:

• What HMRC considers allowable
• Which benefits create additional personal tax
• Which benefits are most tax-efficient
• And how to structure things properly

Let’s dive into the opportunities directors commonly miss.

1. Business Mileage

One of the most commonly forgotten claims.

If you use your personal vehicle for business journeys, your company can reimburse you using HMRC’s approved mileage rates.

Current rates include:

• 55p per mile for the first 10,000 miles
• 25p thereafter

This covers:

• Fuel
• Wear and tear
• Insurance contribution
• Servicing

For a full breakdown of the latest mileage rates, you can read our guide here:

HMRC Mileage Rates 2026/27 Guide

What counts as business travel?

Typically:

• Visiting clients
• Travelling to networking events
• Temporary workplaces
• Supplier meetings
• Travel to qualifying training courses related to your business

But ordinary commuting to a permanent workplace usually does not qualify.

Practical tip

Keep a simple mileage log:

• Date
• Journey
• Purpose
• Miles travelled

Apps make this easy now, and good records are essential if HMRC ever asks questions.

2. General Business Travel

Directors often forget how broad legitimate travel expenses can be.

Allowable costs can include:

• Trains
• Flights
• Hotels
• Parking
• Taxis
• Congestion charges
• Subsistence (meals while travelling)

The key test is whether the travel was wholly and exclusively for business purposes.

Commonly missed examples

• Hotel stays for conferences
• Overnight accommodation before early meetings
• Networking event travel
• Co-working space visits
• Business retreats and strategy days
• Travel to qualifying business training

And yes, if there’s a genuine business purpose, overseas travel can absolutely qualify too.

3. Pension Contributions (One of the Biggest Wins)

Company pension contributions are one of the most tax-efficient ways to extract money from your business.

Why?
Because:

• The company usually receives corporation tax relief at its marginal tax rate
• There’s no employer National Insurance
• You personally don’t pay income tax on the contribution

It’s often dramatically more efficient than taking additional salary or dividends.

Example

If your company contributes £20,000 into your pension:

• The company will receive corporation tax relief based on its marginal tax rate
• You avoid personal tax on extraction
• Your future self benefits too

Important considerations

• Contributions must be wholly and exclusively for business purposes
• Pension annual allowance rules apply
• Large contributions should be planned carefully

For a deeper breakdown, read our guide here:

Making Pension Contributions via Your Limited Company

For many directors, pensions remain massively underused.

4. Relevant Life Insurance

This is one of the most overlooked director benefits.

A Relevant Life Policy is a tax-efficient life insurance policy paid for by the company.

Typically:

• The company pays the premiums
• The premiums are often corporation tax deductible
• The benefit is usually tax-free to beneficiaries
• No benefit-in-kind charge in many cases

For directors wanting life cover personally, this can be far more efficient than paying from post-tax income, but its important that the policy is set up correctly so advice is needed here.

5. Income Protection & Key Person Insurance

These are often confused, but both can be valuable.

Key Person Insurance

Protects the business if a key individual becomes seriously ill or dies.

Useful where:

• Revenue heavily depends on one person
• Specialist expertise is difficult to replace
• The business would suffer financially from absence

Tax treatment depends on policy structure and purpose.

Executive Income Protection

Some policies allow companies to provide income protection for directors and employees in a tax-efficient way.

This area gets nuanced quickly, so advice matters here.

But many directors do not even realise these options exist.

6. Trivial Benefits

A surprisingly useful exemption.

Your company can provide directors and employees with small benefits without tax implications, provided they:

• Cost £50 or less per benefit
• Are not cash or cash vouchers
• Are not performance-related
• Are not part of contractual remuneration

For directors of close companies

Directors of close companies are usually limited to:

• 6 trivial benefits per tax year
• Maximum annual value of £300

For employees

There is generally no annual limit for employees who are not directors of close companies, making this a great way to reward staff tax-efficiently.

Common examples

• Birthday gifts
• Christmas hampers
• Restaurant vouchers
• Bottles of wine
• Flowers

The key is ensuring the benefit remains genuinely “trivial” and not a disguised form of salary or bonus. For more information on this refer to our guide.

7. Staff Annual Party / Christmas Party

Yes,  your company can pay for your Christmas party.

HMRC allows up to:

• £150 per head per year

And this can include:

• Food
• Drinks
• Entertainment
• Accommodation
• Transport

Importantly:

• It’s an exemption, not an allowance
• Go over £150 and the whole amount may become taxable

The event must also be mainly for employees.

For example:

• A company with one director and several subcontractors or clients attending may struggle to qualify
• In that scenario, HMRC may view this as business entertaining instead, which is generally not tax deductible

We covered this in more detail here:

Christmas Tax Savings You Don’t Want to Miss

8. Private Medical Insurance

This one is less about corporation tax saving alone and more about overall value.

Your company can pay for private medical cover.

Usually:

• The company receives corporation tax relief
• The director pays benefit-in-kind tax personally
• The company also pays employer’s National Insurance on the value of the benefit

So why do directors still do it?

Because:

• Access to healthcare is faster
• It supports wellbeing
• It reduces disruption to the business
• The overall cost can still be worthwhile

For many business owners, protecting health is one of the smartest investments they make.

9. Electric Cars Through the Company

This has become hugely popular and for good reason.

Electric vehicles currently attract very low benefit-in-kind rates compared to petrol or diesel vehicles.

Potential advantages include:

• Corporation tax relief
• Capital allowances
• Low personal tax
• Reduced National Insurance
• Charging cost savings

In the right circumstances, electric vehicles can be incredibly tax-efficient.

But watch out for:

• Leasing vs purchasing differences
• Personal usage implications
• Charging equipment rules
• Salary sacrifice interactions

This is an area where tailored advice matters.

10. Mobile Phones

A company can usually provide:

• One mobile phone per employee/director
• Including contracts and line rental
• Without creating a taxable benefit

However, the contract must be in the name of the company.

If the mobile contract remains in your personal name and the company simply reimburses you, the exemption may not apply in the same way.

11. Use of Home as Office

If you work from home, your company may be able to contribute toward household costs.

Options include:

• Simplified flat-rate claims
• Formal rental agreements
• Reimbursement of incremental costs

Potential claim areas:

• Electricity
• Heating
• Broadband contribution
• Office space usage

For many directors, “simple and sensible” usually means using HMRC’s flat-rate allowance of £6 per week without needing detailed calculations.

More complicated arrangements can sometimes create:

• Capital gains tax issues
• Administrative burdens
• HMRC scrutiny

Usually, keeping things proportionate is the best approach.

12. Professional Development & Training

Training is often deductible where it:

• Maintains or updates existing skills
• Relates to your current business activities

Examples:

• Industry courses
• Conferences
• CPD memberships
• Technical training
• Business coaching

What’s usually not allowable?
Training for an entirely new trade or profession.

13. Professional Subscriptions & Memberships

Many directors forget these completely.

Allowable examples may include:

• Trade associations
• Industry memberships
• Professional subscriptions approved by HMRC

Examples:

• Chartered Institute of Marketing (CIM)
• CIPD
• Federation of Small Businesses (FSB)
• British Chambers of Commerce
• Creative industry memberships

The membership should relate to your business or profession.

14. Staff Welfare & Wellbeing

This is an area many business owners either overlook entirely or misunderstand.

Some wellbeing expenses can qualify as allowable business costs, while others may create taxable benefits.

Potentially allowable areas include:

• Eye tests for employees using display screen equipment
• Employer-provided counselling services
• Annual health checks
• Flu vaccinations
• Employee Assistance Programmes (EAPs)
• Certain workplace wellbeing initiatives

Important rules to understand

Eye tests

If employees regularly use screens as part of their role, the company can generally pay for eye tests without creating a taxable benefit.

However, paying for regular prescription glasses usually creates a taxable benefit unless they are specifically required solely for screen use.

Health screenings & medical checks

One annual health screening and one medical check-up per employee per year can often qualify for exemption.

Counselling services

Certain welfare counselling services can be exempt provided they relate to:

• Stress
• Mental health
• Financial wellbeing
• Workplace issues

But the exemption does not normally extend to:

• Medical treatment
• Leisure activities
• General wellbeing perks unrelated to work

Gym memberships

A common misconception.

In most cases:

• Company-paid gym memberships are taxable benefits
• The employee/director usually pays personal tax on the value
• The company may also pay employer’s National Insurance

The key takeaway?
Just because something supports wellbeing does not automatically make it tax-free.

15. Equipment & Technology

This sounds obvious, but many directors still personally pay for business equipment unnecessarily.

Potential claims include:

• Laptops
• Monitors
• Office furniture
• Software subscriptions
• Cameras
• Printers
• Headsets
• Business tools

If the business uses it, the business should usually pay for it directly.

16. Annual Investment Allowance (AIA)

If your business purchases qualifying equipment or assets, you may be able to claim full tax relief through the Annual Investment Allowance.

This can apply to:

• Machinery
• Equipment
• Tools
• Office fit-outs
• Certain commercial vehicles

Timing large purchases properly around year-end can make a significant difference to corporation tax.

17. Charitable Donations

Company charitable donations can:

• Reduce corporation tax
• Support causes aligned with your business values
• Strengthen brand reputation

However:

• The donation must usually be made to a UK registered charity
• Payments must be genuine donations
• Sponsorship works differently from charitable giving for tax purposes

18. Director Salary Planning

A surprisingly common issue:
Directors either take too much salary… or not enough.

Getting the balance right between:

• Salary
• Dividends
• Pension contributions
• Benefits

…can significantly affect:

• Corporation tax
• National Insurance
• Personal tax efficiency

If you are a client of Orenda Collective, salary levels are something we proactively review for you throughout the year to ensure your remuneration remains as tax-efficient as possible.

19. Family Members Working in the Business

If family members genuinely work in the business, paying them a commercial salary may:

• Reduce overall family tax burden
• Reduce corporation tax
• Utilise unused personal allowances

But:

• The work must be real
• The pay must be reasonable
• Documentation matters

HMRC does look closely at this area.

20. Don’t Forget Timing

One of the simplest tax planning tools:
Timing your expenditure properly.

For example:

• Bringing forward equipment purchases
• Paying pension contributions before year-end
• Clearing reimbursable expenses promptly
• Reviewing benefits before the accounting period closes

Small timing decisions can create meaningful savings.

The Biggest Mistake Directors Make

The biggest issue is rarely missing one giant tax strategy.

It’s missing 15 small ones consistently over several years.

We regularly see business owners:

• Paying personal costs the company could cover
• Forgetting legitimate claims
• Missing tax-efficient benefits
• Or only getting support reactively rather than proactively

That’s exactly why we built our support packages to give business owners flexibility around the level of proactive support they need, from compliance-only support through to more strategic business and tax planning.

You can explore our service packages here:

Company Transformation Services

Final Thoughts

Tax efficiency is not about chasing loopholes or complicated schemes.

It’s about:

• Understanding your options
• Using legitimate reliefs properly
• Structuring things intentionally
• And making your money work harder for both your business and your life

Because ultimately, every pound unnecessarily lost to tax is a pound that could have gone toward:

• Growth
• Financial security
• Your wellbeing
• Or simply making business feel less stressful

And that’s exactly the kind of straight-talking business support we care about at Orenda Collective.

Want to make sure your limited company is genuinely tax-efficient, without drowning in jargon?

At Orenda Collective, we help business owners build practical, straight-talking financial strategies that actually support the life and business they want to create.

If you’d like help reviewing your current setup, get in touch here:

Contact Orenda Collective

If you or your employees use a personal vehicle for business journeys, it is important to understand what can be claimed tax-free and how mileage should be reimbursed correctly.

HMRC has updated the Approved Mileage Allowance Payments (AMAPs) for the 2026/27 tax year, with the biggest change being an increase to the main mileage rate for cars and vans.

For many business owners, directors, and employees regularly travelling for work, this could make a meaningful difference over the course of the year.

Key Takeaways

• HMRC mileage rates have increased from 45p to 55p per mile for the first 10,000 business miles
• The change applies from 6 April 2026
• Electric cars can also claim the full 55p rate if personally owned
• Normal commuting does not qualify as business mileage
• Good mileage records are essential to support claims
• Directors can also claim mileage from their company where the vehicle is personally owned

Source: HMRC Mileage Rates and Allowances

What Has Changed?

The main HMRC mileage rate for cars and vans has increased from 45p to 55p per mile for the first 10,000 business miles.

This is the first increase to the approved mileage rates in many years and reflects the significant rise in motoring costs including fuel, insurance, servicing, and vehicle running costs.

Comparison of Old vs New Rates

Vehicle Type	2025/26 Rates	2026/27 Rates	Change
Cars & Vans (first 10,000 business miles)	45p	55p	+10p
Cars & Vans (over 10,000 business miles)	25p	25p	No change
Motorcycles	24p	24p	No change
Bicycles	20p	20p	No change
Passenger payments	5p	5p	No change

Current HMRC Mileage Rates for 2026/27

Cars and Vans

Business Miles	HMRC Rate
First 10,000 business miles	55p per mile
Over 10,000 business miles	25p per mile

Motorcycles and Bicycles

Vehicle Type	HMRC Rate
Motorcycles	24p per mile
Bicycles	20p per mile

These rates apply where an employee or director uses their own personally owned vehicle for business journeys.

What Does the Increase Actually Mean?

If you drive 8,000 business miles per year, the increase from 45p to 55p means:

• Previous claim at 45p: £3,600
• New claim at 55p: £4,400
• Additional tax-free reimbursement: £800

For businesses and directors regularly travelling to clients, networking events, temporary workplaces, or meetings, this can quickly add up.

Can Directors Claim Mileage?

Yes.

Directors can claim HMRC mileage allowances in exactly the same way as employees, provided they are using a personally owned vehicle for business travel.

The company can reimburse the mileage tax-free, and the business will generally receive corporation tax relief on the cost.

This is often a simple and tax-efficient way for directors to extract funds from the company where business travel is involved.

HMRC Mileage Rates for Electric Cars

A common misconception is that electric cars have a lower mileage claim rate.

If you use your own electric car for business journeys, you can still claim the full HMRC approved mileage rate of:

• 55p per mile for the first 10,000 business miles
• 25p per mile thereafter

The mileage allowance is designed to cover all vehicle running costs, including:

• Electricity/fuel
• Insurance
• Repairs and servicing
• Tyres
• Depreciation

You cannot separately claim electricity costs on top of the mileage claim when using the approved mileage method.

Passenger Payments

Employers can also reimburse an additional:

• 5p per passenger per business mile

This applies where employees carry fellow employees during the same business journey.

What Counts as Business Mileage?

Business mileage generally includes journeys such as:

• Travelling to clients
• Visiting suppliers
• Travelling between work locations
• Travelling to temporary workplaces
• Attending networking events or business meetings

Ordinary commuting between home and your permanent workplace does not qualify as business mileage.

Common Mileage Claim Mistakes

Some of the most common issues we see include:

• Claiming ordinary commuting as business mileage
• Claiming fuel or electricity separately as well as mileage
• Not keeping proper mileage records
• Claiming personal journeys as business travel
• Forgetting that electric cars can still claim the full mileage rate
• Claiming mileage for journeys that are not wholly and exclusively for business purposes

What Mileage Records Do You Need to Keep?

To support mileage claims, we recommend keeping:

• Date of journey
• Start and end location
• Purpose of the journey
• Number of business miles travelled

Mileage logs can be maintained using spreadsheets or mileage tracking apps and should be retained alongside your accounting records.

What Should You Do Now?

We recommend that businesses:

• Update internal mileage policies and reimbursement rates
• Ensure bookkeeping or payroll teams are aware of the changes
• Keep clear and accurate mileage logs
• Review whether mileage claims are being treated correctly
• Ensure directors and employees understand what qualifies as business mileage

Final Thoughts

Small changes like this can easily get missed, but they can make a meaningful difference over the course of a year, particularly for businesses and directors regularly travelling for work.

If you are unsure what you can claim, or want help making sure everything is being treated correctly and tax efficiently, our team would be happy to help.

Sources:
HMRC Mileage Rates and Allowances

If there’s one thing we see time and time again, it’s this:

You’re busy running your business, invoices and receipts are coming in from everywhere… and bookkeeping ends up becoming something you “get round to later”.

Then later turns into a pile of emails, missing invoices, and a bit of stress when we ask for information.

The good news is, there’s a very simple way to reduce this burden.

And once it’s set up, it works in the background without you needing to think about it.

The Simple Shift: Automate Your Invoice & Receipt Flow

Instead of manually forwarding invoices or uploading receipts, you can:

• Automatically send supplier invoices straight from your inbox
• Keep everything organised in one place
• Reduce the need for back-and-forth with us
• Make your bookkeeping more accurate and up to date

For most clients, this simple setup saves 1–3 hours per month, and removes the mental load of “I need to send that to my accountant”.

This can be done by:

1. Setting up auto-forwarding rules in your email
2. (Even better) creating a dedicated accounts email address

What This Looks Like in Practice

Before:

• Invoices sitting across multiple inboxes
• Forwarding things in bulk at month end
• Missing documents we have to chase
• Delays in getting your numbers

After:

• Most invoices flow in automatically as they arrive
• Data is captured in real time
• Minimal (or no) chasing from us
• Up-to-date, reliable financials

Why We Recommend This to All Clients

At Orenda, we’re not just here to prepare your numbers after the fact.

We want your numbers to be:

• Accurate
• Timely
• Useful for decision-making

The biggest blocker to that is usually incomplete or delayed information.

This one change removes that blocker almost entirely.

It’s one of the simplest, highest-impact improvements you can make to how your finances are managed.

Option 1: Auto-Forward Invoices from Your Inbox

Both Dext and Hubdoc give you a unique email address.

Any invoice sent to that email will automatically appear in your bookkeeping system for us to process.

What this means for you:

• Reduced manual uploading
• Reduction in mental load of remembering to send everything
• Reduced missing invoices

What this means for your records:

• Cleaner records
• Faster bookkeeping
• Better, more timely insights

How to Set Up Auto-Forwarding

If you use Outlook

You can create a rule so that any invoice email is automatically forwarded.

Basic steps:

1. Go to Settings (top right)
2. Click Mail → Rules
3. Select Add new rule
4. Choose conditions such as:
   • Subject contains “invoice” or “receipt”
   • Or from specific suppliers
5. Set the action to Forward to your Dext or Hubdoc email address
6. Save the rule

For full guidance, you can follow Microsoft’s official guide here.

If you use Gmail

You can set up automatic forwarding using filters.

Basic steps:

1. Go to Settings → See all settings
2. Click Filters and Blocked Addresses
3. Select Create a new filter
4. Add criteria such as:
   • “invoice”, “receipt”, or supplier email addresses
5. Click Create filter
6. Choose Forward it to your Dext or Hubdoc email
7. Save

For full guidance, see Google’s official guide here using the section ‘Forward messages that match your filters’.

Please note if you use Gmail you may need a verification step to allow auto-forwarding to Dext/Hubdoc, if that is the case just pop us an email on [email protected] and we can support you with this verification step.

Option 2 (Recommended): Create an “Accounts” Email Address

If you want to take this one step further and make things even easier…

Set up a dedicated email such as:

[email protected]

Why this works so well:

• All supplier invoices go to one place
• Nothing gets lost in your main inbox
• You can give us access (if you’d like us to manage it for you)
• It creates a clean, scalable system as your business grows

How to use it:

• Ask suppliers to send invoices directly to this address
• Or set up auto-forwarding from this inbox

Common Mistakes to Avoid

• Setting rules too broadly so irrelevant emails are forwarded
• Forgetting to include key suppliers in your setup
• Not testing the rule after setting it up
• Not updating suppliers with your new accounts email address

Taking a few extra minutes to get this right at the start makes all the difference.

Why This Matters (More Than You Might Think)

This isn’t just about making our lives easier.

It’s about giving you:

• More accurate numbers
• Less admin
• Fewer last-minute requests
• Better visibility over your business

This is one of the most impactful “quick wins” we implement with clients, and it consistently transforms how smooth their bookkeeping feels.

Quick Setup Checklist

If you want to get this in place quickly, here’s a simple checklist:

✔ Find your Dext or Hubdoc email address
✔ Decide whether to use your main inbox or create an accounts email
✔ Set up forwarding rules (Outlook or Gmail)
✔ Test it with your invoices
✔ Update your key suppliers

A Small Setup That Makes a Big Difference

Most clients who set this up say the same thing:

“I wish I’d done this sooner.”

It takes around 15–20 minutes to get everything in place, and it can save you hours every single month.

Need Help?

If you can, we recommend setting this up this week while it’s fresh.

You’re very welcome to follow the steps above and do it yourself.

But if you get stuck, or you’d like us to sense-check your setup or walk you through it, just drop us an email at:

[email protected]

We’re always happy to help.

If you run your business through a limited company, dividends are likely part of how you pay yourself.

From April 2026, dividend tax rates are increasing for many directors. This does not mean dividends are suddenly inefficient or that your structure is wrong. It simply means that being intentional matters more than it used to.

This guide explains:

• What is changing
• What it means in real £ terms
• Where the increases start to show up
• Practical ways directors can stay tax-efficient

Plain English, no panic, just clarity.

Who this guide is most relevant for

This guide will be most useful if you:

• Run a UK limited company
• Take most of your income as dividends
• Earn between £12,570 and £100,000 via salary and dividends
• Have not revisited your extraction strategy in the last couple of years

If that sounds like you, the changes from April 2026 are worth understanding properly.

What is changing in April 2026?

From 6 April 2026, the following dividend tax rates will apply:

Dividend tax band	2025/26 rate	From April 2026
Basic rate	8.75%	10.75%
Higher rate	33.75%	35.75%
Additional rate	39.35%	39.35%

In summary:

• Basic and higher rate dividend tax increases by 2 percentage points
• Additional rate dividends remain unchanged
• The dividend allowance stays at £500
• Income tax thresholds remain frozen

None of these changes on their own are dramatic. Taken together, they make it sensible to review how and when profits are taken from your company.

Assumptions used in the examples below

To keep the figures realistic and comparable, the examples assume:

• You are a director of a UK limited company
• You take a £12,570 salary
• The remainder of your income is paid as dividends
• You are UK resident and taxed at England rates
• The dividend allowance is £500
• Dividends are taxed across basic and higher rate bands where applicable

These figures show personal dividend tax only. Corporation tax is calculated separately at company level.

---

What does this look like in real £ terms?

Total income	Dividends paid	Taxable dividends	Dividend tax 2025/26	% of income	Dividend tax 2026/27	% of income	£ difference
£20,000	£7,430	£6,930	£606	3.03%	£745	3.73%	£139
£30,000	£17,430	£16,930	£1,481	4.94%	£1,820	6.07%	£339
£40,000	£27,430	£26,930	£2,356	5.89%	£2,895	7.24%	£539
£50,000	£37,430	£36,930	£3,231	6.46%	£3,970	7.94%	£739
£60,000	£47,430	£46,930	£6,539	10.9%	£7,477	12.46%	£939
£70,000	£57,430	£56,930	£9,914	14.16%	£11,052	15.79%	£1,139
£80,000	£67,430	£66,930	£13,289	16.61%	£14,627	18.28%	£1,339
£90,000	£77,430	£76,930	£16,664	18.52%	£18,202	20.22%	£1,539
£100,000	£87,430	£86,930	£20,39	20.04%	£21,777	21.78%	£1,739

This shows a gradual increase, not a cliff edge. The impact becomes more noticeable as income rises, particularly once dividends fall into the higher rate band.

A simple worked example

Sarah runs a small design studio through a limited company.

She pays herself:

• £12,570 salary
• £47,430 in dividends
• Total income of £60,000

In 2025/26, Sarah pays £6,539 in dividend tax.
From April 2026, that increases to £7,477.

That extra £939 a year is not business-critical on its own. But over five years, if nothing changes, it adds up to nearly £5,000.

This is where planning starts to matter more than habit.

So what should directors actually do?

The key message here is not that dividends no longer work.

It is this:

Dividends work best when they are part of a plan, not a habit.

Here are the main options directors should be aware of.

1. Pension contributions become even more valuable

Company pension contributions remain one of the most efficient ways to extract value:

• Corporation tax relief
• No dividend tax
• No income tax
• No National Insurance

For directors who do not need all profits personally right now, this can be a powerful long-term tool.

2. Being deliberate about dividend timing

In some cases it may make sense to:

• Bring forward dividends before April 2026
• Smooth dividends across tax years
• Avoid large one-off dividends that push income into higher bands

This is about cashflow awareness and forward planning, not aggressive tax strategies.

3. Keeping an eye on key thresholds

Small changes in income can still have a disproportionate tax effect around:

• £50,270, where higher rate tax starts
• £100,000, where the personal allowance begins to taper

Staying just below a threshold can sometimes be more efficient than crossing it by default.

4. Sharing income within the household

Where shares are structured correctly, dividends paid to a spouse or civil partner can:

• Use more basic rate bands
• Reduce overall household tax
• Create better balance and flexibility

This must be set up properly, but when done correctly it remains a legitimate planning option.

5. Retaining profits is not a failure

Not all profits need to be taken out immediately.

• Retained profits can fund growth
• Support future investment
• Be taken later when your personal tax position changes

Flexibility is one of the key advantages of operating through a limited company.

A quick sense-check for your own position

It may be time to review your approach if:

• Your profits have increased over the last two years
• You are regularly into the higher rate band
• You take large dividends once or twice a year
• You do not have a pension strategy in place
• Your personal or family circumstances have changed

None of these are problems. They are simply signals that your business has evolved.

The bigger picture

April 2026 does not mark the end of tax-efficient planning for directors.

What it does mark is a move away from one-size-fits-all approaches.

The directors who tend to do best are those who:

• Understand their numbers
• Review their position regularly
• Align tax decisions with both business and life goals

That is not pessimistic. It is practical, empowering and entirely manageable with the right support.

Need help working out what makes sense for you?

We’ve recently updated our limited company packages to better reflect the level of support our clients need at different stages, including regular check-in sessions at intervals that match the support you require.

If you are on one of our new plans we will automatically discuss this with you at your next check in & challenge session, which you are invited to book two months before your year end if on the Mini plan or each quarter if on the Midi plan.

You can view our updated packages here.

Some clients are currently on our legacy packages, which did not include the Check-In & Challenge sessions. We are working through these clients gradually to discuss whether moving to our Mini Transformation package or above would be helpful.

That said, if you would like to explore this sooner or talk through which level of support feels right for you, please don’t hesitate to get in touch. We’re always happy to chat things through.

A Practical Guide for Small Platform Founders

This guide is for founders running small or early-stage digital platforms. It explains when the UK digital platform reporting rules apply, what you need to do in practice, and where the risks sit if you get this wrong.

The rules are complex, but the intention is simple. HMRC wants visibility over income earned by sellers using digital platforms.

1. What is digital platform reporting?

If you run a digital platform, you may be legally required to:

• Collect information about sellers on your platform
• Check and verify that information
• Report seller income and activity to HMRC each year

These rules apply even if your platform is small, newly launched, or not yet profitable.

Official guidance:
https://www.gov.uk/guidance/reporting-rules-for-digital-platforms

2. What counts as a digital platform?

Your app or website is a digital platform if both of the following apply:

1. It connects sellers to customers to supply goods or services
   Examples include marketplaces, booking platforms, freelance platforms, short-term accommodation platforms, and delivery platforms.
2. You either:
   • Hold information about what sellers are paid
   • Can easily calculate what sellers are paid
   • Can obtain payment information from a third party, such as a payment processor

If your platform only advertises sellers and you cannot access or calculate payments at all, you may fall outside the rules. This requires careful assessment.

3. Who needs to register with HMRC?

You must register with HMRC if you operate a digital platform and any of the following apply:

• You are resident in the UK
• Your company is incorporated under UK law
• Your business is managed from the UK

Registration is required even if you later determine that you have no sellers to report.

Official registration guidance:
https://www.gov.uk/guidance/register-to-carry-out-digital-platform-reporting

4. Who does not need to register?

You do not need to register if you only:

• Sell on someone else’s platform
• Sell your own goods or services directly through your own website or app
• Operate as a sole trader selling your own services

These rules apply to platform operators, not sellers.

5. Are you a reporting platform operator or an excluded platform operator?

When registering with HMRC, you must register as either a reporting platform operator or an excluded platform operator. This is not optional and depends on whether you have reportable sellers.

Understanding this distinction is critical, as the obligations are very different.

Reporting platform operator

You are a reporting platform operator if:

• You operate a digital platform, and
• There are sellers using your platform whose activity must be reported to HMRC

In practice, this usually applies where:

• Sellers earn income through your platform, and
• That income is not fully excluded under the legislation

Most platforms that facilitate bookings, payments, or transactions between sellers and customers fall into this category.

If you are a reporting platform operator, you must:

• Collect seller information
• Verify seller information
• Report seller income and activity to HMRC annually

Excluded platform operator

You are an excluded platform operator if you operate a digital platform but do not have any reportable sellers.

This does not mean you can ignore the rules. You must still:

• Register with HMRC as an excluded platform operator
• Retain evidence explaining why your platform is excluded

Common situations where exclusion may apply include where:

• All sellers are government bodies
• All sellers are publicly listed companies
• All sellers are large entities that fall outside the scope of reporting
• The platform does not facilitate reportable transactions under the rules

Excluded status is narrower than many founders expect and must be justifiable.

How to assess whether your sellers are reportable

Ask the following questions:

1. Do sellers receive income through your platform?
   If sellers are paid, or you can calculate what they are paid, this strongly indicates reportable activity.
2. Are sellers individuals or small businesses?
   Individuals, sole traders, partnerships, and most small companies are reportable.
3. Are you facilitating the transaction?
   If your platform enables the sale, booking, or service delivery, HMRC is likely to treat you as a reporting platform operator.
4. Are payments visible or traceable to you?
   Holding payment data, processing payments, or accessing third-party payment data points towards reporting obligations.
5. Are all sellers clearly excluded under the legislation?
   Exclusions are limited. If unsure, HMRC expects you to assume sellers are reportable until proven otherwise.

Common misconceptions

• “We are too small to report”
  Size and turnover are irrelevant.
• “We do not process payments ourselves”
  You may still need to report if you can access payment data.
• “Our sellers handle their own tax”
  This does not remove your reporting responsibility.

Key takeaway

If your platform connects sellers to customers and income is earned through it, you are very likely a reporting platform operator.

6. When do you need to register?

You must register with HMRC by 31 January following the end of the reportable year.

The reportable year runs from 1 January to 31 December.

Late registration can result in penalties.

7. Due diligence obligations

If you are a reporting platform operator, you must carry out due diligence by:

• Collecting seller information
• Verifying seller information
• Identifying which sellers are reportable

You remain responsible even if you use third-party software or providers.

Official guidance:
https://www.gov.uk/guidance/collect-and-verify-digital-platform-seller-information

8. Information you must collect

Individual sellers

• Full legal name
• Home address including postcode
• Date of birth
• National Insurance number if UK-based
• Non-UK tax identification number and issuing country if applicable
• Rental property address if relevant

Entities

• Legal business name
• Main business address including postcode
• Relevant registration or tax identification numbers
• Rental property address if relevant

9. Timing and updates

• Seller information must be collected by 31 December of the reportable year
• Information can be reused if unchanged
• Primary addresses are valid for 36 months
• If information becomes unreliable, it must be re-collected and re-verified

You may restrict seller access if information is not provided.

10. Verification requirements

You must verify seller information using all data reasonably available to you.

You may face penalties if verification is not carried out correctly.

Further guidance: IEIM902400

11. Active and pre-existing sellers

• Active sellers are those paid during the year
• You may choose to verify only active sellers if HMRC is notified by 31 December
• Pre-existing sellers must be verified by the end of the second reportable year

12. Information you must report

You must report:

• Seller identification details
• Tax identification numbers if available
• Total amounts paid per quarter
• Fees, commissions, or taxes charged
• Number of transactions
• Payment account details if available

Amounts reported include payments credited even if services are not yet delivered.

13. How reporting is submitted

Reporting is submitted using XML files that meet HMRC’s digital schema and business rules. This is a technical process and often requires specialist support.

14. Key deadlines at a glance

• 1 January to 31 December
  Reportable year
• 31 December
  Deadline to collect seller data and notify HMRC of verification choices
• 31 January following the year end
  Registration deadline

15. Practical checklist for founders

• Have you assessed whether your platform meets the definition
• Have you determined reporting vs excluded status
• Have you registered with HMRC
• Do you collect and verify seller information
• Are updates and deadlines diarised
• Do you have a reporting process in place

Final note

Digital platform reporting is not optional if the rules apply, even at an early stage. Getting clarity early reduces compliance risk as your platform grows.

Key HMRC resources

• Reporting rules for digital platforms
  https://www.gov.uk/guidance/reporting-rules-for-digital-platforms
• Registering for digital Platform Reporting
  https://www.gov.uk/guidance/register-to-carry-out-digital-platform-reporting
• Collecting and verifying seller information
  https://www.gov.uk/guidance/collect-and-verify-digital-platform-seller-information

Disclaimer

This guide is provided for general information and guidance purposes only. It is intended to help platform founders understand the UK digital platform reporting rules at a high level, but it does not constitute tax advice, legal advice, or compliance advice.

The digital platform reporting legislation is complex and continues to evolve. Whether the rules apply to you, and how they apply, will depend on your specific circumstances, platform structure, seller base, and operating model.

You should not rely solely on this guide when making decisions or taking action. We strongly recommend that you:

• Review the official HMRC guidance directly
• Seek clarification from HMRC where appropriate
• Obtain professional advice tailored to your circumstances before registering, reporting, or making compliance decisions

No responsibility is accepted for any loss, penalties, or compliance issues arising from reliance on this guide without further clarification or advice.

On 26 November 2025, the Labour government delivered its Autumn Budget, covering everything from tax and pensions to business costs and electric vehicles, this budget outlines a wide range of policy shifts that will impact you.

At Orenda Collective, we know budgets can feel overwhelming, especially when you’re trying to focus on running your business or managing personal finances. That’s why we’ve summarised the most relevant updates for small business owners, sole traders, and individuals.

For a full view of all areas of the budget please refer to the budget document here.

The ‘reaction’ sections in this guide aren’t intended to be political. I’m not here to champion any party, truthfully, none are exactly winning me over right now. These are simply my honest reflections on how specific policies could affect us as small business owners, based on the realities we’re facing day to day.

What You Need to Know: Budget Highlights

Personal Tax Changes:

Threshold freeze extended: National Insurance and income tax thresholds will remain frozen for an additional three years, until 2031. This means more people may gradually fall into higher tax bands over time (known as ‘fiscal drag’).

Cash ISA cap introduced: From April 2027, under-65s will be able to contribute up to £12,000 per year into cash ISAs. The remainder of the £20,000 annual ISA allowance will need to go into stocks, shares, or other investments.

Dividend and savings tax increase: From April 2026, dividend tax rates will rise by 2%, with savings income tax rates also increasing from April 2027.

Wages, Benefits and Pensions:

Two child cap lifted: The two-child limit for child tax credit and Universal Credit will be removed from April 2026, offering increased support for larger families.

Minimum wage boost: From April 2026, the National Living Wage for those aged 21+ will increase by 4.1%, from £12.21 to £12.71 per hour. Younger workers aged 18–20 will see a rise from £10 to £10.85.

State pension increase: Both the basic and new state pensions will rise by 4.8%, outpacing current inflation, thanks to the ongoing “triple lock” guarantee.

Salary sacrifice cap introduced: From 2029, the amount you can contribute to your pension via salary sacrifice (without paying National Insurance) will be capped at £2,000 per year.

Help to Save extended: The scheme offering bonus savings to those on Universal Credit will be extended and expanded beyond 2027.

Housing and Property:

 Council tax surcharge: Properties in England valued at over £2 million will be subject to a new annual council tax surcharge of £2,500 to £7,500, depending on the band.

Higher tax on rental income: From April 2027, rental income will face a 2 percentage point increase in tax.

Electric and Hybrid cars:

New mileage tax: From 2028, electric and plug-in hybrid car owners will begin paying a mileage-based tax, marking a shift toward broader road taxation as EV adoption grows.

Business Taxes:

Employer NI threshold freeze: The National Insurance thresholds for employers will be frozen until 2031, which may gradually increase costs for businesses as wages rise.

Corporation tax rates: Rates are retained at current levels, no changes to profit limits.

Capital allowances: New permanent 40% first year allowance on main pool expenditure, to include assets used for leasing, not cars or second hand assets. £1m annual investment allowance remains. But reducing writing down allowance on the main pool to 14% from April 2026.

Late filing penalties: All late filing penalties on corporation tax are set to double after 1 April 2026, late return new penalty £200, return more than 3 months late, £400, third successive late return £1,000 and third successive late return more than 3 months late £2,000.

Self-Employed NIC: Small profits limits increased £7,105, class 2 NI rate increased to £3.65 per week, and you are no longer able to pay voluntary class 2 when non resident.

Household Bills:

Green levies removed from bills: These will now be funded via general taxation, saving the average household £88 per year.

Insulation scheme change: A separate scheme that helped low-income households insulate their homes will be scrapped, with estimated household savings of £59 per year.

UK growth, inflation and Debt:

GDP growth revised up for 2025: The Office for Budget Responsibility (OBR) now expects the UK economy to grow by 1.5% in 2025 (up from the previous 1% forecast).

Longer-term growth trimmed: Between 2026 and 2029, growth is now forecast to average 1.5%, down from earlier estimates of 1.8%.

Inflation trends: Inflation is predicted to fall from 3.5% in 2025 to 2.5% in 2026, before reaching the government’s 2% target by 2027.

A little more depth:

Savings Tax

From April 2027, the basic and higher rates of savings income tax will each rise by 2 percentage points, for example, from 20% to 22% for the basic rate and 40% to 42% for higher rate tax payers.

What does that mean in real terms?
If you earn £2,000 in interest over the year, you’ll pay an extra £40 in tax. For £10,000 in interest income, the additional tax would be £200. These costs can add up quickly, especially if you’re holding large cash balances outside of tax-efficient accounts.

Reaction: The current policy direction appears to place a greater burden on those who save and build wealth through earnings, rather than those who spend. By increasing taxes on interest and investment income while leaving other areas relatively untouched, the budget signals a shift that could discourage saving over time.

Tip: Make sure you’re using your ISA allowance before relying on general savings accounts. Interest earned within an ISA is tax-free, so it’s often the most efficient place to hold your savings. (More on this below.)

Dividend Tax

From April 2026, dividend tax rates will increase by 2 percentage points across all bands:

• Basic rate will rise to 10.75%
• Higher rate will rise to 35.75%

What does this mean in real terms?
If you’re a small business owner extracting income via salary and dividends, here’s how the changes could affect you:

• If you take a salary of £12,570 and dividends of £37,700, your personal tax bill will increase by approximately £744
• If you take a salary of £12,570 and dividends of £87,430, your personal tax bill will increase by around £1,748.60

Reaction: This feels like a blow to small business owners operating through limited companies. Despite earlier promises not to raise taxes on “working people,” this increase disproportionately affects those who rely on dividends for income, many of whom are freelancers and small company directors. While dividend tax rates are still lower than income tax rates, it’s worth remembering that these profits have already been taxed at the company level (19–25% corporation tax), making this feel like a double hit.

Tip: We’ll be reviewing the numbers for all our clients to assess whether a different balance between salary and dividends could offer a more tax-efficient outcome. If we spot an opportunity to optimise your position, we’ll be in touch directly to discuss your options.

Cash ISA’s

From April 2027, individuals under the age of 65 will only be able to contribute up to £12,000 per year into a cash ISA. The overall ISA limit will remain at £20,000, but the remaining £8,000 can now only be directed towards a stocks and shares ISA or other qualifying investment products.

What does this mean in real terms?
Previously, you could place your entire £20,000 ISA allowance in a cash ISA to earn interest tax-free. Going forward, only £12,000 can be held in cash this way. The other £8,000 of your annual allowance has to be invested if you want to make full use of the ISA cap. You can still choose to invest the full £20,000 in stocks and shares ISAs if you wish.

Reaction
This shift isn’t necessarily negative. In fact, encouraging more people to explore investing could be a good thing, especially during times of high inflation, where the real value of cash savings can decline faster. However, it also highlights the urgent need for better financial education, so individuals feel empowered and confident to make informed investment decisions.

Tip
This isn’t investment advice, and we always recommend speaking to a qualified financial advisor before making any decisions. But it’s a great time to review your personal finances. As a general rule, it’s sensible to have at least six months of essential expenses saved in an accessible cash fund. Beyond that, consider whether you could make better use of your ISA allowance through long-term investments to support wealth growth.

Threshold Freezes Extended

The government has announced that National Insurance and income tax thresholds will remain frozen until 2031, extending the current freeze by another three years.

This may not look like a tax hike, but it will raise £23bn in total by 2030/31 by dragging more people into higher tax bands as their salaries grow. The number of higher-rate taxpayers has already jumped by 78% since 2020. A fifth of all people now pay either higher or additional-rate tax.

What does this mean in real terms?
Normally, tax thresholds rise each year in line with inflation. Freezing them means that as your income increases, whether due to pay rises, promotions, or inflation, you could find yourself:

• Pushed into a higher tax band
• Paying more tax on a greater portion of your income
• Seeing your overall take-home pay rise more slowly than expected

This effect is known as fiscal drag, and it can quietly increase your tax bill without any official rise in tax rates.

Reaction
This is what’s often referred to as a stealth tax. It creates the illusion that income tax isn’t going up, when in reality, more of your income is being taxed over time. While it may seem subtle, it can have a meaningful impact, especially for those whose earnings are steadily increasing year on year.

Tip
Pay attention to your total taxable income, especially if you’re close to the edge of a higher tax band. Strategic planning, such as making pension contributions, charitable donations, or adjusting how you draw income from your business, can help manage your effective tax rate.

Minimum Wage Increases

From April 2026, the National Living Wage for workers aged 21 and over will rise by 4.1%, increasing from £12.21 to £12.71 per hour. Workers aged 18 to 20 will also see their minimum hourly rate increase from £10.00 to £10.85.

What does this mean in real terms?
If you’re an employer, particularly in sectors like retail, hospitality or care, this increase will directly raise your staffing costs. For example:

• A full-time employee working 37.5 hours per week at the new rate will earn approximately £975 more per year.
• If you employ 5 such team members, that’s nearly £5,000 extra annually in wages, before factoring in National Insurance, pension contributions, and potential knock-on impacts on pay structures.

For employees, it’s a welcome increase, especially amid high living costs, but for small business owners, it may require careful planning to manage cash flow and profitability.

Reaction
While it’s positive to see wage growth that supports working people, especially younger earners, this change adds further pressure on small businesses already managing rising costs. For employers, this means taking a proactive approach to budgeting and potentially reviewing pricing, staffing structures, or operational efficiencies.

Tip
Now’s the time to revisit your payroll forecasts for the new financial year. Check how the increases will affect your bottom line and plan accordingly. Consider whether price adjustments, shift scheduling, or automation could help offset the rise. If you’re unsure how to navigate the change, we can help you run the numbers and explore your options.

Salary Sacrifice Cap Introduced

From April 2029, the government will limit the use of salary sacrifice for pension contributions to £2,000 per year. This move targets a long-standing tax-efficient mechanism that allows both employees and employers to reduce their National Insurance (NI) liabilities by redirecting salary into pension savings.

Currently, employees save 8% NI on earnings below £50,270 and 2% above that when using salary sacrifice, while employers benefit from a 15% NI saving on the amount sacrificed. These savings have made salary sacrifice a popular and effective tool for retirement planning.

What does this mean in real terms?
If you currently sacrifice £10,000 of your salary into your pension each year, you could be saving over £1,000 in NI contributions.From 2029, however, only £2,000 of those contributions will be eligible for this tax-saving structure, cutting your NI savings down to around £200 or less, depending on your income level.

This change is expected to generate £5 billion in extra tax revenue for the government by 2030. The delayed implementation likely reflects the administrative complexity and time needed for employers to adjust.

Reaction
Salary sacrifice has long been a valuable, legitimate way to encourage pension saving. This cap reduces an important incentive at a time when many are already under-saving for retirement. While pensions remain tax-advantaged overall, this feels like a step in the wrong direction when it comes to promoting long-term financial wellbeing.

Tip
If you currently use salary sacrifice or are considering it, speak with your advisor to understand how this cap may affect your long-term retirement plans. Other strategies, such as employer contributions outside of salary sacrifice or making use of carry-forward pension allowances, could still offer valuable tax benefits. As always, a tailored approach is best when planning for retirement.

Disclaimer:
The information in this blog is for general guidance only and does not constitute accounting, tax, or business advice. Every business is unique, and we recommend seeking personalised advice before making any financial or strategic decisions. If you need tailored support, feel free to contact us athttps://orendacollective.co.uk/contact/

From April 2026, Making Tax Digital (MTD) for Income Tax will change the way many sole traders and landlords report their income.

Whether it applies to you depends on your gross income in the 2024/25 tax year. HMRC will look at your total self-employed income plus any rental income from that year to decide if you fall into MTD from April 2026.

Thresholds and When They Apply

• From April 2026 – If your combined gross income is over £50,000, you must follow the new rules.
• From April 2027 – The threshold reduces to £30,000.
• From April 2028 – It reduces further to £20,000.

Gross income means the total income you receive before any expenses. For example, if your self-employment turnover is £35,000 and your rental income is £18,000, your total is £53,000. Even if your expenses are high, because your gross income is above £50,000, MTD will apply.

What is MTD for Income Tax?

• You’ll need to keep and submit digital business records.
• You’ll send quarterly MTD updates of income and expenses to HMRC.
• You’ll also make one Final declaration. This replaces your current Self Assessment tax return.
• Submissions must be made using HMRC compatible software such as Xero.

At Orenda, we are only supporting MTD clients who use Xero. This isn’t about making life difficult – it’s about consistency. Using one system means we can provide services that are reliable, efficient, and high quality. In our view, Xero is the best software available for sole traders and landlords.

What You Need to Do Now

Taking action early will make the transition much smoother:

1. Decide what support you want from us – At Orenda, we offer a range of self-employed packages so you can choose whether to handle the bookkeeping and MTD submissions yourself, or let us take care of it all.

See our package options here.

2. Purchase a Xero subscription – For many self-employed businesses, the Xero Simple plan (£7+VAT per month) is the most cost-effective option. Once you’ve purchased it, you need to add us as a user using [email protected], and once added we can support you with the set up.

3. Open a separate bank account – If you don’t already have one, set up a dedicated business bank account. Keeping business income and expenses separate from personal transactions makes it much easier to connect your bank feed to Xero and reduces errors.

Common Questions About MTD for Income Tax

Does MTD apply if I’m just a landlord?
Yes – if your rental income alone is above the threshold, you’ll need to join.

Can I still use spreadsheets?
No, not on their own. You must use compatible software like Xero. While bridging tools exist to link spreadsheets to HMRC, we do not support bridging tools.

What happens if I have more than one self-employed business?
HMRC looks at your total gross income across all your self-employed businesses plus any rental income. If the combined figure is above the threshold, MTD applies. You’ll need to keep separate digital records for each business (separate Xero accounts), but they will all feed into the same MTD account.

What goes in each quarterly report?
Quarterly updates include a summary of your business income and expenses. Year-end adjustments (such as reliefs and allowances) aren’t included in the quarterly reports – they go into the Final Declartion. Think of quarterly updates as a snapshot of your business every three months.

Do I still file a Self Assessment tax return?
No. Once you’re in MTD, you won’t file a Self Assessment return in the old format. Instead, your quarterly updates plus your Final Declaration together replace the tax return. The Final Declaration Submission is where everything is pulled together, including adjustments, reliefs, and allowances – much like your current return.

What happens to reliefs that Orenda claim at year end, like use of home or telephone costs?
Nothing changes. These reliefs are still claimed, but they aren’t part of quarterly updates. They’ll be included in your Final Declaration Submission. We’ll continue to claim use of home, telephone costs, mileage, and other adjustments for you.

How often will I need to report to HMRC?
You’ll send quarterly updates plus a Final Declaration. The deadlines for quarterly updates are:

• Q1: 6 April – 5 July → submit by 7 August
• Q2: 6 July – 5 October → submit by 7 November
• Q3: 6 October – 5 January → submit by 7 February
• Q4: 6 January – 5 April → submit by 7 May

What happens if I don’t comply?
HMRC will introduce penalties for late submissions. Getting systems in place now is the best way to avoid problems later.

What if my income is under £50,000?
You won’t be required to join MTD in April 2026. However:

• From April 2027, if your income is over £30,000, you’ll be included.
• From April 2028, if your income is over £20,000, you’ll be included.

What if my income drops below the threshold – can I exit MTD?
You may be able to leave MTD, but not straight away. The rules are:

• Once you’re in MTD, you must stay in it unless your qualifying income stays below the threshold for three consecutive tax years.
• If your income drops below the threshold for just one year, that isn’t enough – it must stay below for three full years.
• If your income falls to a very low level and it’s no longer “reasonably practicable” to continue, you can apply to HMRC for an exemption.
• If you close your self-employed business or rental property completely, you can notify HMRC and exit MTD straight away.

What if a quarterly submission contains errors?
Don’t worry, quarterly submissions are designed to give HMRC a snapshot of your income and expenses, not a finalised tax return. If you make a mistake or something changes later, you’ll be able to correct it in the following quarterly update or in your Final Declaration.

The key thing is to submit on time, even if figures aren’t perfect, because HMRC will apply penalties for late submissions but not for small errors corrected later. At Orenda, we’ll help make sure your records are kept accurately in Xero so errors are minimised, and we’ll tidy everything up in the year-end process.

Are the tax payment dates changing?
No, the key tax payment dates remain the same as under Self Assessment. What’s changing is when you report income and expenses.

You will still make your payment on account instalments (if applicable) by 31 January and 31 July, and your balancing payment (if any) by 31 January after the end of the tax year.
MTD doesn’t shift those payment deadlines, it only changes how and when you report your figures to HMRC.

How Orenda Can Help

We know this feels like a big change, but you don’t need to figure it out alone. We’ll guide you through:

• Setting up Xero and connecting your bank feed
• Choosing the right self-employed package for your needs
• Making sure your quarterly submissions are accurate and on time (if you select a package that includes this)

We’re here as the caring force for straight-talking business transformation. While this is a significant change HMRC have introduced, with the right systems in place it’s also an opportunity: more oversight of your business finances, fewer last-minute panics, and less stress at year end.

See our self-employed package options here and reach out if you have any questions on [email protected].

As the UK government advances its initiative to digitise the tax system, it’s essential for self-employed individuals and landlords to understand the upcoming changes under Making Tax Digital for Income Tax (MTD for IT).

This guide outlines what MTD for IT entails, the implementation timelines, necessary preparations for clients, and why Xero stands out as an optimal solution for compliance.

Understanding Making Tax Digital for Income Tax

MTD for IT requires certain taxpayers to keep digital records of their income and expenses and submit updates to HMRC using MTD-compatible software. Instead of an annual tax return, taxpayers will need to send quarterly updates throughout the year, providing a snapshot of their earnings and expenses. At the end of the tax year, they will submit a final declaration, confirming their income and tax owed.

MTD for IT is a government initiative aimed at modernising the UK tax system by requiring taxpayers to maintain digital records and submit updates to HMRC using compatible software. The goal is to make tax administration more effective, efficient, and easier for taxpayers to get their tax right.

Implementation Timelines

The rollout of MTD for IT will occur in phases:

• April 2026: Sole traders and landlords with an annual gross income exceeding £50,000 will be mandated to comply.
• April 2027: The threshold lowers, requiring Sole traders and landlords with an annual gross income of £30,000 to join.
• April 2028: The threshold lowers further, requiring Sole traders and landlords with an annual gross income £20,000 to join.

Please note that the above thresholds cover total income combined, so if you earn £30,000 from your self-employment and £30,000 from property then you will be required to comply with MTD from April 2026 because your total income is above £50,000.

Steps Taxpayers Need to Take

From the date they are required to comply with MTD for IT, taxpayers must submit quarterly updates to HMRC using compatible software. We highly recommend that individuals implement the software well in advance of their first required submission. This will allow them to familiarise themselves with the system, resolve any initial challenges, and ensure they are fully confident in using the software when the time comes.

Why Choose Xero for MTD Compliance?

Xero offers a comprehensive solution tailored to meet the needs of self-employed individuals and landlords preparing for MTD for IT:

• HMRC-Recognised Software: Xero’s platform is compatible with MTD requirements, ensuring seamless submission of quarterly updates and final declarations.
• User-Friendly Interface: Designed with simplicity in mind, Xero makes it easy to track income, expenses, and manage tax obligations.
• Scalable Solutions: Whether managing a single property or multiple income streams, Xero adapts to varying business needs.
• Expert Support: As certified Xero partners, we are well-equipped to assist you in implementing the software and providing ongoing guidance to ensure you make the most of its features.

How the Orenda Collective Can Help

At The Orenda Collective, we are staying up to date with the latest MTD rules and guidance to help our clients navigate this significant transition as smoothly as possible.

After preparing clients’ 2024/25 tax returns, we will notify those that fall under MTD for IT and when they will need to comply.

We will be offering a quarterly reporting and final declaration service in place of an annual Self Assessment return, ensuring client’s obligations are fully managed. Further details will be provided to affected clients in due course.

Conclusion

The transition to Making Tax Digital for Income Tax represents a significant shift in how self-employed individuals and landlords manage their tax affairs. By understanding the requirements, preparing in advance, and leveraging software solutions like Xero, you can ensure compliance and benefit from a more streamlined, efficient tax process.

Frequently Asked Questions: MTD for Income Tax

1. Do I still need to file a Self Assessment tax return under MTD?

Not in the traditional sense. Instead of a single annual tax return, you’ll submit:

• Quarterly updates of income and expenses
• A Final Declaration that replaces the current Self Assessment return

2. How do I know if I need to comply with MTD for Income Tax?

You must comply if:

• You are self-employed and/or a landlord
• Your total gross income from these sources is over £50,000 (from April 2026), or over £30,000 (from April 2027), or over £20,000 (from April 2028)
  Gross income means before expenses, and the total is combined across all qualifying income sources.

3. What if I have more than one property or business?

You will need to:

• Keep separate digital records for each source of income
• Submit separate quarterly updates for each
  However, you’ll only send one Final Declaration to HMRC each tax year.

4. What happens if I don’t comply?

HMRC has confirmed that penalties will apply for failure to comply with MTD requirements once you’re mandated. There will be a points-based system for late submissions, with financial penalties triggered after reaching certain thresholds.

5. Will I need to pay tax more frequently under MTD?

No. MTD changes how you report your income, but not when tax is paid. Payment deadlines remain the same—usually 31 January and 31 July for payments on account.

6. How will The Orenda Collective support me?

We will:

• Identify if and when you need to comply with MTD
• Offer quarterly reporting and Final Declaration services
• Help set up and manage Xero
• Keep you informed about any changes in MTD legislation

7. What period of income determines whether I need to comply with MTD for the 2025/26 tax year?

HMRC will use your income reported on the 2024/25 tax return to determine if you need to comply with MTD for Income Tax from 6 April 2026.

If your total gross income from self-employment and/or property is over £50,000 in that tax year (before expenses), you’ll be mandated into MTD from April 2026.

💡 Example:
If your tax return for 2024/25 shows £30,000 from self-employment and £25,000 from rental income, your combined total is £55,000. This means you’ll fall within scope for MTD from April 2026.