Besides paying penalties, interest, criminal prosecution and reputational damage, I have listed a few reasons for paying taxes in full and on time:
The usual ones are:
1. Taxes fund public services like roads, NHS, schools, transport systems etc.
2. Keeps us safe by funding police, justice system and armed forces.
3. Safety net – helps people in case of job loss, sickness and old age.
4. Directs behaviour – like high taxes on cigarettes, alcohol and fuel duty.
5. Helps target resources towards disadvantaged areas by tax incentives.
6. Wealth distribution – transferring wealth from the wealthy to the needy. Prime example is inheritance tax, this ensures wealth is not perpetuated through generations and creates a more equal society.
Basically price of living in a civilized society. Reason a person is successful is the support system a civilized society provides them.
Now some novel ones, equally relevant:
7. Basis of fiat money – one of the main reasons of value of fiat money is that government accepts it for paying taxes. Fiat money enables the government to control the economy. To read more on the topic of fiat money go to Section 3 `The Return to the Gold Standard` of Essays in Persuasion by John Maynard Keynes, one of the most influential economists of 20th century.
8. Paying a fair share of taxes gives the taxpayer the moral authority to question lawmakers.
9. Basis of democracy. In historic times in England when kings wished to raise funds for their wars; they needed to call in Parliament to raise taxes. Parliament (especially the Commons) developed over the centuries giving universal franchise. This today gives us the right to chose who governs us and how.
But it is a social contract. People pay their taxes and governments govern them prudentially.
Often when governments become corrupt people are disinclined to pay taxes.
Thus, taxes keep peace and harmony and help create a better society.
Below is a list of unexpected individuals who were accountants.
Chitragupta – According to Hindu mythology he keeps a record of all deeds – good and bad and their balance decides whether we go to heaven or hell.
Sir Isaac Newton – In later life, he was master of Royal Mint for 30 years. He oversaw the Great Coinage of 1696 when counterfeit currency was rife. It is said he was an honest man when corruption in public life was widespread. He lost a fortune in South Sea Company Bubble. He is also credited, perhaps mistakenly, for moving England from bimetallic system to Gold Standard. Seeing England prosper other countries adopted Gold Standard. There is a fascinating BBC radio play about his time in Royal Mint.
Daniel Defoe writer, most famous for Robinson Crusoe. A trader, journalist and spy. And sometime resident of New Gate prison. I made some changes in my own business reading his book `The Complete English Tradesman. Another absorbing BBC Radio Play.
John D. Rockefeller richest man in recent American history started out as bookkeeper. Unfortunately, his nemesis Ida Tarbell was not.
Medici bank – were early adopters of double entry.
w.e.f. 6th April 2025; Shift from domicile to residence for income tax, capital gains tax and inheritance tax.1
New 4-year FIG regime
In the past non-domiciled individual could pay taxes on FIGs on remittance.
From 6th April 2025 old rules will be removed and new arrivals will be given 100% relief on FIG in their first four years of tax residence, provided they have not been resident in the past 10 years immediately prior to their arrival. 8
This includes UK nationals and UK domiciled individuals who may not have previously had access to, or used, the remittance basis.27
Split year counted as full year of UK residence. 30
If an individual is still within their first four years of UK tax residence under the SRT on 6 April 2025, they can access the 4-year FIG regime until they have exceeded the four-year period. 31
If an individual leaves the UK temporarily during the four-year period, they can claim the 4-year FIG regime for any of the qualifying tax years remaining on their return to the UK. 32
Former Remittance basis (RB) users
Who are not eligible for new regime will pay taxes on arising basis like any other taxpayer. They will continue to pay tax on pre-6th April 2025 FIGs. 9
Remittance basis users who leave the UK and return after a period of ten tax years can only claim the 4-year FIG regime for any new FIG that arises within their 4-year FIG regime period. They cannot claim for any FIG they remit during the 4-year FIG regime period that relates to a year in which they were taxed on the remittance basis. They may, however, be able to use the TRF if their year of return is during the period the TRF is available. 33
Mixed funds – it is advisable for former RB users planning on remitting funds to open fresh bank accounts for particular transactions to ensure clarity (source of funds) and unnecessary additional tax (avoid additional funds coming in the tax net).
Capital Gains Tax RB users can re-base their foreign assets to 5th April 2017.
New Temporary Repatriation facility (TRF)
This will allow individuals previously taxed on Remittance basis (RB) to designated pre-6th April 2025 FIG and pay reduce rate of tax for three years. 13
Tax Year
Rate
2025-26
12%
2026-27
12%
2027-28
15%
Designation means individuals will have freedom to choose when to remit the funds. This does not need to be in the TRF window and could be in a later year. 15
Partial designations can be made.118
TRF not available to non-residents, thus taxpayer (TP) has to be tax resident in the tax year in which he wishes to claim TRF. ICAEW Tax track podcast – Goodbye non-doms, hello FIG
Add TRF charge to funds remitted to pay tax in the UK.
No FTCR against TRF RDRM73340.
Overseas workday relief (OWR)
Removes the need to keep funds outside UK and increase the term from 3 to 4 years.
As in RB Regime, with 4-year FIG regime foreign employment income will not be covered by this regime. TP can claim relief under OWR. 38
Annual limit: lower of 30% of the qualifying employment income or £300,000 per tax year.77
OWR relief is given by employer via payroll on an estimated basis, corrected via SA on actual days basis. ICAEW Tax track podcast – Goodbye non-doms, hello FIG
Claim
New 4-year regime is not automatic taxpayer (TP) will need to make a claim for it in their tax return within 2 years i.e. for 2025-26 by 31st Jan 2028. 24
TP will need to quantify the amount of income and gains for which relief is being claimed under the regime. If amounts of FIG are not quantified and included in the return, then individuals will remain chargeable and subject to tax at their usual rates. 25
Individuals will not need to make a claim for every year of the 4-year period. 26
Claim can be either of income or gains or both. OWR claim is separate. 41
If claim made, no relief for losses – income or capital arising in the year of claim. 42
Claim can be source by source basis.43
TP lose their personal allowance and AEA for CGT.44
Key point is that the death benefit is not taxable.
All gains are chargeable unless they are qualifying policies.43.6 Foreign i.e. policies issued by an non-EU insurer say from India will be a non-qualifying policy. 43.21
Death is a chargeable event. 43.6
Gain is reported in deceased’s tax return.IHTM28160
Computation of gain43.7
Gain = TB – (TD+PG)
TB is total benefit; For a life insurance policy, where the chargeable event is the death of an individual covered under the policy, the value of the policy must be taken to be the surrender value of the policy immediately before the death and not the amount of the proceeds. This is the amount of surrender proceeds that the insurer would, as a matter of fact, have been prepared to pay to the policyholder if the policy had been surrendered immediately before the death.IPTM7520i.e. death benefit is not taxable.
TD premiums paid
PG previous gains; previous gains charged on partial payouts.
See also Friends Provident International note example – death on Page 3.
Charge to Tax43.8
Gain is treated as savings income.
Summary of Basic rate tax credit: RA Blog
Policy Type
Basic rate credit
Top slicing relief calculation
UK policy
Yes
Yes
Foreign policy
No
Yes
For calculation of Top slicing relief see Tolley Exam training guide.
Reduction for periods of non-UK residence 43.11
Apply if appropriate.
Sources:
Book – Tolley Annual Income Tax re numeric footnotes in this article.
If a close company provides loan to directors or shareholders and the loan remains unpaid for 9 months and 1 day after the end of the accounting period in which the loan was made, a tax charge applies which should be paid to HMRC by the company. This is refundable when loan is repaid within 4 years or written off.
This applies to all direct loans and indirect loans if benefiting the participator.
Close company is one which is controlled by a maximum of 5 shareholders or by any number of directors who are also shareholders.
Due date and rates:
Tax rate:
As of 2025, the tax charge is 33.75% which is in line with dividend rate.
Due date:
For Small companies, due in 9 months and one day after the end of the relevant accounting period.
For Large companies (Profits > £1.5M) are required to pay Corporation tax including S455 Charge in quarterly instalments.
How it is paid:
Paid by the company when submitting the Corporation tax return (CT600). The outstanding loan amount must be disclosed on the CT600A supplementary page.
Repayment:
When loan is repaid or written off by company, S455 tax paid earlier will be refunded to the company.
HMRC requires companies to wait 9 months and one day from the end of the accounting period in which the loan was cleared.
HMRC will then assess the outstanding loan and determine the amount of S455 tax eligible for repayment.
Restriction on repayment of S455 tax
In the following cases the repayment of S455 tax will be restricted,
30-day bed and breakfasting rule: If the amount is repaid within due date and followed by a similar loan within 30 days, HMRC treats it as if no repayment had occurred at all and S455 tax remains payable.
£15,000 rule: If the outstanding loan is more than £15,000 and it is repaid with an intention to withdraw at least £5,000 from the company at a later date, S455 tax will still remain payable.
Implications for the Participator
When a company writes off the loan – company will receive a repayment of the S455 tax. Director will be treated as receiving a dividend equal to the amount of the loan written off. This is not an allowable deduction for corporation tax purposes.
If the director is also an employee – It is treated as earnings from employment for NIC purposes, and is subject to Class 1 NIC. Company will pay Class 1 NIC at 15% (25/26 tax year).
NIC paid by the company is a deductible expense for company.
Exceptions
When loan was repaid in 9 months 1 day of year end of the company.
Loan made during the normal course of business i.e., banks and money lenders.
Loan of not more than £15,000 is provided to Shareholder is an employee who holds less than 5% shares.
DLA
Director’s Loan Accounts (DLAs) are often used by directors to take money out of the business before dividends are declared or salaries are paid. Every transaction should be recorded clearly to see whether a director owes money to the company, or vice versa.
An overdrawn DLA indicates that the director owes money to the company. If this overdrawn balance isn’t repaid within the specified period, the company may be subject to S455 tax.
If you intend to offset a loan balance with dividends, make sure dividends are properly declared, supported by adequate profits, and documented in board minutes.
Should director pay interest on their overdrawn DLA ?4 Please use Excel calculator below.
Removal of the Lower Earnings Limit All eligible employees will be entitled to SSP regardless of income. SSP will be paid at 80% of normal weekly earnings or the uprated weekly flat rate of £123.25, whichever is lower.
Removal of the Waiting Period SSP will be paid from the first full day of sickness absence, not from day four.
From October 2026
Tipping
Employers will need to:
a. consult with workers or their representatives before creating a tipping policy.
b. update their tipping policy every 3 years – most restaurants made new tipping policy in circa Oct 2024 due to Employment (Allocation of Tips) Act 2023 which required them to pass 100% tips to employees, so due date for update of tipping policy will be in Oct 2027.
Employment tribunal time limits Time limits for making a claim to an employment tribunal will increase from current 3 months to 6 months.
From 1 January 2027
Unfair dismissal – for an employee to bring an unfair dismissal claim against an employer, time period that employee needs to be in the job will be reduced from 2 years to 6 months.
Other 2027 changes
Zero-hours and low-hours contracts – Workers will get right to guaranteed hours.
Compensation for cancelled shifts, moved to another date, or cut short by an employer.
Reasonable notice of shifts – Employers must provide reasonable notice of shifts and changes to shifts.
First VAT return is usually of repayment. I have listed below actions you can take to make the process easier .
File early to get monies early. Do not wait for the deadline. HMRC processes repayment within 30 days of VAT submission date, not deadline date, so earlier you file earlier you will get repayment in your bank account.
2. Use HMRC online tool to check VAT repayment status: link
3. Email address of HMRC VAT repayment team given below, but do not chase them before 30 days.
4. Prepare to submit supporting paperwork online and then wait for the letter with Case reference. You can use this service to check on documents required to ensure all are available while preparing VAT return. HMRC will send a letter in post requesting paperwork to support the repayment like invoices, bank statement etc. Previously we had to send everything by post but now it’s done online. You can start preparing immediately and once letter with Case reference is received, submit the form.
Roy Accountants 