January 2026 Newsletter
Inheritance Tax reliefs threshold to rise to £2.5 million for farmers and businesses
The level of the Agricultural Property Relief (APR) and Business Property Relief (BPR) thresholds will be increased from £1 million to £2.5 million, the government has announced.
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The change will allow spouses or civil partners to pass on up to £5 million in qualifying agricultural or business assets between them before paying Inheritance Tax (IHT), on top of existing allowances.
The government says the changes come after it listened to concerns of the farming community and businesses about the reforms.
It says it will protect more farms and businesses, while maintaining the core principle that the most valuable agricultural and business assets should not receive unlimited relief.
The change will be introduced to the Finance Bill in January and will apply from 6 April.
Environment Secretary Emma Reynolds said:
'Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.
We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms. We are increasing the individual threshold from £1m to £2.5 million which means couples with estates of up to £5 million will now pay no inheritance tax on their estates.
It's only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain's rural communities.'
Source: GOV.UK Website
E-invoicing will be fundamental change for VAT-registered businesses
The mandatory introduction of e-invoicing for all VAT-registered businesses selling to UK business customers from April 2029 will be a fundamental change, says the Chartered Institute of Taxation (CIOT).
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The government announced the requirement in the Autumn Budget 2025 policy documents.
It said: 'Continued collaboration between the government and the private sector is essential for driving innovation. To drive productivity further, the government will require the use of electronic invoicing for all VAT invoices for business-to-business and business-to-government transactions from 2029, with a roadmap to be published at Budget 2026.'
The CIOT is cautioning the government against rushing into mandatory e-invoicing, calling for the use of thresholds and staged implementation to try to mitigate the impact of such significant digital change.
E-invoicing is a digital exchange of invoice information directly between the supplier and customer's accounting systems; invoices sent electronically by email with a pdf or jpeg format attachment will no longer suffice.
CIOT spokesperson Alison Kerrey said:
'E-invoicing is a fundamental change for businesses. This goes further than Making Tax Digital, because it is not just digital record keeping, it is communicating digitally with customers and suppliers.
We are particularly concerned that those businesses that only issue and receive a handful of invoices per year will face disproportionate costs.
The CIOT support moves to increase the adoption of e-invoicing. But if there is to be a mandate, there need to be real benefits to HMRC and UK businesses and sensible, realistic implementation.'
Source: CIOT Website
MTD penalties waived for first year of Income Tax
Self-assessment taxpayers due to join Making Tax Digital (MTD) for Income Tax next April will not face penalties if late filing quarterly updates.
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In the Autumn Budget 2025 documents, the government said it will not charge penalty points if those joining MTD submit any of their compulsory quarterly updates of income and expenses late during 2026/27.
This means that the first group of taxpayers earning non-PAYE income over £50,000 will not be liable for the new penalty regime under MTD until April 2027.
HMRC will apply the new penalty regime for late submission and late payment to all income tax taxpayers from 6 April 2027.
The new system is based on a points-based sanctions regime and will penalise those who persistently do not comply by missing filing and payment deadlines.
Under the new regime, when a taxpayer misses an annual submission deadline, they will incur a penalty point. A taxpayer becomes liable to a fixed financial penalty of £200 only after they have reached the points threshold of two for late submission of their final declaration.
Sharron West, Technical officer at LITRG, said:
'We're pleased to see the government defer penalties for the first year of Making Tax Digital.
Making Tax Digital is the biggest change to the tax system since self assessment and because of that, we expect that there will be some teething problems when it goes live in April.
This period of grace is especially good news for those who will be getting used to the new system without the help of a tax adviser.'
Source: CIOT Website
Salary sacrifice changes will impact over three million employees
The removal of full tax-free salary sacrifice on pensions with a new £2,000 limit will hit over three million employees at 290,000 companies, according to government figures.
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The change to pension salary sacrifice is due to come into effect from 6 April 2029 and will see a new £2,000 limit on the amount of contributions employees can make into a salary sacrifice scheme free of tax and national insurance contributions (NICs), hitting schemes run by UK employers.
Almost eight million employees currently use salary sacrifice to make pension contributions. Of these, over three million sacrifice more than £2,000 of salary or bonuses.
However, just over half of employees will fall below the threshold based on current HMRC estimates, meaning over four million pension savers will not be affected.
The government said:
'The government supports and incentivises pension saving and has retained Income Tax and NICs reliefs on pensions contributions that are worth over £70 billion per year.
Most other salary sacrifice opportunities were closed in 2017. Salary sacrifice for pensions contributions remains, and its cost as a relief has increased markedly from £2.8 billion in forgone NICs in tax year 2016 to 2017, rising to £5.8 billion in tax year 2023 to 2024. Were no changes made, it is expected that this would nearly triple to £8 billion by tax year 2030 to 2031.'
Source: GOV.UK Website
Spring Statement set for 3 March 2026
The Spring Statement has been scheduled for 3 March 2026 by the Chancellor of the Exchequer Rachel Reeves.
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Ms Reeves has asked the Office for Budget Responsibility to prepare an economic and fiscal forecast for publication on that date.
The government said:
'As set out at the Budget, the Spring forecast will not make an assessment of the government's performance against the fiscal mandate and will instead provide an interim update on the economy and public finances.
The government will respond to the March forecast through a statement to Parliament, in line with the government's commitment to deliver one major fiscal event a year at the Budget.
This approach gives families and businesses the stability and certainty they need and supports the government's growth mission.'
Source: GOV.UK Website
£725 million UK apprenticeship overhaul targets youth unemployment
A £725 million package of skills reforms to the apprenticeship system with the aim of helping to tackle youth unemployment and drive economic growth, has been announced by the UK government.
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The government says the reforms will create 50,000 additional apprenticeships and foundation apprenticeships over the next three years.
As part of the package, the government will also cover the full cost of apprenticeships for eligible young people under 25 at small and medium-sized businesses.
The announcement also emphasised that removing the 5% co-investment rate for SMEs means that the training costs for all eligible under 25 apprentices are fully funded, opening up thousands of opportunities for young people.
Lizzie Crowley, Skills Adviser for the Chartered Institute of Personnel and Development (CIPD), said:
'Apprenticeship starts have been falling for years, limiting opportunities for young people and preventing organisations - especially smaller firms - from building the skills they need to boost performance.
Creating 50,000 apprenticeships and giving mayors a stronger role in connecting young people with employers is a positive step. And in a year of rising employment costs, fully funding apprenticeship starts for under-25s in smaller businesses will be welcome.
However, removing the 5% employer contribution alone won't drive take-up. Cost is rarely the main barrier for smaller employers; the greater challenge is releasing staff for off-the-job training and having the management capacity to support apprentices effectively day to day. Without tackling those practical constraints, take-up is likely to remain limited.'
Source: GOV.UK Website, CIPD Website
HMRC offers time to help pay self-assessment tax bills
HMRC is reminding self-assessment taxpayers that help is available to manage their tax bill.
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The deadline to file and pay any tax owed is 31 January 2026, but people who are unable to pay in full by then may be able to set up a Time to Pay arrangement online and spread the cost over monthly instalments.
For those with bills of up to £30,000, such an arrangement can be set up without even needing to contact HMRC directly.
According to HMRC, since 6 April 2025 nearly 18,000 payment plans have been set up using the service, helping customers avoid late payment penalties by arranging regular payments that suit their own circumstances.
A Time to Pay arrangements cannot be set up until a self assessment return has been filed. If the tax owed is more than £30,000, or a longer repayment period is needed, people can still apply but will need to contact HMRC directly.
Myrtle Lloyd, HMRC's Chief Customer Officer, said:
'We're here to help customers get their tax right. If you are worried about paying your self assessment bill, assistance is available. Our online payment plans offer financial flexibility and can be tailored to individual circumstances. We want to support all our customers in meeting their tax obligations with confidence.'
Latest guidance for employers
HMRC has published the latest issue of the Employer Bulletin.
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The December issue has information on various topics, including:
- Changes take effect 6 April 2026 - prepare for new PAYE responsibilities in labour supply chains.
- Clarifying the Optional Remuneration Arrangement rules at section 228A ITEPA.
- Important update regarding tax refunds.
- Payrolling of benefits in kind.
- Employment Rights Bill autumn consultations.
- Tell ABAB survey report - now live.
Source: GOV.UK Website
