Tax

The September 2026 Facebook Live was a crucial, security-focused session.  It educated business owners on the latest tactics used by fraudsters, such as phishing emails pretending to be from HMRC, fake penalty notices, and invoice redirection scams.  It provided clear red flags to look for and practical steps to take to verify communications and protect the business’s finances.

The Scammers Are Getting Smarter

Fraud is a huge threat to small businesses.  Scammers use fear and urgency to make you act without thinking.  This session is about learning to PAUSE, how to recognise a potential phishing email, and what to do if you are a victim of being scammed.

Phishing is a scam using fraudulent emails, texts or websites to trick you into giving away personal information or money.

HMRC Scams: They Will Never…

Over the years, more and more scams are appearing, and businesses are being targeted specifically with HMRC scams.  Emails, or even texts, may state that you are due a tax rebate or have received a penalty, or ask for personal information.

There are things that HMRC will never do that can help you to spot a scam:

• HMRC will NEVER use texts or emails to tell you about a tax rebate or penalty.  They will send you a letter, or a message will appear in your Government Gateway account.
• HMRC will NEVER ask for personal or payment information by email or text.
• HMRC will NEVER call threatening you with immediate arrest for non-payment of tax.

Other clues that will point to the messages being part of a scam are poor grammar, generic greetings such as “Dear Taxpayer”, links to non-gov.uk websites, and threatening language.

If you receive any communication that looks like it comes from HMRC, asking you to click on a link to provide personal information or access the messages, do NOT click on those links.  You should log into your Government Gateway account by going directly to the website on your browser and logging in.   Clicking on links in suspicious emails can cause your email or device to be hacked, and the scammers then have access to all of your personal data, as well as data relating to any of your contacts.

You can contact HMRC to report suspicious communications, including emails, texts, social media accounts and phone calls.  HMRC have also published a list of genuine HMRC contacts to help you decide if the communication is real.  You can visit the gov.uk website to get that information.

Invoice & Mandate Fraud: The Biggest Threat

This type of scam is becoming more common, and as people move to invoicing customers only electronically, it is going to be very important to make sure you are aware of what to look for.  This type of fraud involves a fraudster tricking a business into paying a legitimate invoice to a criminal’s bank account.

For example, a fraudster impersonates one of your regular suppliers and emails you with new bank details for payment.  You pay your legitimate bill to the fraudster’s account. 

There are ways to prevent this sort of thing from happening:

• ALWAYS verify any change in bank details with your known contact at the supplier, using a phone number you have on file (not one from the email).
• Instil a clear process for changing supplier details in your business
• Be suspicious of emails with a sense of urgency or a change in the tone of language

Scammers are being very clever, and I have had clients contact me to query whether emails from Ihelm Enterprises are genuine, and have even had a client inform me that one of his suppliers had been scammed by receiving an email that looks like it genuinely came from one of their own suppliers, but it turns out it wasn’t.

Things to look out for that indicate the email is a scam include:

• The email address is not the usual email address your supplier emails you from
• The email doesn’t follow the same format as previous emails ie, the colours or logo are not the same
• Poor grammar
• Stating the payment must be made immediately, instead of it being for the agreed terms you have with the supplier
• If you hover over the links, they do not point to your supplier’s website

Your suppliers will not have any issues with you contacting them to verify if an invoice you have received from them is genuine.

What To Do If You Suspect A Scam

It can be really hectic trying to run your own business when you are dealing with customers, paying suppliers, marketing, HR, and just the day-to-day tasks.  We all get busy and sometimes don’t necessarily take the time to read emails from suppliers that closely, or we flag them for looking at later.  However, this is what scammers are counting on – that business owners are too busy to pay close attention to their emails, and will just pay the invoices or click on the links.

To help ensure you are not getting scammed, there are some very simple steps you can take.

1. PAUSE – take the time to read the email properly.
2. If you think the email may be a scam – STOP – do not reply, click any links or download any attachments.
3. CHECK: If it claims to be from HMRC, go to the link I mentioned earlier to check if the contact details are on the list of genuine contacts.  Also, log into your Government Gateway account directly to check if there are any messages from HMRC relating to the email you have received.  If it’s a supplier, call them.
4. REPORT: If you suspect the email is suspicious, you can report it, and it will get investigated.  If the email pretends to be from HMRC, you can forward it to phishing@hmrc.gov.uk.  You can also report phishing emails to the National Cyber Security Centre by forwarding them to report@phishing.gov.uk.  If it is a text message, you can forward it to 7726 (it’s free to do so), and it will report the message to your mobile phone provider.

The government website provides guidance on how to report other types of scams and phishing emails.

If the email turns out that it was genuine, that’s fine; there are no repercussions if you report an email as a potential scam, and it isn’t.

If You’ve Been Scammed

If you have clicked on links in a scam email and made payments to the scammers, it is very important that you contact your bank or credit card company immediately to let them know you have just made a payment and been scammed.  They may be able to stop the payment or recover it.  Your bank or credit card company will provide you with instructions on how to submit the information to them.

You should also contact the police on 101 to report that you have been scammed.  They will take various details from you about what has happened, and it will be logged.

The next step is to report the scam to Report Fraud.  Report Fraud can also help with getting it reported to the police.  If you visit their website, you can click on the red button that says “Make a report” to start the process. Report Fraud is the UK’s national reporting centre for fraud and cybercrime.

You must keep records of all communication you have had with the scammer.  It will be useful when you ask your bank or credit card provider to reimburse you.

Important Note about HMRC VAT Scam

I wanted to share some information about a scam that has been happening to VAT-registered businesses over the last 18 months.

Business owners have had issues with submitting VAT returns, and when they have gone onto the Government Gateway account to check things, they have discovered that a fraudulent VAT return has been submitted using their Government Gateway details, but not using their software.  It often creates a large refund due to the business owner.  However, in some cases, the scammers have managed to change the bank account details on the account to their own bank account. 

HMRC have not shared much information about this scam, and in most cases, they simply close down the Government Gateway account and set up a new one, all without notifying the business owner until after the fact. 

In some cases, the business owner has then had to submit documentation to HMRC to get the fraudulent VAT return removed from their records, so they are able to submit their true VAT return, but this can take time, meaning the correct return is often late being submitted.

This is something that has been posted across numerous business groups on social media, as well as groups for bookkeepers and accountants.  It isn’t something that’s been publicised by the government.  I do have first-hand experience in dealing with this scam due to two of my own bookkeeping clients who have had this occur.  It is extremely important that you stay vigilant and keep a close eye on your Government Gateway Account.  If you see anything suspicious, report it to HMRC straight away and change all your passwords.

Protecting your business’s money is just as important as earning it.  Make sure your team knows these rules.  For more tips on financial security and internal controls, check out the blog section on my website.  Stay vigilant!

If you want to have a chat about other ways you can protect your business from potential HMRC scams and invoice fraud, just contact me and we can have a chat.

The Facebook Live for August 2026 covered the specific expenses that can be claimed against rental income, including repairs vs improvements, mortgage interest relief, letting agent fees, and the “replacement of domestic items relief”. It provides clarity and helps landlords maximise their claims correctly.

For the landlords!

With MTD ITSA now live for many landlords, getting your expenses right quarterly is more important than ever. That is anyone with self-employment and/or property income over £50,000, who now has to keep digital records and send quarterly updates to HMRC.

This blog post will cover the main categories of allowable expenses.  Allowable expenses are costs that can be deducted from your rental income to reduce your taxable profit.

The Golden Rule: “Wholly and Exclusively”

An expense is only allowable if it was incurred “wholly and exclusively” for the purpose of the property rental business.  If there is a personal element, you can only claim the business proportion.  To make it easier, where possible, ensure that you are not paying for items that have mixed use – all purchases should be for that particular rental property.  You must ensure you have all the paperwork to back up the transactions.  That way, you can provide proof to HMRC that you have recorded a transaction properly within the accounts, if they were to ask.

Repairs vs. Improvements (Revenue vs. Capital)

This is the most common area of confusion for landlords.  Having a clear understanding of what types of expenses can be claimed against the revenue of a rental property will help when it comes to completing your accounts.

Repairs are allowable expenses.  This includes things like replacing a broken boiler with a similar model, fixing a leaking roof, and repainting between tenants.  These are all purchases that maintain the property.

Improvements to the property are not allowable expenses. Improvements are any type of work done that adds value to the property.  For example, building an extension, adding a conservatory, significantly upgrading the kitchen beyond a like-for-like replacement.  These types of costs are not allowed to be claimed against your revenue.  Instead, they are added to the cost of the property, which reduces the gain you are taxed on when you sell it.  Anytime you make an improvement to the rental property, the transactions still get recorded in the accounts, but they would go on the balance sheet.  When the property is sold, you would then be able to potentially use them to reduce your Capital Gains Tax.

Common Allowable Expenses Checklist

To make this easier to work through, I have put together a one-page checklist you can print off and keep with your property records, plus an interactive version online. 

Rather than read the whole thing out, here is what it covers:

• Letting agent and property management fees
• Landlord insurance – buildings, contents and rent guarantee
• Ground rent and service charges
• Utilities and council tax, where you are paying them rather than the tenant
• Safety certificates – gas, electrical and EPCs
• Repairs and maintenance, including cleaning and gardening between tenancies
• Accountancy and bookkeeping fees, and legal fees on shorter leases
• Advertising for new tenants
• Travel to the property for inspections, repairs and viewings
• Replacement of domestic items, which we will come on to shortly
• Direct running costs like phone calls, stationery and postage

And on the reverse, the ones that catch people out because they are not allowable – the cost of the property itself, improvements, anything personal, and the capital element of your mortgage payments.

In my experience, the ones landlords most often forget are agent fees, service charges, safety certificates and the mileage for inspection visits. None of them are big on their own, but across a year they add up to real money.

Everything on the list still has to pass the wholly and exclusively test we covered at the start, and it is all based on HMRC’s current guidance for residential landlords. I used AI to help draft and lay the checklist out, and I have checked every item against HMRC’s guidance myself before publishing it.

Two Special Cases

Two special types of transactions need to be pointed out.

1. Mortgage Interest Relief: If you are an individual UK Landlord, you can no longer deduct mortgage interest as an expense. Instead, you get a tax credit at the basic rate of tax (20%) on the interest portion of your mortgage payments, which you can claim through your self-assessment tax return.
   
   However, there are some exceptions to this rule.
   
   a. If you operate as a limited company, and it owns the rental property, then you can deduct 100% of the mortgage interest as a business expense.
   
   b. You may still come across older guidance saying that furnished holiday lets (FHLs) are exempt from this restriction. Under the old FHL regime that was correct – owners of qualifying holiday lets could deduct 100% of their finance costs, in the same way a trading business can. Holiday lets are now treated in the same way as any other residential letting, so the 20% tax credit applies to them too. If you have an FHL and you are working from guidance written before April 2025, please do check it.
   
   c. If the rental property is non-residential or commercial, then they are exempt from the personal mortgage interest restrictions.
   
2. Replacement of Domestic Items Relief: If you have to replace items in the rental property that are classed as movable furniture, appliances or furnishings, you can claim for the cost of a like-for-like replacement.  This would include items such as the fridge, washing machine, sofa, carpets, curtains and beds.
   
   4 conditions must be met to claim this type of relief:
   a. The relief can only be claimed if the person or company claiming it operates a property business that includes the letting of houses.
   b. The old item is replaced with a new item, and it must be for the exclusive use of the lessee in that property.  The old item must no longer be available for use.
   c. The cost of the new item must not be prohibited by the “wholly and exclusively” rule, but it would otherwise be blocked as capital expenditure.  That is really the whole point of this relief – it lets you deduct something that would normally be treated as capital and disallowed.
   d. The owner of the rental property must not claim any Capital Allowances for the purchase of the new item.

You cannot claim this relief if rent-a-room relief has been claimed in relation to any rent-a-room receipts received. Under the old furnished holiday lettings regime, FHLs were also excluded from this relief because they could claim capital allowances on furniture and fittings instead. Now that the FHL regime has ended, holiday lets have lost those capital allowances and can claim replacement of domestic items relief in the same way as any other let.

You can read more about the rules set out by HMRC on their website. 

When you claim this relief, you can claim the exact cost of the new like-for-like item, as well as the delivery and disposal costs.  You then deduct anything you received for the old item, so if you sold the old fridge for £30, that £30 comes off your claim. These would get claimed directly through your self-assessment tax return.  Keep in mind that if you buy an item that is of higher quality, the deduction is limited to being only for the cost of an equivalent replacement.

You must keep very clear records for transactions of this kind. That would include any invoices and receipts for the disposal of the old item and the purchase of the new item.

There are a couple of other pages on the government website that are helpful for landlords:

The Property Income Manual
How to work out your rental income when you let property

Don’t pay more tax than you need to.  Keeping meticulous records of your allowable expenses is essential for any landlord.  If you’re struggling to keep up with your property bookkeeping, especially with MTD, I can help.  Just contact me if you would like to have a chat.

The Facebook Live for July 2026 provided practical, actionable advice for managing finances during periods of economic uncertainty.  The topics covered included aggressive credit control to manage late payments, reviewing and cutting non-essential overheads, renegotiating terms with suppliers, and exploring short-term funding options like overdrafts or business credit cards.

Control What You Can Control

As we all know, some economic factors are outside our control, but our response to the situation is not.  The global situation with COVID-19 back in 2020 is a good example.  This blog is about proactive steps that can be taken to protect your business during periods of economic uncertainty.  We are going to focus on the three Cs: Cash, Costs and Communication.

CASH is King: Protect Your Cashflow

During times of economic uncertainty, everyone will be trying to cut back on the money they spend and delay paying bills as much as they can, to keep the cash in the business as they don’t know what is going to happen, what money they will need or when.  You do not want to end up being an informal bank for your customers.

However, as a business owner, you need to put aggressive credit control measures in place.  What is credit control?  Credit Control is the process of ensuring that customers who owe you money pay on time.

Here are some steps you can take to ensure your business is being paid on time.

1. Make sure that your credit control procedures are clear and easy to understand.  Did you make your customers aware of your credit control terms before they became a customer?  Are they published on your website?  Do your invoices show the credit terms on them?
2. Invoice your customers immediately and accurately, for any work that you do for them.
3. Have clear payment terms in place.  Some businesses have different types of credit terms for different types of customers, so make sure your invoices show the correct payment terms for that type of customer.  You need to ensure that all customers know what your payment terms are from the start.  You might have a policy of invoices due within 14 days, or maybe it’s 28 days.
4. Follow up on overdue invoices systematically.  Start from the first day they become overdue.  You will want to make sure that the process you follow for chasing overdue invoices is clearly outlined in your credit control procedures.  For example, with my business, hosting clients are invoiced a month before their hosting expires, with payment due by the date the hosting expires.  If they do not pay on time, they are given 7 days’ grace, but after that, a statement reminder is sent every week for 3 weeks, and if payment still doesn’t occur, their hosting account is turned off.  The process I follow for my bookkeeping clients is different, as they are a different type of client.
5. In your credit control procedures, on the invoices, and in your late payment reminders, mention that you have the right to charge statutory late payment interest.  You can decide how you wish to charge for late payments, but by law, in the UK, when there is a Business-to-Business agreement, a business can charge 8% plus the Bank of England base rate.  However, you can use a different rate for charging interest, but you would need to make it very clear in your payment terms and credit control procedures what that rate is.

This page on the Government website talks about how to deal with late commercial payments, and what you can legally do in regard to charging interest and recovering your debt. 

The Federation of Small Businesses also has a late payments hub with template chasing letters, a late payment interest calculator, and guidance from the Small Business Commissioner.

What about your current pricing?  When was the last time you increased your prices?  It is a good idea to increase your rates every year due to inflation and other rising costs. During periods of economic downturn, you may see your own business expenses going up, which would mean that you would need to increase your prices to cover those increased costs.  If you increase your prices on a regular basis, and in small increments, it won’t come as such a big surprise to your customers.

Costs: Become Leaner and More Efficient

Every business will look at ways they can save money during an economic downturn, and you shouldn’t be afraid to do the same.

The first thing to do is to conduct a full review of your overheads.  Overheads are ongoing expenses not directly attributed to creating a product or service, but things that are still needed for running your business.  Examples include things like rent, utilities, or even website and email hosting.

Go through your bank statements, credit card statements, and PayPal accounts line by line to see what it is you are actually paying out for.  Make notes on a spreadsheet of who you are paying, how much you are paying, and what it is for.

The next step is to categorise all of your outgoings into 3 categories:

Essential – can’t operate without the item
Nice to Have – improves things but isn’t critical to running your business
Non-essential – anything that can be gotten rid of as it will not have an impact on your business

It might surprise you just how many things you are paying for that you don’t even use.  Maybe you signed up to do several courses, or you have several apps that you are paying for that all do the same thing, but you had forgotten that you had an app that did that job.  Take a close look at every expenditure you have noted down and challenge everything.  Are you really using all those software subscriptions you are paying for?  Can you get a better deal on your insurance or utilities?  Can you renegotiate rent?

Scaling back your expenditure will help with your cash flow at any point in time, but especially when there are tough economic times you are dealing with.

Once you know what is going out, put together a simple cash flow forecast for the next twelve weeks. Money in, money out, week by week. It does not need to be complicated – a spreadsheet is fine. The point is to see a shortfall three or four weeks before it arrives, while you still have time to chase an invoice, delay a purchase or arrange an overdraft, rather than finding out on the day the payment bounces.

Communication: Talk to People

Communicating with your customers and suppliers is key to having any successful business, but there are times when communication becomes even more important.

Talk to your customers and keep them informed about whether you need to increase your prices by explaining why.  If all of your business costs are going up, i.e. software fees, then you are going to need to increase your prices to cover those costs.  Making sure you give your customers as much notice as possible about price increases, and clearly explaining why they are happening, when they will happen, and by how much, is going to make it easier for your customers to then look at their own costs and plan ahead.  Good customers will understand why you are increasing your prices.

It is also worth renegotiating your terms with suppliers before you hit a problem. If you have been a reliable customer for years, say so, and ask what they can do. That might be extending your payment terms from 14 days to 30, moving an annual bill to monthly instalments, asking for a loyalty or volume discount, or agreeing a fixed price for the next twelve months so you are not caught out by mid-year increases. The worst they can say is no, and most suppliers would far rather keep a paying customer on adjusted terms than lose one altogether. Get whatever you agree confirmed in writing.

Don’t be afraid to contact your bank or credit card company, or any lenders you have loans with, to discuss your situation.  It is especially important if you are going to need to take out an overdraft, or ask for a longer period of time to pay off a loan.  Speaking to them at the earliest opportunity will most often work in your favour.  Just make sure that you know what it is you want to ask them for, and have an idea of the amount of payments you can afford, and how much more time you are going to need to make those payments. 

Funding: Know Your Short-Term Options

If cash flow is still tight after tightening credit control and cutting costs, there are short-term funding options worth understanding before you need them.

An arranged overdraft is usually the cheapest way to cover a short, predictable gap – but arrange it while things are stable, not when you are already in trouble. A business credit card can smooth timing on smaller purchases and gives you a clear paper trail, but only if you clear the balance each month; otherwise the interest will cost you more than the problem it solved. Invoice finance lets you draw against unpaid invoices, which can help if late payment is your main issue rather than a lack of work. And for larger gaps, a short-term business loan with a fixed repayment schedule is easier to plan around than rolling overdraft use.

Whatever you choose, work out the total cost of the borrowing, not just the monthly payment, and be honest with yourself about how you will repay it. Borrowing to cover a timing gap is sensible; borrowing to prop up a business that is losing money is not.

Having a tight grip on your finances is your best defence in a downturn.  If you need help analysing your costs, setting up a robust credit control process, or forecasting your cash flow, I’m here to help.  Let’s build a resilience plan for your business. Let’s build a resilience plan for your business. Just contact me if you would like to have a chat.

The Facebook Live for June 2026 talked about the pros and cons of aligning the accounting year with the tax year, versus choosing a different date. It covered the implications for tax payment deadlines, workload management, and industry seasonality, helping business owners make a strategic choice for their business.

What is a Year-End?

The year-end is the date your formal accounting period finishes.  This is the date that you would “close the books” and prepare your annual accounts and tax returns based on the 12 months of your financial year.

The “Standard” Year-End

For sole traders, the tax year runs from 6^th of April to 5^th of April.  For simplicity, most businesses use a 31^st March year-end, meaning their tax year runs from 1^st of April to 31^st of March.  This is called the “tax year basis”.

For new limited companies, the default year-end is the end of the month one year after they were incorporated.  For example, if you set up a limited company on June 12^th, 2026, then your first financial year will cover from June 12^th, 2026 to June 30^th, 2026.  However, the following years will have a financial year from July 1^st to June 30^th.

Why choose a different year-end?

There are a number of reasons that you might want to choose a different year-end for your business.

• Seasonality: If you run a seasonal business (i.e. weddings, Christmas retail), it makes sense to end your year after your busiest period.  This gives a truer picture of a full season’s trading and means you aren’t doing accounts during your peak time.

• Workload Management: Ending your financial year in a quieter month gives you more time to focus on the accounts.

• Stocktaking: It might be easier to perform a stocktake when inventory levels are naturally at their lowest.

The Implications of Choosing a Different Date

If you do decide to choose a different year-end date for your financial year, you need to be aware of the implications.

For sole traders, it used to be very complicated if you changed your year-end so that it was different to the standard year-end due to overlapping profits.  However, due to “Basis Period Reform”, which was announced back in 2022 and brought into effect from the 2023/2024 tax year, this is changing, and by now, most sole traders will have their financial year-end aligned with the tax year.  The main point is that for sole traders, sticking to March 31st as your year-end is now almost always the simplest option.  If you do not stick to the March 31st or April 5th year-end, then you will need to manually apportion and calculate your profits for the tax year every time you file.

It is completely different for limited companies.  They have complete flexibility over their tax year-end date.  They can choose to keep their year-end as per their incorporation date, or they can file an AA01 form with Companies House to change their accounting period to a different one.  The main implication is that your Corporation Tax is due 9 months and 1 day after your year-end.

How do you set or change your year-end?

If you are a limited company, you can shorten your accounting period as often as you like or lengthen it (up to 18 months) once every 5 years by filing an AA01 form with Companies House.  However, if your accounts are already overdue, you cannot change the date.  The request to change must be applied for before the current filing deadline expires.  Once you have filed the AA01 form, you will need to notify HMRC of the change before your original Corporation Tax return filing deadline.  If the change in your accounting period means it will exceed 12 months, you will need to file two corporation tax returns.

If you are a sole trader, you would prepare your accounts to the new date, and when you submit your self-assessment tax return, you update the dates in the accounting period boxes on the tax return, as long as your tax return is submitted on time.

Your year-end date is a strategic decision, not just an administrative one. If you’re setting up a new limited company or feel your current year-end isn’t working for your business cycle, just contact me, and we can have a chat about the implications of changing it.

The Facebook Live for May 2026 helped to teach business owners how to read and interpret key financial reports.  It went beyond just profit and loss, explaining the balance sheet and cash flow statement in simple terms.  The focus was on identifying Key Performance Indicators (KPIs) to track business health, spot trends, and make informed decisions.

From Scorekeeper to Strategist

Your accounts software provides powerful reports.  Most people only look at the profit figure, but there is so much more.  Learning to read the reports turns you from just keeping score to planning strategies.

The Profit and Loss (P&L) Statement: The Story of Your Performance

The P&L Statement is a fundamental part of any reports a business requires.  It shows you your income and expenses over a set period of time (month, quarter, year), resulting in a profit or loss.  This information is then used to calculate how much tax you owe to HMRC.  However, the information the P&L can tell you is much more than just how much tax you might owe at the end of the year.

Using the data in the report, you can look at some Key Performance Indicators that can tell you how well your business is doing.

Gross Profit & Gross Profit Margin

These KPIs show you how efficiently you produce and sell your product/service.  It lets you know if your margin is stable.  Gross Profit is expressed in pounds and is simply the difference between your sales and cost of sales.  It tells you whether you have the money available to cover your expenses.  To calculate the Gross Profit Margin, you would take your Gross Profit (sales minus cost of sales) and divide that figure by your total Sales, then multiply the answer by 100.  This figure should be similar from year to year, so if there is a significant change in this figure from one year to the next, an investigation into your buying and selling prices needs to happen.  To ensure your business is profitable, your Gross Profit needs to be sufficient to cover your expenses and give an acceptable return on capital.

Net Profit & Net Profit Margin

Net Profit is the figure you see at the very bottom of the P&L Statement.  It is calculated by taking your Gross Profit and subtracting all the expenses that the business has.  If your expenses are more than your Gross Profit, you will end up with a negative number, which is called a Net Loss.   The Net Profit Margin is a similar calculation to Gross Profit Margin, except it is the Net Profit figure divided by the total Sales, then multiplied by 100.  This KPI tells a business owner how much profit is generated for every sale made and measures overall efficiency and profitability.  As this figure uses all costs of running a business, it is considered a true indicator of the profitability of a business.

The Balance Sheet: A Snapshot of Your Financial Health

The balance sheet is not a report that most small businesses know about or even look at.  It is not generally provided to a sole trader if their accounts are only being completed once a year to submit their tax return, but it is still a very important report, as it tells you what assets your business owns and how much your business owes to others.  It uses the figures that do not go on your Profit and Loss Statement – your bank account balance, the amount of money customers owe to you, the amount of money you owe for loans or to suppliers, and how much money you have invested into your business.  As long as the information is being entered into accounts software, there is no reason this report cannot be generated.  It is just as important for a business owner to understand their balance sheet as it is for them to have a P&L provided.

A balance sheet will show the information separated into three sections:

• Assets: these are the things the business owns, such as the bank account balance, cash, stock, and money owed by customers (debtors)
• Liabilities: these are the things that the business owes to others, such as money owed for loans, money owed to suppliers (creditors)
• Equity: what the business actually “owns” after paying off everything it owes

The basic formula for the balance sheet is Assets = Liabilities + Equity.  That means that the total Assets should equal the Total Liabilities plus the total Equity of the business.

Using Them Together and Identifying KPIs

When your accounts information is put into accounts software, or many years ago when they were kept using paper ledgers or spreadsheets, the two main reports that are used to know how a business is doing are the Profit and Loss Statement and the Balance Sheet.  You might also have a third report provided called the Trial Balance, but this is just a report that shows all the accounts with a Debit balance and all the accounts with a Credit Balance, and helps to check that your Debits equal the Credits.  That is how bookkeeping works – your Debits will always equal your Credits, and if there is a mismatch, then there is a number incorrectly entered.

The P&L shows the performance of a business over a period of time (month, quarter, year).  It shows you the money coming in (your sales), the money going out (costs of sales, rent, wages, utilities), and the final result, which is either a profit or a loss.  It answers the question “Did the business make money?”

The Balance Sheet shows what the business owns and owes at a specific date.  It answers the question “What is the business worth right now?”

The information from the Profit and Loss Statement flows into your balance sheet.  The profit or loss a business makes doesn’t just disappear once the tax owed for the year is calculated.  That figure affects the information on the balance sheet. If a profit is shown on the P&L, it will increase the Equity on the balance sheet.  If a loss is shown on the P&L, it will decrease the Equity on the balance sheet.

Using these two reports together is important because they show different things.  The P&L shows how well the business is doing, and the balance sheet shows how strong the business is.  You can have a profitable business, but run out of cash (which indicates an issue with your balance sheet), or you can have a lot of assets, but still make a loss (which indicates a P&L problem).

A Profit and Loss Statement explains the change, and the Balance Sheet shows the result.

Your numbers are telling a story.  If you’re ready to understand that story and use it to make better decisions, I can help you to understand your numbers.  We can set up regular meetings to review your KPIs and plan for growth. Just contact me, and we can have a chat.

On May 21st, 2026, the Chancellor, Rachel Reeves, made some announcements about reducing VAT on some items between the period of June 25th, 2026 and September 1st, 2026. This is to help not only businesses, but also to ease some of the burden on families during this peak period.

These measures form part of the Government’s “Great British Summer Savings” scheme, and the reduced 5% rate runs from 25/06/2026 to 01/09/2026 inclusive, right across the UK. The detailed rules are set out in Revenue and Customs Brief 5 (2026), and they fall into three main areas: children’s meals, children’s tickets, and family attractions.

The changes announced include the following items, and the guidelines are very strict.

VAT on Children’s Meals reduced from 20% to 5%

From 25/06/2026 to 01/09/2026, Children’s Meals in restaurants and cafes will have a reduced VAT rate of just 5%. To determine whether the meal qualifies for the reduced rate, it must meet two very specific requirements:

• The meal is marketed, priced and presented as a children’s meal, and
• Supplied as part of catering services for consumption on the premises

A children’s meal is only eligible for the decreased VAT rate if it’s marketed, presented, and priced as a children’s meal. It is not based on who consumes it.

If a children’s meal is supplied as a fixed package (ie, including a drink), the whole package can qualify for the reduced VAT rate. However, if optional items, add-ons or upgrades are priced separately and don’t form part of the children’s meal, they remain subject to their normal VAT liability.

The reduced VAT rate does not apply to:

• Smaller or discounted versions of adult meals
• Shared meals for both adults and children
• Takeaway food

If a meal appears on both an adult and children’s menu, the children’s version would normally be differentiated by portion size or price. However, portion size alone is not a determining factor.

If the meal includes a non-alcoholic drink as part of the children’s meal, it will qualify for the reduced rate. If the meal includes an alcoholic drink, it will not be regarded as a children’s meal.

If a meal is exempt from VAT (i.e. it’s supplied alongside exempt education or care), it will be unaffected by the reduced VAT rate.

The main thing to remember is that for the children’s meal to qualify for the 5% reduced VAT rate, it must be marketed, priced and presented as a children’s meal, and the meal must be consumed on the premises.

VAT on Children’s Tickets reduced from 20% to 5%

The reduced rate also applies to children’s admission tickets for cinemas, theatres, concerts, shows, exhibitions, and soft play. As with meals, the ticket must be marketed and sold specifically as a child admission to qualify.

Where a family ticket is sold for a single price and includes at least one child admission, the reduced rate can apply to the whole ticket, including the adult admissions within that package.

VAT on Family Attractions reduced from 20% to 5%

Admission charges to family attractions also benefit from the 5% rate. This covers venues such as theme parks, amusement parks and fairs, zoos, aquariums and wildlife attractions, circuses, museums (where not already exempt), and indoor or adventure play facilities.

A few important points apply here:

• The reduced rate applies to the right of admission only. Food, merchandise, and upgrades sold separately keep their normal VAT treatment.
• Where a supply is already exempt from VAT (for example, under the cultural exemption), the reduced rate will not apply.
• Sporting activities, whether taking part or spectating, and the use of sports facilities, are excluded.
•  

Season tickets and advance bookings

Season tickets or passes allowing repeat entry outside the 25/06/2026 to 01/09/2026 window will not qualify unless they are priced the same as a standard single-entry ticket. Tickets allowing repeat entry solely within the qualifying period may qualify.

For timing, the admission itself must take place within the period. Tickets bought during the period for use after 1st September do not qualify, although businesses can choose to apply the reduced rate to prepayments.

What this means for your business

If you operate in hospitality, leisure or visitor attractions, the short lead-in time means systems and pricing may need updating quickly. In practice, you should identify which of your supplies qualify, review how they are marketed, priced and presented, and make sure mixed or bundled supplies are split and taxed correctly to avoid misapplying the rate.

The measure will be brought in through a statutory instrument, so some details may change before the legislation is finalised.

If you would like help reviewing how the temporary rate affects your business, please contact me, and we can have a chat.

The Facebook Live for March 2026 raised awareness of a valuable but often misunderstood government incentive.  It broke down what qualifies as Research and Development for SMEs (it’s broader than you think), explained the difference between the SME and RDEC schemes, and outlined the key information needed to prepare a claim with your bookkeeper or accountant.   The information covered is for businesses that have an accounting period start date of before April 1^st, 2024.

It’s Not Just for People in Lab Coats!

Many business owners hear the phrase “R&D tax credits” and immediately assume it only applies to laboratories, scientists in white coats, or large tech companies developing cutting-edge software.

In reality, that’s one of the biggest misconceptions surrounding the UK’s R&D tax relief scheme.

Thousands of small and medium-sized businesses across industries—from manufacturing and construction to food production and digital services—successfully claim R&D tax credits every year. If your business has invested time and resources into improving products, processes, or services, you may already be carrying out qualifying R&D without even realising it.

R&D tax credits are designed to encourage innovation across all sectors, not just high-tech industries.

You may qualify if your business has:

• Improved a product or service
• Developed a new manufacturing process
• Solved a technical challenge in production
• Built bespoke software to improve efficiency
• Experimented with new materials or techniques

For example:

• A construction company developing a new method to reduce structural load
• A food manufacturer experimenting with new recipes or preservation methods
• An engineering firm creating a more efficient component
• A software agency developing a custom platform for a client

If your team had to overcome technical uncertainty and couldn’t easily find the solution, there’s a good chance it could qualify as R&D.

What Actually Counts as R&D?

For tax purposes, R&D has a specific definition.

A project may qualify if it seeks to achieve an advance in science or technology by resolving scientific or technological uncertainty.

In simpler terms, your project may qualify if:

1. You were trying to improve or create something
2. The solution wasn’t readily available or obvious
3. You had to experiment, test, or iterate to find a solution

Typical qualifying activities include:

• Designing and testing prototypes
• Developing or modifying software systems
• Engineering new components or machinery
• Experimenting with materials or formulations
• Improving production processes or automation
• Conducting technical testing or modelling

It’s important to note that commercial challenges alone don’t qualify. The uncertainty must be technical rather than financial or market-based.

How the SME R&D Tax Relief Scheme Works

The SME scheme is the most commonly used R&D tax relief programme in the UK.

To qualify as an SME, your business must typically have:

• less than 500 staff
• a turnover of under 100 million euros, or
• a balance sheet total under 86 million euros, and
• have an accounting period beginning before April 1^st, 2024. 

Don’t worry if your accounting period begins on or after April 1^st, 2024; that doesn’t mean you cannot claim anything, it just means you could be eligible to claim under the Research and Development merged scheme (RDEC) or the Enhanced R&D intensive support (ERIS).  The RDEC and ERIS schemes replace the SME scheme for businesses that have an accounting period that starts on or after April 1st, 2024.  The qualifying expenditure rules for the two schemes are identical, but the calculation of the credit amount is different.  I will be covering the scheme for claiming R&D tax credits for businesses with an accounting period after April 1st, 2024, in a future Facebook Live.

Under the scheme, businesses can claim an enhanced deduction on qualifying R&D costs, which reduces their corporation tax bill.

Depending on whether the company is profitable or loss-making, the benefit works slightly differently:

Profitable companies

• Receive additional tax relief that reduces their corporation tax liability.

Loss-making companies

• Can potentially surrender losses for a cash credit, providing a valuable cash injection for growing businesses.

For many SMEs, this can represent a significant return on the money invested in innovation.

However, when you are working out if you are eligible to claim R&D Tax Credits, if your business is linked to another business, you need to include those figures in your total.  For example, your business is linked to another if it holds over 50% of the voting rights, and another business holds over 50% of the voting rights in your business.  This is something I will cover in a future Facebook Live.

What Costs Can You Claim?

Another common misunderstanding is that only large equipment purchases qualify. In reality, a wide range of project costs can be included in an R&D claim.

Eligible costs often include:

Staff Costs

• Salaries and wages of employees involved in R&D
• Employer’s National Insurance contributions
• Pension contributions

Subcontractor Costs

• Payments to third-party contractors who worked on R&D activities

Software

• Software licences required for development or testing

Consumables

• Materials used during testing or prototyping
• Components used during development

Utilities

• Proportion of electricity, fuel, or water used for R&D activities

Externally Provided Workers

• Agency staff or specialists brought in to support development work

The key factor is that the costs must be directly related to qualifying R&D activities.

How to Start an R&D Tax Credit Claim

Starting a claim may sound complex, but the process is usually straightforward when broken down into a few steps.  However, this is a specialist area, and the key is to document everything!  What was the uncertainty?  What did you do to try to solve it?  What were the failures and successes?  This information will be used to prepare the report that you will submit with your company tax return.

1. Identify Qualifying Projects

Review your projects over the last accounting period and identify those involving technical challenges or innovation.

2. Gather Financial Data

Compile the relevant costs associated with those projects, including staff time, materials, and subcontractor expenses.

3. Prepare the Technical Narrative

HMRC requires an explanation of:

• The scientific or technological advance sought
• The uncertainties faced
• How the team attempted to overcome them

4. Submit the Claim

R&D claims are typically submitted as part of your Corporation Tax return, supported by a technical report and cost breakdown.

5. Receive the Benefit

Once processed, HMRC will apply the tax reduction or issue a cash payment if applicable.

R&D tax credits are one of the UK’s most valuable incentives for innovative businesses, yet many companies fail to claim simply because they assume they don’t qualify.  The reality is that innovation happens in businesses of all sizes and industries, not just in laboratories or global technology firms.  If your business has spent time solving technical problems, improving processes, or developing new products, it may already qualify for R&D tax relief.

Taking the time to explore the scheme could unlock valuable tax savings or additional cash flow to reinvest in future innovation.

If you think you might need to do an R&D claim, contact me, and we can have a chat.

With the April 2026 start date for MTD ITSA for many, it is a critical time for landlords and sole traders.  This month’s blog post will recap who is affected by the changes, outline the core requirements (quarterly updates and year-end submission), demonstrate how to check HMRC for your mandation date, and provide a clear action plan for the final months of preparation.

It’s Happening.  The time is now.

MTD ITSA, or Making Tax Digital for Income Tax and Self Assessment, is no longer an idea that “might” happen in the future.  It takes effect in April 2026, and we are now in the final countdown to that start date.  This blog post aims to provide a no-nonsense, practical checklist to help sole traders and landlords to be prepared to follow the legal requirements of MTD ITSA.

Who does this affect from April 2026?

When MTD ITSA starts in April 2026, not every sole trader or landlord will have to follow it.  They are staggering the start dates, and when you start will be based on your income from your previous tax return.  It is very important to note that when you have to start following MTD, ITSA is not based on the profit or loss you make, but on the total sales (turnover/income) you have before any deductions have been made.

From April 2026, sole traders and landlords with a total qualifying income of over £50,000 must comply with MTD ITSA.

• If you are a sole trader with no property income, this means your total business income.
• If you are a landlord with no business income, this means your total property income.
• If you have both business and property income, this means the combined total of both

The threshold for those with a qualifying income over £30,000 will be mandatory from April 2027.  It is currently planned that those with qualifying income over £20,000 will need to follow MTD ITSA from April 2028, though this has not yet been fully confirmed.

Even if you do not have to start following MTD ITSA from April 2026, it is a good idea to start putting things in place so that you are ready to comply as soon as you need to.

The Core Requirements (The “What”)

There are several very strict requirements that must be followed when it comes to MTD ITSA.

1. Digital Records: You must keep all business records digitally.  This refers to using software to keep your accounts.  You don’t necessarily need to keep digital copies of your invoices and receipts.  However, it is good practice to ensure your invoices and receipts are able to be accessed easily, just in case HMRC do an inspection on your accounts.  The easiest way to ensure you have the information to hand is to attach a digital copy of the invoice or receipt to the transaction in your accounts software, if that’s possible.

• Compatible Software:  The software you use to keep your accounts must be MTD ITSA compatible and able to send the quarterly reports and final submission to HMRC.  This does not mean you cannot use spreadsheets to prepare your accounts.  If you do use spreadsheets, or if your accounts software cannot communicate directly with HMRC, you can use special bridging software to complete the submissions, but that software must be MTD ITSA compatible.

• Quarterly Updates:  At the end of each quarter, you will be required to submit a quarterly update to HMRC using MTD Compatible software.  The information included in the update will relate to your income and expenses.  At this point, it has been stated that this will not have an impact on the final amount of tax you will owe to HMRC, as that calculation will be done after your final year-end submission has been submitted, which is the same way it has been.  The purpose of the quarterly submissions is to help reduce errors in people’s tax returns, provide real-time information so that you are better able to plan for the amount of tax you might owe at the end of the tax year, and it helps to ensure business owners and landlords are compliant with their tax obligations.

• Final Declaration: At the end of the tax year, you would submit a final declaration to HMRC which will include any other income you may have (savings, pensions, dividends), the final year-end adjustments made to your accounts (for example, depreciation, profit/loss on the disposal of assets), as well as any other information you need to provide to HMRC for your tax liability to be calculated.  After you have submitted the final declaration, you will be provided with your final tax bill, which will outline what tax you owe to HMRC based on the information submitted, and the deadlines for making those payments.

Your Final 2-Month Checklist (The “How”)

The April 2026 start date is fast approaching for sole traders and landlords with qualifying income over £50,000.  HMRC estimate that approximately 864.000 people will be required to follow MTD ITSA from April 2026.  The following 4 things will help you to ensure you are ready from day 1.

1. Confirm your start date:  You can confirm whether you need to start following MTD ITSA from the 6th of April 2026 by checking your qualifying income (business and/or property income) from your 2024/2025 self-assessment tax return.  If your income was over £50,000, then you know you must follow MTD ITSA.  You may also receive a letter from HMRC sometime in February or March 2026 notifying you.  However, it is your responsibility to know if you have to comply with MTD ITSA, so do not rely on being notified by HMRC.  The government website has a tool that you can use to check if you need to follow MTD ITSA, and you can find it here.

• Choose your software:  If you haven’t already chosen what software you will use for MTD ITSA, I strongly recommend that you start looking at the different software that is available and choose now.  You will want to have time to familiarise yourself with the software and to ensure your accounts are all set up on it.  If you do not have any experience with keeping accounts digitally, it is a good idea to contact a bookkeeper who understands the software that you would like to use and ask them to help provide training, etc.  Sadly, using accounting software is not as simple as the software companies make it out to be.  You need to understand where the information needs to go to ensure you are not over- or underpaying your taxes.  Categorising information incorrectly, for example, a loan as income, could be a very costly mistake.  There are a lot of options out there for accounts software – QuickBooks Online, Xero, FreeAgent, Sage, and spreadsheets.  Try some of them out, check the pricing, what is included in the subscription, does it provide everything you will need for your business (i.e., stock tracking, payroll, multicurrency, VAT), and does it come with support.  You need to make sure the software you are using is right for you and your business.

• Get your records in order:  Ensure that your bookkeeping is up to date before April.  You can’t start with a backlog.  You will want to get into the habit of keeping your accounts up to date on a monthly basis, before you need to follow MTD ITSA, as that will take a lot of the pressure and stress away of making sure you meet the quarterly submission deadlines.

• Sign up for MTD ITSA:  If you have a tax agent, you can get them to sign you up or help you sign up for MTD ITSA, or you can do this yourself.  You will need to have your accounts software in place first before you sign up.  You will need to have your Government Gateway details, which would have been provided to you by HMRC when you first became self-employed or a landlord.  You will also need your National Insurance number.  If you do not know your Government Gateway login details, you will need to click on the “problems signing in” link to recover them.  You can access the Government Gateway page here. If you need to sign up for MTD ITSA, you can do so here. If you have a bookkeeper who doesn’t currently act as your tax agent because you have an accountant who submits your self-assessment tax return, but you would like your bookkeeper to submit your quarterly returns, you can appoint them to be a secondary tax agent.  Speak to your bookkeeper about whether they can help you with the quarterly submissions.

Penalties for Non-Compliance

If you do not comply with MTD ITSA, you will be subject to penalties.  HMRC have developed a points-based system where you will be given a set number of points for each late submission.  Once you have received the maximum penalty points allowed, you will face a fine.  There will be a separate penalty system for late payments and non-compliance with the software. 

The point threshold is 4 points for quarterly submissions and 2 points for the annual submission.  For every late submission, you will receive 1 penalty point.  If you reach the maximum threshold of 4 points for late quarterly submissions, you will receive a £200 fine.  If you reach the maximum threshold of 2 points for late annual submissions, you will receive a £200 fine.  Any points earned will expire after 24 months, but only if the threshold has not been reached.  If you have met the threshold of penalty points, the points will only expire after a period of compliance has been met.  For quarterly submissions, you would have to file all returns on time for 12 months.  For annual submissions, you would have to file all returns on time for 24 months.

The penalty system for late payments will involve interest and monetary fines.

• If your payment is 0 to 15 days late, you won’t receive a penalty, but interest will accrue.
• If your payment is 16-30 days late, a 3% penalty will be charged on the tax outstanding as of day 15.
• If your payment is 31+ days late, an additional 3% penalty will be added (making it a total of 6% of the original outstanding amount), plus a second, daily penalty at an annual rate of 10%

It is important to note that HMRC charges interest on day 1 for any unpaid amounts.

If you are using software that is not MTD ITSA-compliant to keep your accounts, you could receive a penalty of up to £400 per return.

If your income is over £50,000, you must be ready by April 2026.  If you are not yet set up with compliant software and a plan, you are at risk of penalties.  Contact me urgently for an MTD setup and support package.