Martin Bruno Accountants

Going self-employed? Here's something many people don't realise…

You don't just pay one tax. You usually pay Income Tax and National Insurance on your profits. Both are included in your Self-Assessment tax bill.

2025/26 rates
Income Tax
• £0–£12,570: 0% (your Personal Allowance)
• £12,571–£50,270: 20%
• £50,271–£125,140: 40%
• Over £125,140: 45%

Class 4 National Insurance
• 6% on profits between £12,570 and £50,270
• 2% on profits above £50,270
Example
A profit of £45,000 gives a tax bill of around £8,432 (£6,486 Income Tax and £1,946 National Insurance), leaving about £36,568 before student loan repayments or other deductions.

💡 Every allowable business expense reduces your taxable profit, so keeping good records can save you tax.

⚠️ If your tax bill is over £1,000, HMRC may ask for Payments on Account. This means your January payment could include both this year's tax bill and an advance payment towards next year's tax.
Setting money aside each month can help avoid an unexpected tax bill.

If you're taking dividends whenever you need cash, there's a good chance you're paying more tax than necessary — and nobody has pointed it out. Here's why.

HMRC Dividend Tax Rates from 6 April 2026 are:
Tax Year Basic Higher Additional
2026-27 10.75% 35.75% 39.35%

Most directors know that dividends are usually more tax-efficient than salary. What many don't realise is that there's a limit to how much you can take before the tax rate jumps. The key number is £50,270.
That threshold includes your salary, dividends, and most other taxable income. So, if you're paying yourself a salary of £12,570, you've only got around £37,700 of the basic-rate band available before higher-rate dividend tax starts to apply. And the difference is significant.

Once you move into the higher-rate band, every additional pound of dividend income is taxed at a much higher rate, 35.75p/39.35p rather than 10.75p. For directors taking substantial dividends, that can add thousands of pounds to an annual tax bill.
The problem is that most business owners don't track their position throughout the year. They take money when they need it. Without visibility of your cumulative income, it's easy to drift into a higher tax band without realising it until your self-assessment return is prepared and its too late.
The good news? The solution isn't complicated. Know your numbers.
Understand how much of your basic-rate band you've already used, how much dividend capacity remains, and what the tax impact will be before you make further withdrawals

🚗 HMRC increases mileage allowance rates for the first time in 15 years

HMRC has announced an increase to the Approved Mileage Allowance Payments (AMAP) rates for the 2026/27 tax year, with the changes backdated to 6 April 2026.

New mileage rates for cars and vans:
• 55p per mile for the first 10,000 business miles (up from 45p)
• 25p per mile thereafter
Other approved rates:
• Motorcycles: 24p per mile
• Bicycles: 20p per mile
• Passenger payments: an additional 5p per passenger per mile
This is the first increase since 2011 and is intended to better reflect the cost of using a personal vehicle for business travel, covering fuel, insurance, servicing, road tax, MOTs and general wear and tear.

💡 If your employer reimburses mileage at less than the approved rate, you may be able to claim tax relief on the difference through Mileage Allowance Relief.

Businesses should review their mileage policies and reimbursement processes to ensure they reflect the new rates.

The countdown is on! The UK tax year-end is fast approaching on 5 April 2026. Now’s the perfect time to review your finances and make smart moves to reduce your tax bill. Need help? We’ve got you covered! Email [email protected]

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Yay that is the last of the Tax Returns submitted 😍January has been a VERY long month!!

Please note that the office will close at 4pm on the 23rd December and reopen at 9am 5th January.
We hope all our clients have a wonderful Christmas & A Happy New Year. 🎄