The Accountant Network Ltd

📊 𝐖𝐡𝐚𝐭 𝐭𝐡𝐞 𝐡𝐢𝐤𝐞 𝐢𝐧 𝐭𝐡𝐞 𝐝𝐢𝐯𝐢𝐝𝐞𝐧𝐝 𝐭𝐚𝐱 𝐫𝐚𝐭𝐞 𝐦𝐞𝐚𝐧𝐬 𝐟𝐨𝐫 𝐩𝐞𝐫𝐬𝐨𝐧𝐚𝐥 𝐚𝐧𝐝 𝐟𝐚𝐦𝐢𝐥𝐲 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬

💼 In her tax-raising Budget on 26 November 2025, the Chancellor announced that the dividend ordinary rate and the dividend upper rate are to rise by two percentage points from 6 April 2026. ⬆️

This will affect director/shareholders in personal and family companies who extract profits in the form of dividends.

💷 𝐇𝐨𝐰 𝐝𝐢𝐯𝐢𝐝𝐞𝐧𝐝𝐬 𝐚𝐫𝐞 𝐭𝐚𝐱𝐞𝐝

📌 Dividends have their own tax rates, which are lower than the standard income tax rates.

Dividend income which is not sheltered by the personal allowance or the dividend allowance is treated as the top slice of income.

It is taxed at the dividend ordinary rate where it falls in the basic rate band, at the dividend upper rate where it falls in the higher rate band and at the dividend additional rate where it falls in the additional rate band.

📅 For 2025/26, the dividend ordinary rate is 8.75%, the dividend upper rate is 33.75% and the dividend additional rate is 39.35%.

📈 From 6 April 2026, the dividend ordinary rate rises to 10.75% and the dividend upper rate rises to 35.75%.

There is no change in the dividend additional rate which remains at 39.35%.

✅ All individuals are entitled to a dividend allowance, which is £500 for 2025/26 and remains at this level for 2026/27.

The dividend allowance acts as a nil rate band; dividends sheltered by the allowance are tax-free.

However, it uses up part of the band in which it falls.

⚠️ 𝐈𝐦𝐩𝐚𝐜𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐫𝐢𝐬𝐞

💸 Where profits are extracted as dividends and the shareholder is a basic or higher rate taxpayer, they will pay an additional £20 in tax on every £1,000 of dividends paid in 2026/27 as compared to 2025/26.

A shareholder taking £50,000 of dividends a year will pay an additional £1,000 in tax.

🚫 Additional rate taxpayers are unaffected by the change.

🏃‍♂️ 𝐁𝐞𝐚𝐭𝐢𝐧𝐠 𝐭𝐡𝐞 𝐫𝐢𝐬𝐞

⏳ Where a personal or family company has retained profits, consideration should be given to paying dividends before 6 April 2026 if the tax hit will be lower than if the dividend is paid on or after that date.

However, if dividends have already been paid to use up the basic rate band, there is no point paying a dividend if it would be taxed at the dividend upper rate if paid before 6 April 2026 and at the dividend ordinary rate if paid on or after that date; 10.75% is lower than 33.75%.

👨‍👩‍👧‍👦 In a family company scenario with an alphabet share structure, to minimise the total tax paid on profits extracted as dividends, make sure shareholders’ dividend allowances and basic rate bands are used up before paying dividends taxable at the higher rates.

💡 Consideration could also be given to extracting profits in other ways, such as employer pension contributions or tax-free benefits in kind.

Call now to connect with business.

💼 𝗘𝗺𝗽𝗹𝗼𝘆𝗲𝗲𝘀 𝗮𝗿𝗲 𝗼𝗻𝗰𝗲 𝗮𝗴𝗮𝗶𝗻 𝗮𝗯𝗹𝗲 𝘁𝗼 𝗺𝗮𝗸𝗲 𝗮𝗻 𝗼𝗻𝗹𝗶𝗻𝗲 𝗰𝗹𝗮𝗶𝗺 𝗳𝗼𝗿 𝗿𝗲𝗹𝗶𝗲𝗳 𝗳𝗼𝗿 💷 𝗱𝗲𝗱𝘂𝗰𝘁𝗶𝗯𝗹𝗲 𝗲𝘅𝗽𝗲𝗻𝘀𝗲𝘀 𝘁𝗵𝗮𝘁 𝘁𝗵𝗲𝘆 𝗶𝗻𝗰𝘂𝗿 𝗶𝗻 𝗱𝗼𝗶𝗻𝗴 𝘁𝗵𝗲𝗶𝗿 𝗷𝗼𝗯.🧾🖥️

Employees who incur expenses in undertaking their job may be able to claim tax relief for those expenses where they are not reimbursed by their employer. The expenses will qualify for relief if they are incurred wholly, exclusively and necessarily in the performance of the duties of their employment or meet the deductibility conditions for particular types of expenses, such as travel expenses or professional fees and subscriptions.
Last year, HMRC introduced new evidence requirements for claims for employment expenses. While the new rules were being implemented, they also closed their online expenses claim service for a limited period. During this time employees who wished to submit a claim for relief for employment expenses had to do so by post on form P87.
A new iForm went live in December, meaning employees can once again claim relief for employment expenses online.

🖥️📄 𝗠𝗮𝗸𝗶𝗻𝗴 𝗮𝗻 𝗼𝗻𝗹𝗶𝗻𝗲 𝗰𝗹𝗮𝗶𝗺 💻✅
A claim can be made online using the new iForm by visiting the Gov.uk website at www.gov.uk/tax-relief-for-employees/travel-and-overnight-expenses, but only if the claim amounts to £2,500 or less in a single tax year.
Where the amount claimed is more than £2,500, it must be made in the tax return. Employees who are required to submit a Self Assessment tax return should make the claim in their return, even if it is for £2,500 or less.

📎 𝗘𝘃𝗶𝗱𝗲𝗻𝗰𝗲 𝗿𝗲𝗾𝘂𝗶𝗿𝗲𝗱 📂
Claims for tax relief for employment expenses must now be accompanied by evidence in support of the claim. The evidence that is required will depend on the nature of the claim.
For example, where the claim is for a subscription to a professional body, a receipt or other evidence of the amount paid to that body should be supplied. For mileage allowance claims, a mileage log should be maintained which shows each journey, the postcode for the start and end of the journey and the reason for the journey. The mileage log should be supplied with claims for mileage allowance relief.
Where an employee is required to work from home some or all of the time, a claim can be made for the additional household costs incurred as a result. Where such a claim is made, the claimant will need to submit a copy of their employment contract or such other document as makes it clear that the employee is required to work from home rather than working from home through personal choice.
For other expenses, a receipt or other evidence, such as a bank or credit card statement, must be provided which shows both the item in respect of which relief is claimed and also that the claimant paid for that item.
Evidence is not required for flat rate expenses claims made for uninforms, work clothing and tools.

😡𝐑𝐄𝐀𝐋𝐈𝐒𝐓𝐈𝐂 𝐒𝐂𝐀𝐌 𝐋𝐄𝐓𝐓𝐄𝐑𝐒😡
Scammers are becoming increasingly adept at fooling people and a favoured tactic is a letter, a text or an email purporting to be from HMRC, often promising a tax refund in exchange for personal and financial data.
During the summer, many taxpayers received a very convincing scam letter which appeared to be from HMRC, seemingly from the Individuals and Small Business Compliance scheme. The letter asked the recipient to provide business bank statements, the most recent set of accounts, VAT returns in PDF format for the last four quarters and a clear photo of either a passport or a driving licence for all the directors for ‘identification purposes’, and for them to email the information to [email protected]. The letter warned that if the information was not provided, they would ‘conduct an investigation and possibly freeze any business activity’ until the investigation is complete. The letter had the look and feel of a genuine HMRC letter, adopting a similar format and font.
It is easy to see why people would be duped, and the threat of having their business assets frozen is enough to panic many people into complying.
So, if you receive a letter which appears to be from HMRC, what can you do to check its authenticity?
The first point is to consider what is being asked and why. There are some red flags in the letter. Firstly, the unique taxpayer reference (UTR) quoted is only six digits, whereas a UTR is ten digits. It is always prudent to check that the UTR quoted on a letter is correct. Further, it is sensible to ask why HMRC would ask for copies of the last filed accounts and VAT returns, which are easily available to them. The request to send photos of a passport or driving licence should also be viewed with suspicion. Finally, the email address to which the documents are to be sent is not a genuine HMRC email address, which would end in ‘gov.uk’.
🕵️𝐆𝐄𝐍𝐔𝐈𝐍𝐄 𝐇𝐌𝐑𝐂 𝐂𝐎𝐍𝐓𝐀𝐂𝐓🕵️
HMRC produce regular updates to help taxpayers gauge whether a communication that appears to be from them is indeed genuine. The guidance can be found on the Gov.uk website. Typically it will list recent communications from HMRC, so the taxpayer can check whether the communication they have received is listed. HMRC will contact taxpayers by letter, text and email, and sometimes will use more than one communication channel.
🚨 𝐒𝐓𝐀𝐘 𝐀𝐋𝐄𝐑𝐓 🚨
It is important to be alert to the possibility that a communication which seems to be from HMRC may be a scam. Particular care should be taken as regards clicking on links included in a text or an email. While HMRC may include links to information on the Gov.uk website or to a webchat, other links should be viewed with suspicion – if in doubt, don’t click on the link. HMRC will never send links which offer a tax refund on the provision of personal or financial details, nor will they ask for personal or financial information by text.
👮 𝐑𝐄𝐏𝐎𝐑𝐓𝐈𝐍𝐆 𝐒𝐂𝐀𝐌𝐒 👮
Scam texts can be forwarded to 60599. Suspicious emails, texts, letters and phone calls can also be reported to HMRC by emailing them at [email protected].

🚧𝐈𝐧𝐜𝐨𝐦𝐞 𝐭𝐚𝐱 𝐫𝐚𝐭𝐞𝐬 𝐚𝐧𝐝 𝐚𝐥𝐥𝐨𝐰𝐚𝐧𝐜𝐞𝐬 𝐟𝐨𝐫 𝟐𝟎𝟐𝟒/𝟐𝟓🚧
The 2024/25 tax year starts on 6 April 2024. Although many of the rates and thresholds are the same as for 2023/24, there are some changes.
📊𝗜𝗻𝗰𝗼𝗺𝗲 𝘁𝗮𝘅📊
The income tax rates for 2024/25 for England, Northern Ireland and Wales are set out in the table below.
Rate Band of taxable income
Basic rate 20% £1 to £37,700
Higher rate 40% £37,701 to £125,140
Additional rate 45% Over £125,140

The income tax rates applying to the non-savings non-dividend income of Scottish taxpayers are set by the Scottish Government.
🌀𝐏𝐞𝐫𝐬𝐨𝐧𝐚𝐥 𝐚𝐥𝐥𝐨𝐰𝐚𝐧𝐜𝐞𝐬🌀
The personal allowance for 2024/25 remains at £12,570. Once adjusted net income reaches £100,000, it is reduced by £1 for every £2 by which adjusted net income exceeds £100,000. This means that individuals with adjusted net income of £125,140 and above do not receive a personal allowance.
The marriage allowance, which allows an individual to transfer 10% of their personal allowance (as rounded up to the nearest £10) to their spouse or civil partner as long as neither pays tax at a rate in excess of the basic rate, remains at £1,260 for 2024/25.
The married couple’s allowance, available where at least one spouse or civil partner was born before 6 April 1935, is set at £11,080 for 2024/25. The allowance is reduced where income exceeds £37,000 by £1 for every £2 by which adjusted net income exceeds £37,000 until the minimum amount of the allowance is reached. This is set at £4,280 for 2024/25. Effect is given to the married couple’s allowance in the form of a 10% tax reduction.
🎯𝐃𝐢𝐯𝐢𝐝𝐞𝐧𝐝𝐬🎯
All individuals, regardless of the rate at which they pay tax, are entitled to a dividend allowance. This is set at £500 for 2024/25.
Dividends not sheltered by the dividend allowance or any unused personal allowances are treated as the top slice of income and taxed at the appropriate dividend tax rate. This is the ordinary dividend rate of 8.75% where the dividend falls in the basic rate band, the dividend upper rate of 33.75% where the dividend falls in the higher rate band and at 39.35% where the dividend falls in the additional rate band.
💰𝐒𝐚𝐯𝐢𝐧𝐠𝐬💰
Basic and higher rate taxpayers are entitled to a savings allowance. For 2024/25, this is £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Additional rate taxpayers do not receive a savings allowance.
Savings income falling within the savings starting rate band of £5,000 is taxed at 0%. The starting rate band is reduced by every £1 of taxable income.
📈𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐠𝐚𝐢𝐧𝐬 𝐭𝐚𝐱📈
For 2024/25, the capital gains tax annual exempt amount is £3,000.
Capital gains are taxed at 10% where income and gains do not exceed the basic rate band of £37,700. Where income and gains exceed the basic rate band, capital gains are taxed at 20%. Higher rates apply to gains on residential property. For 2024/25, these are, respectively, 18% and 24%.

👩‍🎓𝐓𝐑𝐀𝐈𝐍𝐈𝐍𝐆 𝐂𝐎𝐒𝐓𝐒 𝐀𝐍𝐃 𝐓𝐇𝐄 𝐒𝐄𝐋𝐅-𝐄𝐌𝐏𝐋𝐎𝐘𝐄𝐃👨‍🎓
A sole trader or proprietor of an unincorporated business may incur training costs. The tax treatment of those costs depends on whether the costs are regarded as ‘revenue’ or ‘capital’ expenditure. HMRC have revised their guidance in this area, expanding the range of training for which a deduction is available.
🛑𝐎𝐥𝐝 𝐫𝐮𝐥𝐞𝐬🛑
Previously, HMRC only treated training costs as revenue expenditure where they updated existing knowledge or expertise. Any training that provided the proprietor with a new skill was deemed to be capital expenditure with the result that the proprietor was unable to deduct the costs in computing their taxable trading profits.
📶𝐍𝐞𝐰 𝐫𝐮𝐥𝐞𝐬📶
HMRC now accept that expenditure incurred by the owner of a business on training courses undertaken by them is revenue expenditure if the course of learning:
• updates existing expertise or knowledge; or
• provides new knowledge or expertise.
This means that costs incurred on training to acquire new skills or knowledge to keep pace with technological advances or changes in industry practice will usually be allowable where they relate to the proprietor’s existing business area. They also accept that courses that are ancillary to the owner’s main business area, for example, an introductory bookkeeping course, may also be classed as revenue expenditure depending on the facts of the case.
Expenditure on training unrelated to the owner’s existing business, such as that which would allow them to branch out into a new area, is unlikely to be allowed as a deduction. This is illustrated by the decision reached by the Special Commissioners in a case in which a taxpayer who traded as an English tutor and as an advisor in bringing appeals before various tribunals was denied a deduction for the cost of resitting examination fees that would have provided him with a diploma in law. The deduction was denied as the course was a ‘bridging course’ to equip him with new skills to allow him to move into new areas of practice which the Special Commissioners found to be capital expenditure.
👨‍⚖️𝐀𝐩𝐩𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧👩‍⚖️
HMRC’s updated guidance contains examples to illustrate when a deduction for training costs would be forthcoming and when it would be denied.
Allowable expenditure would include:
• costs incurred by a wedding photographer on an online refresher course using photo editing software;
• the costs of an introductory bookkeeping course incurred by a plumber to help him run his business better;
• the costs of an e-commerce and website development course incurred by a potter currently selling his pottery on a local stall which will enable him to move his business online;
• costs incurred by a web designer in completing a short course in AI which will provide her with new expertise in an upcoming area of technology related to her business;
• the costs incurred by a gas fitter on training in connection with installing heat pump systems as these skills are likely to be needed to future-proof his business;
• the costs of a nutrition course incurred by a personal trainer as her clients expect her to have a basic understanding of nutrition and this knowledge can be used in developing training plans; and
• the costs of a beginners’ course on drawing illustrations undertaken by an author who writes children’s books she sells online as this will improve the books she creates and save the costs of an illustrator.
⏹ 𝐁𝐲 𝐜𝐨𝐧𝐭𝐫𝐚𝐬𝐭, 𝐭𝐡𝐞 𝐟𝐨𝐥𝐥𝐨𝐰𝐢𝐧𝐠 𝐜𝐨𝐬𝐭𝐬 𝐚𝐫𝐞 𝐥𝐢𝐤𝐞𝐥𝐲 𝐭𝐨 𝐛𝐞 𝐝𝐢𝐬𝐚𝐥𝐥𝐨𝐰𝐞𝐝:
• the costs of a course to become a driving instructor incurred by someone who is unemployed and wishes to become a driving instructor as the costs do not relate to an existing business;
• the costs of a sports science degree incurred by the owner of a sportswear shop selling branded clothing as the knowledge acquired will not specifically help him to sell sportswear;
• the costs of a tattooing course incurred by a freelance make-up artist as they are not related to her existing business; and
• the costs of a painting and decorating course incurred by a taxi driver who wants to move into the painting and decorating business as the course is not related to his current business.

🛒𝐒𝐄𝐋𝐋𝐈𝐍𝐆 𝐎𝐍𝐋𝐈𝐍𝐄 – 𝐖𝐇𝐄𝐍 𝐃𝐎 𝐘𝐎𝐔 𝐍𝐄𝐄𝐃 𝐓𝐎 𝐓𝐄𝐋𝐋 𝐇𝐌𝐑𝐂?🛒
Earlier in the year, it was erroneously reported in the press that new tax rules were coming into force which would mean that anyone selling online would need to tell HMRC and pay tax on their earnings.
There is, however, no change in the tax rules, which apply to online sellers as they do to other traders. However, from 1 January 2024 onwards, digital platforms are now required to collect information on online sellers and their income, and they must report this to HMRC by January 2025. Consequently, online sellers who have previously failed to declare taxable income may now come to HMRC’s attention.
💰𝐓𝐚𝐱𝐚𝐛𝐥𝐞 𝐢𝐧𝐜𝐨𝐦𝐞 𝐚𝐧𝐝 𝐠𝐚𝐢𝐧𝐬💰
Not everyone selling online will need to pay tax or tell HMRC. This is only necessary if the person is trading or makes a capital gain. A person selling some old clothes on Vinted for less than they paid for them does not need to tell HMRC about their income or pay tax on it.
🧑‍💼𝐓𝐫𝐚𝐝𝐢𝐧𝐠🧑‍💼
A person will normally be trading if they sell goods or services for a profit. The normal ‘badges of trade’ apply to determine whether a trade exists.
An online seller who is trading must tell HMRC about their income if their gross trading income is more than £1,000 in the tax year. This limit applies to all income from trading – not just that from online sales.
The £1,000 trading allowance means that if gross trading income is less than £1,000, the income can be enjoyed tax-free and does not need to be reported to HMRC. If gross trading income is more than £1,000, the trader has the option of deducting the trading allowance or their actual expenses. Where actual expenses are less than £1,000, it will be beneficial to deduct the £1,000 trading allowance instead to arrive at the taxable profit.
If the trader has made a loss from selling online, they may wish to report this, even if their gross trading income is below the £1,000 limit. This will allow them to utilise the loss.
Where income from online selling needs to be reported to HMRC, this is done in the Self-Employment pages of the Self Assessment tax return. New online sellers who have not previously filed a return will need to register for Self Assessment no later than 5 October after the end of the tax year in which their trade commenced (so by 5 October 2024 where they started their trade in the 2023/24 tax year).
🏗️𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐠𝐚𝐢𝐧𝐬🏗️
An online seller may also need to tell HMRC if they make a chargeable gain. However, the chattels rules mean that a gain on a single chattel only needs to be declared if the proceeds are more than £6,000 and the chattel is not exempt, as is the case for private cars.

📢𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐳𝐞 𝐘𝐨𝐮𝐫 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐏𝐫𝐨𝐟𝐢𝐭𝐬 𝐢𝐧 𝟐𝟎𝟐𝟑/𝟐𝟒! 📈💼
As we approach the tax year's end, it's time for personal and family businesses to fine-tune their profit extraction strategy. 🧐💰 Our latest article explores tax-efficient options, including salary and bonuses, dividends, pension contributions, benefits in kind, and even the choice to do nothing.

💡 𝐊𝐞𝐲 𝐇𝐢𝐠𝐡𝐥𝐢𝐠𝐡𝐭𝐬:
1. Optimize your tax efficiency with salary and bonuses, considering personal allowances and National Insurance thresholds.
2. Delve into the world of dividends, mindful of dividend allowances and upcoming changes in tax rates.
3. Unlock the potential of tax-efficient pension contributions for a secure financial future.
4. Explore tax-free benefits in kind, utilizing exemptions for treats up to £50.
5. Evaluate the choice to retain profits within your company based on your business needs.

🌐✨ Dive into the details and make informed decisions for a prosperous financial year! 🚀💬 Link to Original Article: https://accountantnetwork.co.uk/news