Tax E-News – January 2026

Welcome to the January 2026 edition of Tax E-News. We hope that you find this informative. Please contact us if you wish to discuss any matters in more detail.

January 2026

MAKING TAX DIGITAL FOR INCOME TAX – AN UPDATE 

Making Tax Digital (MTD) for income tax will be mandated for a large group of self assessment taxpayers from 6 April 2026, with even more individuals being mandated in 2027 and 2028. The following MTD for income tax measures were announced at Budget 2025  […]

Let’s start with some good news! The government has announced that late filing penalties will not be issued in respect of quarterly updates in 2026/27. This easement will not apply to the 2026/27 annual tax return, which must be filed by 31 January 2028. All quarterly updates must be submitted before the annual tax return can be filed. […]

EMPLOYEES’ WORKING FROM HOME EXPENSES

From 6 April 2026, employees will no longer be able to claim a tax deduction from their earnings in respect of expenses incurred while working from home.  Historically, some home-working employees have claimed a flat-rate deduction of £6 per week or the actual costs of working from home, if higher.

The government has said that such relief will be abolished because too many people are claiming the deduction when they are not entitled to it. […]

MANDATORY PAYROLLING OF BENEFITS IN KIND FROM APRIL 2027

From April 2027 it will be mandatory for employers to include most benefits in kind (BiKs) provided to employees in their payroll.

All BiKs will need to be payrolled except employer provided living accommodation and interest free and low interest (beneficial) loans. It will be possible to payroll these two BiKs on a voluntary basis. […]

WHAT IS E-INVOICING?

Over the coming years we will be hearing a lot more about e-invoicing because the government has confirmed that it will be mandated for VAT invoices from 2029.  It believes that growth, administrative benefits and increased revenue can be optimally achieved by the introduction of e-invoicing. 

Electronic invoicing or ‘e-invoicing’ is the digital exchange of invoice data between a buyer and a supplier’s financial systems. An e-invoice is not just a digital photograph or an email attachment – it will require both the supplier and customer to have compatible software so that data in prescribed fields can be transmitted from one to the other. […]

WHY DID THE CHICKEN GO TO THE VAT TRIBUNAL?

In WM Morrison Supermarkets v HMRC, the first tier tribunal (FTT) found that rotisserie chickens were a supply in the course of catering and therefore subject to VAT at 20%.

VAT legislation zero-rates supplies of food, but supplies of catering are excluded from the zero-rating.  ‘Catering’ includes supplies of hot takeaway food but not cold. ‘Hot takeaway food’ is also defined and includes any food that is kept hot after it has been heated, be it on hot plates, under heat lamps or in packaging that retains heat. This is why it is possible to buy a VAT-free hot pie or pasty; if they are neither cooked to order nor kept warm, they can be zero-rated straight out of the oven!  […]

ADVISORY FUEL RATES FOR COMPANY CARS

The table below sets out the HMRC advisory fuel rates from 1 December 2025. These are the suggested reimbursement rates for employees’ private mileage using their company car.

Where the employer does not pay for any fuel for the company car, these are the amounts that can be reimbursed in respect of business journeys without the amount being taxable on the employee. […]

DIARY OF MAIN TAX EVENTS

JANUARY / FEBRUARY 2026