Welcome to the March 2026 edition of Tax E-News. We hope you find this update helpful. If you would like to discuss any of the topics covered in more detail, please do not hesitate to get in touch with us.

Spring Forecast

During a week largely dominated by news of the conflict in the Middle East, Chancellor Rachel Reeves delivered the Spring Forecast to Parliament on 3 March 2026. Addressing MPs, the Chancellor said the government had “restored economic stability” as she presented the latest economic outlook from the Office for Budget Responsibility (OBR).

The Chancellor focused on the government’s economic growth agenda, particularly in relation to Gross Domestic Product (GDP) per person. However, the OBR’s report paints a more nuanced picture and highlights that the fiscal backdrop for the next Budget is likely to remain challenging.

In line with the government’s commitment to holding just one major fiscal event each year, the Spring Forecast did not introduce any new tax or spending measures. That said, the OBR’s projections provide some early insight into the pressures that may influence future fiscal decisions.

What does the Spring Forecast tell us about tax?

From a tax perspective, the OBR suggests the overall tax burden is set to increase over the remainder of the decade. Taxes as a proportion of GDP are forecast to rise to 38.5% by 2030/31, representing a post-war high.

A significant contributor to this increase is the continued freeze on income tax thresholds, which is now expected to remain in place until April 2031. As wages rise, more individuals will gradually be drawn into higher tax bands, even where their real circumstances have not changed.

The state pension also introduces an interesting complication. From 2027/28, it is expected to exceed the personal allowance. This could bring an estimated 600,000 additional individuals into the tax system in 2026/27 and around 1 million by 2030/31. The government has indicated that it does not intend for pensioners whose only income is the basic or new state pension to pay income tax during this Parliament, although the practical details of how this will work have yet to be confirmed.

The OBR also highlights the impact of the increase in employer National Insurance contributions that came into effect last April. These higher costs may influence hiring decisions at a time when unemployment is forecast to rise to 5.3% in 2026, before falling back to 4.1% by 2030.

Self assessment payments are expected to increase significantly in 2026/27. This is partly linked to the abolition of the non-domiciled tax regime in 2025/26 and the introduction of a temporary repatriation facility. Individuals with overseas income or assets should ensure their tax planning remains under careful review.

Strong performance in UK equity markets in recent months has also led the OBR to forecast increased receipts from capital taxes. If you hold UK equity shares, it may be worth reviewing your portfolio to consider whether crystallising gains, rebalancing holdings, or making use of available allowances could improve your tax position. Any such planning must carefully navigate the ‘bed and breakfasting’ rules (which apply when selling and repurchasing shares), so please do contact us if this situation applies to you.

The overall message from the OBR’s report is clear: effective tax planning is becoming increasingly important. Capital taxes and transactions are likely to remain firmly on the government’s radar. For both individuals and businesses, this means paying closer attention to allowances, considering the timing of income, gains and dividends, and ensuring available reliefs are fully utilised. Reviewing pension contributions, profit extraction strategies, and how assets are structured within a family may also present practical opportunities to manage future tax liabilities.

Making Tax Digital for Income Tax – time is ticking

We continue to support a number of clients as they prepare for Making Tax Digital (MTD) for income tax. This new regime for self-employed individuals and landlords will apply from April 2026 where business and/or property income (total income before expenses) exceeds £50,000 per year.

Under the new system, digital records must be maintained and quarterly updates submitted to HMRC. The first update will be due by 7 August 2026.

Last month, HMRC issued a press release confirming that approximately 860,000 individuals will be affected by these changes. HMRC is encouraging taxpayers to prepare early and highlights the potential benefit of spreading tax compliance activity more evenly across the year.

If you fall within the 860,000 individuals moving into the regime from April 2026, it is important to remember that the normal annual tax return process will still apply for the 2025/26 tax year. This means that while you will submit quarterly updates for the year ending 5 April 2027, your 2025/26 Self Assessment tax return must still be filed by 31 January 2027.

If we are not already assisting you with preparations for this new digital reporting regime, please do get in touch so we can help plan your transition.

Overpayment relief from HMRC

If you have paid too much tax, perhaps due to an error on a tax return or because you believe an HMRC assessment is incorrect, it is generally not possible to claim a refund more than four years after the end of the relevant tax year.

For example, a refund relating to the 2021/22 tax year must be claimed by 5 April 2026.

However, where tax has been overpaid, it may be possible to recover it through a process known as overpayment relief. This involves submitting a formal claim to HMRC and can act as an important safety net. HMRC reviews these claims carefully and a number are rejected if the correct procedures are not followed.

HMRC has recently updated its guidance to help taxpayers make successful claims. An overpayment relief claim must be made in writing and must include:

• A statement confirming the claim is for overpayment relief
• The tax year in which the overpayment occurred
• The reason why too much tax has been paid or assessed
• The amount of tax overpaid or over-assessed
• Confirmation of whether an appeal has previously been made in relation to the same tax (the term “appeal” must be used)

The claim must also include a declaration confirming that the information provided is correct and complete to the best of the claimant’s knowledge and belief. It must be personally signed by the individual making the claim.

Following the correct steps and procedures is essential. If you believe you may have paid too much tax, we would be pleased to assist.

Advisory fuel rates for company cars

HMRC has published updated advisory fuel rates effective from 1 March 2026. These rates represent the recommended reimbursement amounts for employees using company cars for private mileage.

Where the employer does not pay for fuel used in a company car, these are the amounts that can be reimbursed for business journeys without creating a taxable benefit for the employee.

The petrol, diesel and home charging rates remain unchanged this quarter, while the LPG and public electric charging rates have been updated.

The new rates per mile are:

Previous rates are shown in brackets.

*Fully electric cars only. Note that for hybrid cars, you must use the petrol or diesel rate.
You can also continue to use the previous rates until 31 March 2026.
You may continue using the previous rates until 31 March 2026.

Employees using their own cars

Where employees use their own vehicles for business travel, the Advisory Mileage Allowance Payment (AMAP) tax-free rate remains at 45p per mile (plus 5p per passenger) for the first 10,000 business miles in a tax year, reducing to 25p per mile thereafter.

Input VAT

Within the 45p/25p AMAP rates, part of the payment represents the fuel element. Employers can reclaim input VAT on the fuel portion at a rate of 20/120, provided the claim is supported by a VAT receipt from the fuel supplier.

For example, for a 1300cc petrol car, 2p per mile can be reclaimed as input VAT (12p × 20/120).

Employer-provided vehicles and taxable benefits in kind

As we approach the new tax year, it is worth remembering that certain flat-rate figures used to calculate employer-provided vehicle benefits will increase in line with inflation from 6 April 2026:

• The flat-rate van benefit charge will increase from £4,020 to £4,170
• The flat-rate van fuel benefit charge will increase from £769 to £798
• The multiplier used for calculating the car fuel benefit charge will increase from £28,200 to £29,200

Where an employer provides a company car to an employee or director, it will normally give rise to a taxable benefit in kind. The value of the benefit depends on the vehicle’s power source, list price and CO₂ emissions, with reductions available where the vehicle is unavailable for part of the year.

Pool cars owned by an employer and shared by multiple employees will not normally create a taxable benefit. However, strict conditions apply, including minimal private use and the vehicle not normally being taken home overnight by any one employee.

Care must be taken when applying the pool car rules. A recent tax tribunal case demonstrates the potential risks. In MWL International Ltd and Maywal Ltd v HMRC (2026), a company director relied on an informal understanding with HMRC that certain vehicles qualified as pool cars. The arrangement had been in place for over 25 years.

However, during a later PAYE audit, HMRC concluded that the vehicles did not genuinely meet the pool car conditions. As a result, significant National Insurance liabilities arose. The company challenged HMRC’s position, but the Upper Tribunal ruled that HMRC is entitled to apply the correct tax rules, regardless of any previous informal agreement.

The case highlights the importance of ensuring that vehicles genuinely meet the pool car conditions in practice, rather than relying on historic arrangements.

Sourcing labour from third parties? Due diligence required

Finally, a reminder for businesses that obtain workers through third parties such as agencies or umbrella companies.

From 6 April 2026, new rules may make businesses jointly and severally liable for PAYE and National Insurance obligations if the intermediary supplying the workers fails to account for the tax due.

To avoid unexpected liabilities, we strongly recommend reviewing labour supply chains and ensuring the new rules are clearly understood.

 
DIARY OF MAIN TAX EVENTS

MARCH / APRIL 2026

Content accurate as of 04.03.26