Rising fraud – steer clear of scams
Record levels of fraud, now often aided by the use of artificial intelligence (AI) to enhance convincing scams, mean increased vigilance is more important than ever.
AI is bringing many benefits to individuals and businesses but, as its capabilities and accessibility grow, it is not surprising that criminals are exploiting its capabilities. People increasingly deal with their finances online and obtain information from social media, leaving them exposed to fraudsters as well as so-called ‘finfluencers’ – financial influencers – who generally have no professional qualifications.
The fraud prevention service Cifas revealed earlier this year that more than 444,000 cases were recorded to the National Fraud Database in 2025, a record high. Nearly three-quarters were linked to identity fraud and facility (account) takeover through use of stolen or compromised personal details.
AI and other technologies have enabled criminals quickly and easily to create convincing impersonations, fake documents and false identities, often taking in older targets. Fraudsters even tried to dupe customers of Coutts bank, using the fake firm name of Coutts Wealth Management with fake client emails and phone numbers.
‘Finfluencer’ warning
Research by Queen Mary University of London found that financial guidance shared by ‘finfluencers’ on popular social media platforms is generally of low quality. Although people say they verify what they read, many do so only by reading comments on a post rather than consulting reliable websites, let alone professionals. Fewer than 10% of posts from independent content creators stated the creator’s relevant expertise.
Tax avoidance schemes are often attractive because many people perceive that the very wealthy appear to pay very little tax. But subscribers to many such schemes have ended up paying huge tax bills augmented by penalties.
Reputable firms also use social media to promote their legitimate products. Guidance by the Financial Conduct Authority (FCA) states that firms must promote a balanced view of the benefits and risks of any product, and that ‘finfluencers’ who promote a financial product or service without approval of an appropriate FCA-authorised person may be committing a criminal offence.
Earlier this year seven ‘finfluencers’ were fined at Southwark Crown Court for promoting an unauthorised foreign exchange trading scheme on Instagram. They included TV stars from popular shows and their combined Instagram following was 4.5 million.
You can protect yourself by checking online advice on websites of respectable financial organisations and consulting your own accountants or financial advisers before taking any action. Remember: if it looks too good to be true, it almost certainly is.
Focus on close companies and their directors
Small companies and their directors have suffered a number of tax rises and now also face additional onerous reporting requirements both by the company and in individuals’ tax returns.
Since April 2025 companies have had to pay national insurance contributions (NICs) at 15% on all remuneration – salary and bonuses – paid to their directors above £5,000 a year, and on most benefits in kind. Many directors who also own their companies have been able to avoid this charge, and the separate employee’s NICs on remuneration above £12,570 a year, by paying themselves dividends instead.
From 6 April 2026 the basic and higher rates of income tax on dividends went up by two percentage points, to 10.75% basic rate and 35.75% higher rate. The rate payable on dividends falling within an individual’s additional rate band (income over £125,140) remained at 39.35%. The personal allowance and the basic- and higher-rate thresholds have been frozen since 2021/22 and are now set to remain at their current levels until 5 April 2031, a classic example of a stealth tax.
Because of the NIC burden, paying dividends rather than increasing salary is still more efficient for most directors, but the calculation of the best mix of salary and dividends depends on individual circumstances. Pension contributions and whether the company can claim the Employment Allowance to reduce employer NICs – not available to single-director companies – need to be considered.
Loans and dividends
Also increased from 6 April 2026 is the rate of tax charged where a close company makes a loan to a director/shareholder – now 35.75% rather than 33.75% before. A close company is broadly a company controlled by directors who are also shareholders, or by five or fewer shareholders. When the loan is repaid (often by way of a dividend) the company can claim repayment of the tax charge.
In addition, directors who receive income from their company in the form of dividends must now show this income in the employment section of their tax return (although dividends are not actually employment income) and give much more detail than previously. Close company directors must state each company’s name and registration number, the amount of dividends received and the percentage of share capital owned. This is required even if no salary or dividends are received.
Additional reporting on the horizon
It may not stop there. An HMRC consultation document published in March 2026 has proposed even more onerous reporting requirements, to enable HMRC fully to cross-reference company information with directors’ personal tax returns. HMRC believes that some small businesses are not paying the right amount of tax and a significant reason is “error and evasion in transactions that occur between a company and its owners”.
Under the proposed plans, companies would have to provide detailed information about transactions between the company and its shareholders, including cash payments, asset purchases and sales, dividends or other distributions and any other transfer of value from the company to a shareholder. The consultation has now closed and any new rules are likely to be revealed in the autumn Budget.
As discussed in ‘Looking ahead to payrolling benefits’, the phasing in of compulsory payrolling of some benefits in kind from April 2027 will also affect directors themselves. Instead of reporting benefits to directors on a form P11D, the tax and employer’s NICs will be paid monthly through the payroll. HMRC’s original proposal of over 100 new data fields to capture the required level of detail has been significantly scaled back in the phased introduction.
All this adds to the complexity and expense of running a limited company rather than operating as a sole trader. Limited companies still offer many advantages including limited personal liability, potential tax efficiencies and flexibility, and more opportunities for pension contributions. The decision depends on your own circumstances and good professional advice is essential.
Looking ahead to payrolling benefits
Many business owners and farmers have already taken steps to mitigate the HMRC is now taking a phased approach when it comes to the introduction of mandatory payrolling of taxable benefits. Only certain benefits will have to be payrolled from 6 April 2027, with payrolling of most other benefits coming in a year later.
Simplified first phase
Mandatory payrolling from 6 April 2027 will apply to only the most popular benefits provided by employers; these are also generally the least complicated. The first phase will cover the following benefits:
- company cars and fuel;
- company vans and fuel; and
- private medical insurance and other employer-provided medical benefits.
The reporting requirements have also been significantly simplified following concerns around the opportunity for errors, with the number of required data fields reduced by 75%. The original number of over 100 data fields could have easily led to an entire submission being rejected.
Reporting
To transition to payrolling, first you need to identify the cash equivalent of the benefit. For example, the cash equivalent of providing medical insurance for an employee would be the cost of the insurance. This amount is then spread across the number of pay periods. So, if medical insurance costs £960 and an employee is paid monthly, £80 would be included as earnings each month; and be subject to income tax. With payrolling, the taxable value of benefits provided to employees has to be reported via your normal payroll full payment submission (FPS).
Other benefits
All other taxable benefits, with two exceptions, will have to be payrolled from 6 April 2028. The two exceptions are employer-provided accommodation and cheap/interest-free loans, although the intention is that these benefits will also have to be payrolled at some point in the future.
For 2027/28, the P11D process will remain in place for any benefits that are not payrolled either on a mandatory basis or voluntarily. The same for 2028/29 onwards, if an employer provides, but does not payroll, accommodation and/or loans.
Voluntary payrolling
Employers have the option of voluntarily payrolling those employee benefits that have not been mandated for 2027/28 – including accommodation and loans.
- Registration for voluntary payrolling must take place before 6 April 2027, prior to the start of the tax year (as is currently required). HMRC will open registration from November 2026.
- For 2028/29 onwards, it will be possible to voluntarily payroll accommodation and loans.
However, the information required for benefits payrolled voluntarily might be less than when payrolling of those benefits is mandated. The transition from voluntary to mandatory payrolling
Double jeopardy
The move to mandatory payrolling could mean that employees face having tax deducted for two tax years at the same time. With payrolling, tax is deducted in real-time, but an employee might also have tax collected via their tax code on benefits received in the previous year.
It is therefore imperative that employees are made aware of the changes to how their benefits will be taxed going forward. Early communication is the key to employees understanding how the changes might affect their tax code and take-home pay.
Any employee facing financial difficulty because of multiple tax deductions will be able to ask HMRC to spread the underpayment over more than one tax year.
Self-employed pensions gap
Three-quarters of self-employed people are not saving into a private pension, according to a report by the Institute for Fiscal Studies (IFS).
Pension saving is especially low among young workers and people in their first year after moving from employment to self-employment. This compares with four in five employees making regular contributions.
Much of the difference is the result of automatic enrolment of eligible employees by their employers, who also have to contribute to their employees’ pensions. Self-employed people must seek out a suitable scheme and decide how much to put into it – this at a time when they may be putting all their effort, time and financial resources into establishing and building their new business.
Even by the fifth year of self-employment only about 24% of workers aged 30 or under save for a pension. These people will have built up little or no pension pot from any former employment. Among workers aged 31–50, around 38% are paying into a pension scheme in the fifth year of self-employment, still a very low figure.
A report by the second Pensions Commission in 2026 points to the challenges people face, citing “longer retirements, slower growth, and falling home ownership. … Many more will live without the stability that home ownership once offered; and will face higher housing costs than any generation of pensioners before”. More years are likely to be spent in poor health or frailty, making it harder to supplement an inadequate pension by possible part-time work, where available, and potentially giving rise to higher living costs. The value of the State pension is currently protected by the ‘triple lock’ to which the present government has committed until the end of its term in 2029, but for how much longer? Few people will be able to live on the State pension alone, except perhaps very frugally.
Saving enough?
So how much do you need to save? A widely used rule of thumb is to take the age you start saving and divide it by two. Then save that percentage of your income until your retirement. So if you start only at age 35, you should put 17.5% of your income into your pension. Of course personal circumstances such as other savings must be put into the mix, but what is clear is that the later you start a pension plan, the more you will have to put in to achieve a reasonably comfortable lifestyle in retirement.
Pension saving has a great advantage over other forms of saving because of tax relief on contributions. You can usually get tax relief of up to 45% on all your pension contributions up to the £60,000 annual allowance or the amount of your earnings if lower. The annual allowance can be carried forward for up to three years. But it is essential always to take good professional advice on what is best for you and how to achieve your goals.
Employees should also review their pension arrangements. A £2,000 cap on salary sacrifice comes into force in April 2029, meaning that contributions over that amount will not save national insurance contributions. HMRC has estimated that £2.9 million employees are expected to reduce their pension savings.
Graduates paying a high price
Many graduates are finding themselves worse off compared with employees without degrees once their 9% student debt repayment is taken into account, despite earning higher salaries.
Graduates pay back 9% of their income over specific thresholds ranging from £25,000 to £33,795 per year.
- For English and Welsh students who started an undergraduate course under Plan 2 (academic years 2012/13 to 2022/23) the repayment threshold increased to £29,385 in April 2026.
- A person without any student debt and earning, for example, £40,000 will take home £32,320 after taxes.
- A graduate earning £1,000 more, but with a student loan on Plan 2, will only take home £31,995. This is because they will also have to repay £1,045 of their loan.
The disparity is only going to get worse for English graduates, because the Plan 2 repayment threshold of £29,385 will remain frozen for the following three years, that is 2027/28, 2028/29 and 2029/30. Scottish, Welsh and Northern Irish graduates are not affected by this measure.
Interest implications
Graduates repaying Plan 2 student loans can currently be charged interest of up to 6.2% depending on their level of earnings. This means that a typical graduate needs to be earning in excess of £66,000 before repayments make an impact on their student debt and the full amount of debt is eventually repaid. Many graduates will never repay their student loan, meaning – for those on Plan 2 – 30 years of repayments before the loan gets written off.
Self-funding
Wealthier parents with children going to university will want to know whether they should be self-funding their child’s university fees and living costs, rather than taking out a student loan (the 2026/27 cohort will be on Plan 5). However, the decision is far from straightforward given that the normal debt rules do not apply here.
- For example, parents might pay the full cost of university education thereby avoiding any student debt (which is currently averaging around £48,000), but if their child never earns more than the repayment threshold then they will have paid off a debt that would never have been due.
- The problem, of course, is estimating earnings for up to 40 years (the Plan 5 repayment period) into the future.
A compromise strategy might be to take the full student loan, and then for parents to look at paying the loan off early after graduation. They would only do so if it looks like their child is going to have a high-earning career.
Profit and loss reporting returns
The government has confirmed that micro-entities and small companies will have to file profit and loss (P&L) accounts with Companies House from 2028, but can then choose whether these accounts are made public.
The original intention was that changes would come in from April 2027, but, following stakeholder concerns, reform has been put back to April 2028.
Filing requirements
Both micro-entities and small companies will have to file a P&L account, but there will be the option to opt out of publishing this information on the public register.
- Details of the opt out have not yet been published.
- Even if a company opts out of publishing its P&L account, HMRC (as is currently the case) and law enforcement will still have access to help identify fraud and tax evasion.
- Many company owners have been against the change because it will put commercially sensitive information into the public domain, making the opt out option a welcome amendment.
- All companies will have to file their annual accounts using commercial software, which is already the case for HMRC filings. The existing Companies House web and paper-based accounts filing routes are to be closed.
As HMRC already receives a full set of accounts, many may consider the P&L opt out option somewhat academic but still requiring more time and costs. Companies should ensure that the filing software they use can support the Companies House requirements, as they must also continue to fulfil the existing HMRC filing requirement.
Other changes
Some other reforms will also be brought in from April 2028:
- Companies will no longer be able to prepare and file abridged accounts.
- The number of times a company can shorten its accounting reference period will be reduced; there are currently no restrictions on how often this can be done.
Companies House will contact all companies via their registered email address to tell them about the upcoming changes.
Prepare for unfair dismissal reforms
The qualifying period to bring a claim for unfair dismissal will fall from two years to six months from January 2027.
Employees who have completed six months’ service by that date will gain protection immediately. Employers need to start preparing now for this significant reform, and other changes to the unfair dismissal provisions, which will affect employment contracts and matters such as probationary periods.
Existing ‘day one’ protections unchanged
The changes only apply to ‘ordinary’ unfair dismissal. The existing ‘day one’ protections against discrimination and automatically unfair dismissals remain. The qualifying period for employees’ rights to request written reasons for dismissal will also fall to six months and the qualifying period for protection against unfair dismissal for reason of spent convictions will be removed. The cap on compensation awards for unfair dismissal will be removed.
Probation period limit
The change will mean that an employee’s probationary period cannot be extended beyond six months. Therefore it will be essential for employers to have structured probation and performance management processes in place from the outset.
The non-renewal of a fixed-term contract on its expiry counts as a dismissal for unfair dismissal purposes but the change means that contracts of over six months can be subject to scrutiny over fair dismissal. Redundancy may be an option but there are strict rules.
These changes do not apply to Northern Ireland, where unfair dismissal legislation is devolved.
News round up
Prime Minister Burnham takes office
Following Kier Starmer’s resignation in early July, Andy Burnham became Labour leader unopposed and took over as Prime Minister on 20 July. He has stated his primary concern is tackling cost of living concerns, announcing a VAT cut on electricity bills on his second day in power. John Healey has taken over from Rachel Reeves as Chancellor, so we await news on the timing of the next Budget.
Delays at Companies House
Filing deadlines might have been missed due to recent service issues at Companies House, but any penalty issued as a result of a late filing can be appealed. Companies House should now be processing same day transactions as normal.
Advisory fuel rates
With the Middle East conflict continuing to impact oil prices, HMRC’s latest advisory fuel rates see large per mile increases for company car users with petrol or diesel vehicles. Liquified petroleum gas (LPG) rates are also up, but fully electric rates are unchanged.
Changes to voluntary NICs for periods abroad
People going abroad for a fixed time period can no longer pay voluntary class 2 NICs to preserve entitlement to the state pension. New applications to pay voluntary class 3 contributions require ten years of continuous UK residency or at least ten years of paid NICs.