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Scottish Tax Advice for High Earners and the 67.5% Tax Trap

Posted on 14 July 202614 July 2026 by Farazia Gillani

Scottish tax advice for high earners has become more important as Scottish taxpayers earning above £100,000 face one of the highest effective marginal income tax rates in the developed world. The figure is 67.5%. It does not appear in any legislation. It is not an official rate. But it is real; it is unavoidable unless planned around, and it is growing more relevant every year as frozen thresholds drag more earners into its range.

What Is the 67.5% Tax Trap and Where Does It Come From?

The trap is the product of two policies colliding.

The first is a UK-wide rule. The Personal Allowance, currently £12,570, begins to taper once income exceeds £100,000. For every £2 earned above that threshold, £1 of the allowance is withdrawn. By £125,140, the allowance is gone entirely. This taper has long created a 60% effective marginal rate for higher earners in England and Wales because they pay 40% tax on the extra income and 40% on the allowance that disappears.

The second is Scotland-specific. Scotland has its own income tax rates, set by the Scottish Parliament under powers devolved through the Scotland Act 2016. In Scotland, the income between £75,001 and £125,140 falls within the Advanced Rate band, which is taxed at 45%.

The Scottish Government’s own tax-ready reckoners confirm the outcome directly: “Taxpayers earning more than £125,140 do not benefit from the Personal Allowance. These taxpayers face a marginal rate of Income taxation of 67.5% on earnings between £100,000 and £125,140.”

The arithmetic works like this. On each £2 earned in this range, the Scottish taxpayer pays 45% income tax on that £2 and separately loses £1 of Personal Allowance, which is then also taxed at 45%. The result is a combined rate of 67.5% on each additional pound.

Scotland’s Six-Band System in 2026/27

To understand where the trap sits, it helps to see the full rate structure. The Scottish Government confirmed the following bands for 2026/27 at the Scottish Budget on 13 January 2026:

Band	Gross Income Range	Rate
Starter	£12,571 to £16,537	19%
Basic	£16,538 to £29,526	20%
Intermediate	£29,527 to £43,662	21%
Higher	£43,663 to £75,000	42%
Advanced	£75,001 to £125,140	45%
Top	Above £125,140	48%

Source: gov.scot — Scottish Income Tax rates and bands 2026/27

In this Budget, the Higher, Advanced, and Top rate thresholds all remained unchanged. Only the Starter and Basic rate thresholds were raised, by 7.4%.

Two things stand out. Scotland’s Higher Rate begins at £43,663, compared with £50,271 in England. Scottish earners, therefore, enter the 42% band nearly £7,000 earlier. The Advanced Rate of 45% interacts with the Personal Allowance taper to create the 67.5% trap, and it has no equivalent in England’s three-band structure.

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Why Scottish tax advice for high earners matters more now

Three years ago, the trap caught a narrower group of earners. Frozen thresholds have changed that.

The UK government confirmed in the 2025 Autumn Statement that the personal allowance will remain frozen at £12,570 until at least 2030/31, as confirmed by the Scottish Government’s technical factsheet. The higher, advanced, and top-rate thresholds in Scotland will also remain frozen for the current Parliament.

As wages rise with inflation, more workers are crossing £100,000 for the first time. Professionals in medicine, law, and financial services, as well as senior public sector employees and business owners drawing salary and dividends, are increasingly being pulled into the taper range without any change in the value of what they earn in real terms.

The Institute for Fiscal Studies noted that Scotland’s marginal rate structure is “significantly more complex” than the rest of the UK, with seven effective rates once the taper is counted, and that the 67.5% rate in the £100,000 to £125,140 range exceeds England’s equivalent 60% by 7.5 percentage points.

Who Is Caught

The trap affects Scottish residents whose non-savings, non-dividend income falls between £100,000 and £125,140. This category includes:

Employed professionals on salaries in this range
Company directors drawing salary above £100,000
Self-employed individuals whose taxable profits cross the threshold
Earners who receive a bonus that pushes them over £100,000 in a single year
Those with combined income sources — salary, rental income, or self-employment — that together exceed the threshold

It is worth noting that National Insurance and dividend income are reserved matters and do not follow Scottish income tax rates. The trap is specific to non-savings employment and self-employment income.

Scottish income tax planning and adjusted net income

The good news is that the 67.5% rate is avoidable. The mechanism is straightforward.

Tax advice for Scottish taxpayers often starts with adjusted net income, the figure used to calculate the personal allowance taper. This is broadly gross income minus pension contributions and Gift Aid donations. If adjusted net income can be brought below £100,000, the full personal allowance is restored, and the 67.5% rate does not apply.

Pension contributions are the most commonly used tool for achieving this. Contributing enough to bring adjusted net income to £100,000 avoids the taper entirely. For a Scottish taxpayer at £110,000, a £10,000 pension contribution achieves this goal. Because the contribution attracts 45% tax relief and restores the personal allowance, the effective rate of relief for a Scottish advanced rate taxpayer in this band is the 67.5% rate itself.

Salary sacrifice is more efficient still. Contributions made through a salary sacrifice arrangement reduce gross pay before tax and National Insurance are calculated. This means both income tax and National Insurance are saved, rather than income tax alone. The employer will typically also save on employer National Insurance, and some employers pass this saving back into the employee’s pension.

Carry-forward allows unused pension annual allowances from the three previous tax years to be used in the current year. This option can be valuable for an earner who has received an unusually large bonus or has seen income spike above £100,000 for the first time.

Gift Aid donations also reduce adjusted net income. A qualifying donation of £10,000 under Gift Aid has the same effect as a pension contribution of the same amount in reducing the taper exposure.

The current pension Annual Allowance is £60,000 for most taxpayers in 2026/27, as confirmed by HMRC’s pension scheme rates guidance. High earners with adjusted income above £260,000 face a tapered reduction in their allowance, which is relevant for those looking to use huge contributions to navigate the taper.

What Happens If Nothing Is Done

For an earner with no planning who moves from £99,999 to £125,140 of income, the effective rate on that entire additional slice is 67.5%. A pay rise of £25,141 yields just £8,171 in additional take-home pay. The remaining £16,970 goes to HMRC.

This is not an avoidance scheme. It is the intended consequence of the Personal Allowance taper combined with Scotland’s Advanced Rate. Planning to reduce adjusted net income below £100,000 is lawful, HMRC-acknowledged, and widely recommended by professional bodies.

How tax advice from Apex Accountants for Scottish taxpayers can help

The 67.5% trap often creates demand for Scottish tax advice for high earners among people who are unaware of it until they receive their tax bill. It also catches earners who believe they have planned around it but have miscalculated their adjusted net income.

Apex Accountants & Tax Advisors works with Scottish residents, professionals, and business owners to:

Calculate adjusted net income accurately, including all relevant income sources and deductions
Model pension contribution strategies to bring income below £100,000 efficiently
Advise on salary sacrifice arrangements, including the interaction with employer National Insurance
Review carry-forward positions from previous years to identify additional headroom
Assess the impact of bonuses or one-off income events and plan for them in advance
Structure dividend and salary remuneration for Scottish company directors to minimise exposure to the taper
Advise on Gift Aid and other legitimate deductions that reduce adjusted net income

Scottish income tax planning is most effective earlier in the tax year, when more options are available. If you review your position after the year has ended, you will limit what you can do.

Contact Apex Accountants today for tax advice for Scottish taxpayers and a review of your Scottish income tax position. Book a free consultation with one of our specialist tax advisers.

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Frequently Asked Questions

What is the 67.5% tax trap in Scotland?

It is the effective marginal income tax rate that applies to Scottish taxpayers earning between £100,000 and £125,140. It arises from the combination of Scotland’s 45% Advanced Rate of income tax and the UK-wide Personal Allowance taper, which withdraws £1 of the £12,570 allowance for every £2 earned above £100,000. The Scottish Government’s own ready reckoners confirm this rate. See gov.scot: Scottish Budget 2026/27 Tax Ready Reckoners.

Does the 67.5% rate apply if I earn dividends or savings income above £100,000?

No. The Scottish income tax rates apply only to non-savings, non-dividend income such as employment income, self-employment profits, and rental income. Dividend income and savings interest are taxed at UK-wide rates regardless of where you live. However, dividend income does count toward your adjusted net income, which determines whether the Personal Allowance taper applies. See GOV.UK: Scottish Income Tax.

How do pension contributions help avoid the tax trap?

Pension contributions reduce your adjusted net income, which is the figure HMRC uses to calculate the Personal Allowance taper. If a contribution brings your adjusted net income below £100,000, your full personal allowance of £12,570 is restored. The effective tax relief on contributions made within the taper range is 67.5% for Scottish Advanced Rate taxpayers, because the contribution both avoids the 45% charge and restores the tax-free allowance.

What is the pension annual allowance in 2026/27?

The standard annual allowance for most taxpayers is £60,000 for 2026/27, or 100% of earnings if lower. This figure covers contributions from all sources, including employer contributions. High earners with threshold income above £200,000 and adjusted income above £260,000 face a tapered reduction in their allowance. Unused allowance from the three previous tax years can be carried forward. See HMRC: Pension Scheme Rates.

Does the trap affect Scottish taxpayers who work in England?

Yes. Scottish taxpayer status is determined by where you live, not where you work. If your main residence is in Scotland, you pay Scottish income tax rates regardless of where your employer is based or where you work each day. Your employer should apply an S-prefix tax code to your PAYE.

Were there any changes to the £100,000 threshold in the 2026/27 Scottish Budget?

No. The Scottish Government confirmed at the Scottish Budget on 13 January 2026 that the higher, advanced, and top-rate thresholds would remain unchanged. Only the starter and basic rate thresholds increased. The UK government, not the Scottish Parliament, sets the £100,000 personal allowance taper threshold, which remains frozen.

VAT on Online Marketplace Sales: What UK Sellers Need to Know About the New HMRC Consultation

Posted on 13 July 202613 July 2026 by Farazia Gillani

UK-based sellers trading on Amazon, eBay, Etsy and similar platforms could soon find themselves subject to a very different VAT system. A new joint consultation from HM Treasury and HMRC is looking at whether online marketplaces should become liable for VAT on domestic seller sales, not just on sales made by overseas traders.

If this goes ahead, it would be one of the biggest shifts in UK marketplace VAT since the 2021 reforms. Here’s what’s actually being proposed, who it affects, and what sellers should be doing about it now.

What Is the Online Marketplace VAT Liability Consultation?

The consultation, titled Extending VAT Online Marketplace Liability to Combat Non-Compliance, opened on 23 June 2026 and runs for eight weeks, closing at 11:59pm on 18 August 2026. It’s a joint project between HMRC and HM Treasury, and it sits within a wider package of 40 tax measures announced by the Exchequer Secretary to the Treasury on the same date.

At its core, the proposal would extend online marketplace VAT liability rules beyond overseas sellers and low-value imports, making platforms responsible for accounting for VAT on certain sales made by UK-established businesses too.

No implementation date has been set. If the government decides to proceed, a further technical consultation on draft legislation would follow before anything becomes law.

Why Is the Government Doing This?

The short answer: money and fairness.

HMRC estimates that tens of thousands of UK-based businesses trading through online marketplaces aren’t meeting their VAT obligations, with the resulting non-compliance running into the hundreds of millions of pounds each year.

The concern isn’t really about VAT rates or new taxes. It’s about levelling the playing field. Sellers who dodge VAT can undercut competitors who charge it correctly, whether those competitors trade online or from a high street shop. The government has said any additional revenue raised would be channelled back into support for high street businesses through changes to the business rates system.

This builds on the 2021 reforms, which made marketplaces liable for VAT on:

sales by overseas sellers with goods already in the UK at the point of sale
low-value imports of £135 or less, where the goods are outside the UK when sold

Those changes worked well for overseas non-compliance. What they didn’t fix was VAT leakage among UK-based sellers, and that’s the gap this new consultation is trying to close.

Read: The Complete Tax Guide for Online Sellers in the UK – Amazon, Vinted, eBay, and Etsy

How Does Marketplace VAT Work Right Now?

Before looking at what might change, it helps to understand the current rules.

Scenario	Who accounts for VAT today
Overseas seller, goods already in the UK at sale	The marketplace
Goods outside the UK, consignment value £135 or less	The marketplace
Goods outside the UK, consignment value over £135	Normal import VAT and customs rules apply
UK-established seller, goods in the UK at sale	The seller
Sale to a UK VAT-registered business customer with a valid VAT number	The business customer accounts for VAT in the relevant low-value import scenario

A platform only counts as an “online marketplace” for VAT purposes if it does all three of the following:

sets the terms of sale
processes or enables payment
is involved in ordering, delivery, or facilitating delivery

Platforms that simply run adverts, process payments only, or redirect buyers elsewhere aren’t caught by these rules.

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What Would Actually Change for UK Sellers?

This is the part that matters most to domestic sellers. Under the proposal, marketplaces would become liable for VAT on business-to-consumer sales made by UK-established sellers, where the goods are already in the UK at the point of sale.

Technically, this would work through a deemed supply structure: the seller would make a zero-rated supply to the marketplace, and the marketplace would then charge VAT to the end customer and account for it on its own VAT return.

A few things the proposal makes clear:

It’s aimed at B2C sales only — business-to-business transactions are out of scope.
It would not change VAT rates on any goods. Zero-rated items stay zero-rated.
Sales through a seller’s own website or physical shop would be unaffected — the seller would keep accounting for VAT on those as normal.
Input tax recovery would continue under the usual rules.

For information on the trading allowance, do read: How to Use the £1,000 Trading Allowance When Selling on Vinted, eBay & Other Platforms

Who Would Be Protected? The Threshold Question

HMRC faces one of the trickiest challenges in this proposal: preventing the rules from affecting small sellers who do not need to register for VAT. HMRC is consulting on two main options:

Option 1: A Minimum Platform Threshold

A marketplace would only become liable for a seller’s VAT once that seller’s sales on that specific platform pass a set value. The lead suggestion is £90,000 — the same as the standard UK VAT registration threshold — though a lower figure is also being considered, since £90,000 per platform could still leave gaps for sellers who spread sales across several marketplaces.

Option 2: A VAT rate relief

Instead of a threshold, smaller UK businesses below the VAT registration threshold could get some form of rate relief on their marketplace sales.

Neither option is confirmed. The consultation is genuinely asking for input on which approach works better in practice, and it’s a question sellers close to the threshold should watch closely.

It’s also worth being clear about what stays the same: the standard UK VAT registration threshold remains more than £90,000 of taxable turnover across all sales channels combined. A platform-specific threshold, if introduced, wouldn’t replace that underlying obligation.

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Who’s Excluded From the Proposed Rules?

Private and casual sellers: Individuals selling personal possessions, not operating as a business, aren’t intended to be caught by any of this.
Second-hand goods sellers — possibly: This one is still unresolved. UK businesses using the Second-hand Margin Scheme calculate VAT on the margin between purchase and sale price, which doesn’t fit neatly into a marketplace deemed-supply model. HMRC is weighing up whether to exclude second-hand sales entirely or find another way to handle them.

Takeaway and Food Delivery Platforms Are Explicitly in Scope

This isn’t just an e-commerce goods story. The consultation specifically names takeaway food delivery platforms, restaurants, fast food kitchens and takeaway outlets as relevant businesses.

For platforms that only operate within the UK and haven’t previously had to deal with the overseas-seller marketplace rules, this could be a much bigger operational shift than for the likes of Amazon or eBay, which already run complex VAT logic for international sellers.

What About the Flat Rate Scheme?

The consultation directly asks about the impact on businesses using the VAT Flat Rate Scheme. If marketplace sales move to a deemed-supply model where the platform accounts for VAT, sellers on the Flat Rate Scheme could effectively lose the ability to apply their flat rate percentage to that portion of turnover.

Businesses using the Flat Rate Scheme with a significant share of marketplace sales should review the impact early, as this remains an open issue rather than a confirmed rule.

A detailed tax guide for eBay sellers: eBay HMRC UK Tax Rules Every Seller Should Know

What Should Sellers and Their Accountants Do Now?

There’s no new law yet — this is still a consultation, and the response period runs until 18 August 2026. But that’s exactly why now is the sensible time to check exposure, rather than waiting for the outcome.

A practical short-term checklist:

List every marketplace the business sells through
Break down turnover by platform, not just as a single total
Separate B2C sales from B2B sales
Check how close turnover is to the £90,000 VAT threshold
Review whether the business uses the Flat Rate Scheme
Flag any second-hand goods activity
Note which sales come through the business’s own website, since these stay outside the marketplace model
Prepare for more marketplace onboarding checks and data requests going forward

Review Area	Why It Matters
VAT registration status	Both the standard threshold and the proposed platform threshold sit at £90,000
Marketplace turnover by platform	The lead proposal is based on sales per platform, not combined turnover
Sales channel split	Website and shop sales stay under the current model; marketplace sales could shift
B2C vs B2B split	Only B2C marketplace sales are in scope of the proposal
Second-hand goods	Treatment is still undecided because of the Margin Scheme
Flat Rate Scheme use	Directly flagged as an area HMRC wants evidence on

How We Help You Deal With the VAT on Online Marketplace Sales and the Proposed Changes

At Apex Accountants, we work with online sellers, e-commerce businesses and marketplace traders across Amazon, eBay, Etsy and food delivery platforms to keep their VAT position under control — including ahead of policy changes like this one.

Our support covers:

VAT registration reviews for e-commerce and marketplace sellers
Turnover analysis broken down by platform and sales channel
B2C and B2B VAT mapping for mixed-channel businesses
Flat Rate Scheme impact reviews
Second-hand goods and Margin Scheme reviews
Marketplace VAT compliance checks for Amazon, eBay, Etsy and similar platforms
Support with preparing and submitting responses to the HMRC consultation

If you sell through an online marketplace, the sensible move isn’t to wait for the final rules — it’s to understand exactly where your VAT exposure sits today.

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Conclusion

This is still a consultation, not a finished piece of legislation, and the final shape of any changes won’t be clear until after 18 August 2026. But the direction of travel is unmistakable: HMRC wants marketplaces to take on more VAT responsibility for UK-based sellers, not just overseas ones and low-value imports.

VAT-registered sellers may find that platforms, rather than sellers themselves, account for VAT on marketplace sales. Smaller sellers need to assess whether the final rules introduce a suitable threshold or relief. Sellers can strengthen their position by reviewing VAT registration status, platform-by-platform turnover, sales channel mix and Flat Rate Scheme use before the rules take effect.

Common Questions From UK Marketplace Sellers

Will this affect my Amazon, eBay or Etsy account?

Potentially, yes. The proposal applies to qualifying online marketplaces that facilitate B2C goods sales. It is not limited to specific platforms and could affect sellers using major marketplace channels.

Does this affect sales through my own website?

No. The proposal currently focuses on marketplace sales only. VAT obligations for sales made through your own website, physical shop or direct channels would continue under existing rules.

What if my turnover is under £90,000?

This remains an important area under consultation. Possible protections include a Minimum Platform Threshold or VAT rate relief, but the final approach has not been confirmed.

Will marketplaces ask for more information from sellers?

Yes, sellers may need to provide more details. Platforms could review business location, marketplace turnover, seller status, and whether goods are new or second-hand.

Are business-to-business sales included?

No. The proposed changes focus on business-to-consumer sales of goods. B2B transactions are outside the main scope of the proposed marketplace VAT liability rules.

A Complete Guide on Hair and Beauty Tax Rules in the UK

Posted on 10 July 202621 September 2026 by Farazia Gillani

Hair and beauty businesses often use flexible working models. A salon may have employees, chair renters, mobile stylists, freelance beauty therapists, and room renters working under one roof.

That flexibility can work well, but it also creates tax risk.

The key issue is not just what a contract says. The real working arrangement matters too. As per the hair and beauty tax rules, workers in this industry are either employed or self-employed, and that status affects income tax, national insurance, and VAT responsibilities.

For salon owners, barbers, nail technicians, beauty therapists, and chair renters, this is now a good time to review contracts, payment flows, client ownership, and VAT treatment.

At Apex Accountants, we help hair and beauty businesses get these areas right before small issues become expensive problems.

What is the new tax guidance for hair and beauty services?

The latest focus is on how people actually work in salons, barbershops, and beauty studios.

There is no special new tax rate for hair and beauty services. The real change is clearer guidance on employment status and VAT treatment.

This matters because the wrong setup can affect the following:

Area	Why it matters
Employment status	It affects who pays Income Tax and National Insurance.
Chair rental	It can create VATable income for the salon.
Client payments	It affects who reports sales and VAT.
Self-Assessment	Freelancers may need to file tax returns.
Making Tax Digital	Some sole traders now need digital records.

The main lesson is simple. A business model must match daily working practice.

HMRC employment status guidance for the hair and beauty industry – employment or self-employed

Employment status is one of the biggest tax issues in hair and beauty.

A person may be called ‘freelance’, ‘self-employed’ or a ‘chair renter.’ That label is not enough. The actual working pattern must support it.

The contract and the daily setup both matter.

Working point	More like employed	More like self-employed
Hours	Salon sets hours	Worker chooses hours
Days worked	Salon decides	Worker decides
Clients	Salon provides clients	Worker finds own clients
Products	Salon provides products	Worker buys or chooses products
Tasks	Salon controls duties	Worker manages own work
Pay	Fixed wage or rate	Worker sets own prices
Time off	Salon controls leave	Worker chooses leave

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When a worker is likely to be employed

A worker is more likely to be employed if the salon controls their working day.

This may include:

setting start and finish times
deciding which days they work
booking clients for them
setting prices
providing products
assigning tasks
monitoring performance
paying a fixed hourly rate or salary

Employees have income tax and national insurance deducted through PAYE. Apprentices in salons will normally fall into this employed category.

When a worker is likely to be self-employed

A worker is more likely to be self-employed if they run their work like their own business.

This may include:

choosing when and where they work
finding their own clients
keeping their own client records
buying products and equipment
setting their own prices
taking payments from clients
paying rent or commission to the salon
working at more than one salon
only earning money when they have appointments

Chair renters, mobile stylists, and beauty therapists who visit clients at home can fall into this category, but only where the facts support it.

Mixed work is common

Some people work in more than one way.

For example, a stylist may be employed by a salon during the week and also have private clients outside those hours. In that case, they may have employment income and self-employed income.

This means the tax treatment may be split.

The PAYE income is handled by the employer. The private client income may need to be reported through self-assessment.

Why getting employment status wrong is risky

Wrong status can lead to unpaid tax, National Insurance, interest, and penalties.

The risk is higher where a salon treats someone as self-employed but still controls their work like an employee.

Salon owners should review:

contracts
rotas
pricing control
client ownership
product supply
booking systems
payment handling
rent or commission agreements

The aim of the HMRC employment status guidance for the hair and beauty industry is to make the paperwork match the business model.

VAT rules for chair rental

Chair rental is one of the most important VAT areas for salons.

Where a salon rents chair space to self-employed stylists, the supply to those stylists is subject to VAT. This rule can apply even if the stylist has a licence to occupy the chair space.

This is because chair rental often includes more than space. It may include access to washbasins, reception areas, waiting areas, and other salon facilities.

A VAT-registered salon must treat this income correctly on its VAT return.

Read: Zero-Rated VAT on Hair Loss Treatments: Mark Glenn Ltd v HMRC Explained

Who accounts for VAT on client takings

VAT treatment depends on who supplies the service to the client.

Business model	VAT treatment
Stylists are employees	The salon supplies the service and accounts for VAT on gross takings.
Self-employed stylists supply services to the salon	The salon accounts for VAT on gross takings. The stylist may also have VAT duties if registered or required to register.
Stylists supply services direct to their own clients	VAT depends on the stylist’s own takings and VAT position. Payments passed to the salon are payment for the salon’s own supplies, such as chair rent.

This is why the payment flow matters. The answer changes depending on whether the client belongs to the salon or the self-employed worker.

Signs that a stylist supplies clients directly

A self-employed model is stronger when the stylist is genuinely trading on their own account.

Useful indicators include:

Stylists keep their own books and records
they set their own prices
they have their own clients
client pays the stylist
stylist handles complaints
the stylist controls bookings
stylist carries business risk
salon charges rent or commission
the written agreement reflects the real setup

If the salon controls the client relationship, prices, and payments, the tax position may be different.

VAT registration for salons and beauty businesses

A beauty and hair business must register for VAT if taxable turnover goes over £90,000 in the last 12 months.

Registration is also needed if taxable turnover is expected to go over £90,000 in the next 30 days.

For salons and beauty businesses, taxable turnover may include:

hair services
beauty treatments
nail services
barbering
product sales
chair rental income
room rental income
commission from self-employed workers

A business can also register voluntarily if turnover is below £90,000. Once registered, VAT must be charged on taxable supplies from the date of registration.

Also Read: Do Hairdressers Charge VAT in the UK?

Flat Rate Scheme for Hair and Beauty

Some smaller VAT-registered businesses may use the Flat Rate Scheme.

For hairdressing or other beauty treatment services, the flat rate percentage is 13%. A business may pay 16.5% if it is classed as a limited-cost business. This scheme can be useful, but it is not always the best choice.

Before using it, salon owners should check:

expected turnover
product costs
equipment costs
VAT on purchases
chair rental income
whether the limited cost business rule applies

A quick VAT review can help avoid choosing a scheme that costs more than expected.

Self-Assessment for freelancers

Self-employed stylists, barbers, nail technicians, and beauty therapists may need to file a tax return.

A sole trader must usually send a self-assessment tax return if they earn more than £1,000 before deducting expenses. Untaxed tips and commission can also create a filing requirement.

Self-employed workers should keep records of:

client payments
chair rent
room rent
stock and product costs
equipment costs
travel costs
training costs
insurance
phone and booking software costs
business bank transactions

Tax is paid on profit, not sales. Good records help show the real profit figure.

Tips in hair and beauty

Tips need careful handling. Income tax applies to tips. Whether National Insurance applies depends on how the tips are paid and managed.

Tip type	Tax treatment
Direct tip kept by the worker	The worker must report it. Income Tax applies. National Insurance is not usually due.
Tip paid through the employer	Tax is deducted through wages. National Insurance may apply depending on the setup.
Tips paid through a tronc	Tax is handled through the Tronc system. National Insurance depends on employer involvement.
Compulsory service charge	Treated like wages if paid to the worker.

Cash tips should not be ignored. They still form part of taxable income.

Under the Employment (Allocation of Tips) Act 2023, which took effect on 1 October 2024, employers must allocate qualifying tips, gratuities and service charges fairly and transparently between workers and may not make any deductions from them except those required or permitted by law (for example, income tax). Workers can request access to the employer’s written tipping policy and to their own tipping records, and employers must keep those records for three years and respond within four weeks.

For tax, HMRC’s guidance (Booklet E24) explains that cash tips paid directly by a customer to a worker belong to that worker and are taxable on them, but no PAYE or NICs are due via the employer.

Tips distributed via a genuinely independent tronc are subject to PAYE by the troncmaster but normally have no NICs, whereas tips received and paid out by the employer are treated as earnings subject to both PAYE and employee and employer NICs. In all cases, tips are taxable income to the worker who ultimately receives them.

Making Tax Digital for Income Tax

Making Tax Digital for Income Tax now affects some sole traders.

It applies in stages based on qualifying income from self-employment and property:

Qualifying income	Start date
Over £50,000 in 2024 to 2025	6 April 2026
Over £30,000 in 2025 to 2026	6 April 2027
Over £20,000 in 2026 to 2027	6 April 2028

This can affect freelance stylists, mobile beauty therapists, nail technicians, and barbers who trade as sole traders.

Those in scope need compatible software and digital records.

This is important because many hair and beauty businesses still use notebooks, spreadsheets, or booking apps that are not linked to tax records.

Business rates for salon premises

Physical salons in England may also need to review business rates.

Retail, hospitality, and leisure relief can no longer be newly claimed. From 1 April 2026, business rates are calculated using rate multipliers.

Hair and beauty salons are listed among service businesses that can fall within the retail, hospitality, and leisure multiplier rules, where the property meets the conditions.

This can affect:

hair salons
nail bars
beauty salons
tanning shops
salons offering non-surgical cosmetic procedures
piercing salons

This applies to England only.

Common mistakes to avoid

Hair and beauty businesses should avoid these errors:

treating all freelancers as self-employed without checking the facts
using chair rental agreements that do not match daily practice
missing VAT on chair or room rental
counting only profit when checking VAT registration
ignoring cash tips
mixing personal and business payments
failing to keep client payment records
waiting too long to prepare for Making Tax Digital
assuming a contract is enough on its own

Good tax compliance in this sector starts with clear records and a working model that makes sense.

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How We Help Businesses Stay Compliant with HMRC’s New Tax Guidance for Hair and Beauty Services

At Apex Accountants, we support hair and beauty businesses with practical tax and accounting advice.

Our services include:

employment status reviews for salons and barbershops
chair rental and room rental tax checks
VAT registration advice
VAT return support
Self-assessment for stylists and beauty therapists
bookkeeping for salons and freelancers
payroll for salon employees
Making Tax Digital setup
year-end accounts
business structure advice

We help salon owners and freelancers build a tax setup that reflects how they actually work.

Conclusion

Hair and beauty tax rules are not just about filing returns on time. The real risk sits in the business model.

Salon owners need to know whether workers are employed or self-employed. They also need to check VAT on chair rental, client takings, tips, self-assessment, and digital reporting.

Freelancers need to know when to register, what records to keep, and how their income should be reported.

Apex Accountants can help hair and beauty businesses review their contracts, VAT position, payment flows, and tax records so the business stays compliant and is easier to manage.

Frequently Asked Questions About Hair and Beauty Tax Rules

Am I self-employed if I rent a chair?

Renting a chair does not automatically make you self-employed for UK tax purposes. Your status depends on whether you control clients, prices, hours, bookings, and payments and operate independently. HMRC’s CEST tool and hair-and-beauty guidance should be used to confirm status.

Does chair rental include VAT?

If the salon is VAT-registered, chair rental to self-employed stylists is normally standard-rated for VAT, especially when facilities like reception, washing, or bookings are included. Pure land/property rent can be exempt, but most salon “chair rentals” are included as taxable.

Do beauty therapists need to register for VAT?

Beauty therapists must register for UK VAT if their taxable turnover exceeds £90,000 in any rolling 12-month period or if they expect to exceed it. Voluntary registration is allowed below the threshold and may help a month-long period reclaim input VAT on business costs.

Do mobile hairdressers need a tax return?

Self-employed mobile hairdressers must file a self-assessment tax return if their gross trading income exceeds £1,000 in a tax year, after using the £1,000 trading allowance. Below this, no return is needed unless they have other reportable income or gains.

Are tips taxable?

All tips and gratuities are subject to UK Income Tax. How they are reported depends on whether customers pay you directly or via the salon; National Insurance may also be due where the employer allocates or manages the tips under PAYE or a tronc.

Does Making Tax Digital apply to beauticians?

MTD for Income Tax applies to self-employed beauticians with qualifying business or property income over £50,000 from April 2026, with the threshold falling to £30,000 in 2027 and £20,000 in 2028. They must use compatible software and send quarterly updates to HMRC.

Do hairdressers pay tax on tips?

Yes — tips are taxable income for whoever ends up receiving them, whether they come in cash, by card or through a tronc. Cash tips handed straight to a stylist are declared by the stylist on their Self Assessment or through payroll, while tips distributed through a tronc are taxed through PAYE when the troncmaster allocates them. Since October 2024, employers must also allocate tips fairly and keep tipping records that workers can ask to see.

What can a hairdresser claim on tax?

Self‑employed hairdressers can deduct the ordinary costs of the trade so long as they are incurred wholly for the business: scissors, clippers, electricals and other tools, products and colours, insurance, chair rent, continuing professional development, laundry of towels and gowns, business use of a mobile phone, and travel between salons or to clients — but not ordinary commuting. If you work from home, you can claim a reasonable proportion of utilities or use HMRC’s simplified working‑from‑home rates; alternatively, if your costs are small, you may use the £1,000 trading allowance instead of itemising actual expenses.

When does Making Tax Digital apply to salon owners?

Making Tax Digital for Income Tax starts on 6 April 2026 for sole traders and landlords with qualifying annual income over £50,000 (based on the 2024/25 tax year), followed by a threshold of over £30,000 from 6 April 2027 (based on 2025/26). Affected salon owners must keep digital records and send quarterly income and expense updates through MTD‑compatible software, alongside an end‑of‑period statement, instead of only filing one annual Self Assessment return. Limited companies and employers are unaffected — MTD for VAT already applies to VAT‑registered businesses.

UK Supreme Court Confirms Income Tax on Deferred Trader Profits

Posted on 10 July 202610 July 2026 by Farazia Gillani

A landmark ruling by the UK Supreme Court in June 2026 has ended a long-running tax dispute involving Alex Gerko and other members of a forex trading partnership. The Court found that profits held back by a corporate member and later paid out to traders were taxable income, despite the elaborate deferral scheme. In essence, the scheme could not escape income tax on deferred trader profits through clever structuring.

High-Profile Trader Tax Appeal Outcome and What It Means

Partnership structure:

HFFX LLP was a foreign exchange trading partnership with both individual and corporate members. An internal Capital Allocation Plan (CAP) allowed part of each trader’s bonus to be paid to the corporate member (GSAM) instead. GSAM invested the funds and later returned proceeds as “Special Capital” to the traders.

Intended tax result:

The arrangement aimed to have GSAM pay corporation tax on the retained amounts and to make the eventual payments to individuals appear as non-taxable capital, avoiding income tax. The traders argued they only received capital, not income.

HMRC’s challenge:

HMRC argued the deferred amounts were still income and should be taxed. It raised two legal claims:

HMRC said the partnership’s profit-sharing rules meant these amounts were effectively the individual partners’ profit shares and should be taxed in the year earned.

Section 687 ITTOIA (miscellaneous income):

Alternatively, HMRC said the payments were income “not otherwise charged” and thus still taxable when actually paid.

The Supreme Court unanimously dismissed both appeals, siding with HMRC on the core points. Its reasoning, explained below, clarifies how deferred bonuses are taxed in the UK.

Read: ‘Widespread Non-Compliance’: Three-Quarters of Landlords and Sole Traders Miss Deadlines for Making Tax Digital for Income Tax

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How Deferred Bonuses are Taxed in UK

Section 850 of the Income Tax (Trading and Other Income) Act 2005 requires that a partner’s share of a firm’s profits be determined “in accordance with the firm’s profit-sharing arrangements” in each accounting period. The key is legal entitlement during that period.

The court held that for s850 to apply, the partners must have a contractual right during the period to receive a specific share of profit. In this case, the “indicative allocation letters” to traders did not give any enforceable right to payment in that period. The actual payments occurred later and were at GSAM’s discretion. Therefore, the deferred amounts were not regarded as partners’ profit shares under s850.

“Profits are translated into income only to the extent a partner had a contractual right in that period to share in those profits… The amounts in the indicative allocation letters were therefore not profit shares… because the individual member had no contractual right… to receive that sum of money.”

2. Miscellaneous income (Section 687):

Section 687 ITTOIA is a catch-all tax charge on income “from any source not charged under any other provision.” HMRC argued that when GSAM finally paid out the Special Capital, it was taxable income because it came from trading profits and was not covered by any other rule.

The individual members contended that GSAM’s payouts were purely voluntary (since GSAM had discretion) and so had no “source” for s687. The Supreme Court disagreed. It found that the decision-making process under the CAP was a sufficient source linking the payments to the recipients’ trading earnings. In other words, there was a clear economic connection: the payments rewarded the traders for their work. Thus, the special capital was income in their hands when paid and taxable under s687.

“The decision-making process of Mr Gerko and GSAM in implementing the CAP… is the source of the deferred income received by the individual members… The special capital received… under the CAP is therefore income charged to income tax under section 687 ITTOIA.”

Outcome:

The Supreme Court dismissed the traders’ tax appeal and HMRC’s cross-appeal. In practical terms, the traders (including Alex Gerko) must pay income tax on the deferred amounts just as if they had been paid in the year earned. The scheme’s structure could not convert taxable earnings into tax-free capital.

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Key Insights and Lessons From Income Tax on Deferred Trader Profits Case

Economic substance matters:

The courts looked at the real nature of the payments, not just how they were labeled. Even though the CAP branded the payments as “Special Capital,” the substance was deferred compensation for trading profits. UK tax law will tax the substance of income, not the form.

A contractual right is essential:

To use Section 850, a partner must have had a clear right in that accounting period to part of the profit. In this case, the partners had no contractual entitlement to the deferred sums during the relevant years, so s850 did not apply. In any profit-sharing scheme, ensure that profit rights are clearly defined and enforceable if you want them to trigger tax reliefs in real time.

Deferred payments can still be taxed later:

The ruling confirms that postponing payment does not sidestep taxation. If the income is clearly linked to your work (through contracts, decisions, or incentives), it will be taxed under the catch-all rules like s.687 when it is received. Timing alone doesn’t eliminate tax liability.

Plan with tax in mind:

Complex structures often attract scrutiny. Taxpayers should design arrangements in alignment with both the letter and purpose of the law. Overly aggressive schemes risk being recharacterised by HMRC and the courts.

Precedent matters:

This case followed similar lines to earlier decisions (e.g. the BlueCrest cases) about deferred partnership payments. It underlines that legal discretion given to a corporate partner (like GSAM) is still governed by implied duties (per Braganza rules) and can create taxable sources of income.

Also Read: How the Income Tax Threshold Freeze 2030–31 Could Affect Your Tax Bill

What Went Wrong in the Scheme

The heart of the problem was that the profit-sharing and deferral plan tried to separate profit generation from profit receipt:

The incentivisation plan (CAP) gave GSAM absolute discretion to allocate retained profits later. Legally, individual traders had no vested right to those profits until GSAM actually paid them.
Because of that discretion, in the eyes of law no part of HFFX’s profits was definitively theirs in the year it was earned. The partnership deed’s profit-sharing rules never guaranteed those deferred sums to the individuals.
The traders hoped that labelling the payouts as a capital allocation (rather than salary) would exempt them from income tax. The Court focused on the actual link: GSAM paid the money as a reward for trading performance, which made it income to the traders.
In short, the scheme lacked a binding profit-sharing right up front, so it failed to meet the conditions of section 850. And when the payments were finally made, they were caught by the residual tax rule (s687).

Avoiding these pitfalls:

Make sure that any bonus or profit share you defer still meets legal tests if you want to claim favourable tax treatment. If you intend for a deferred arrangement to count as partnership profit, build in a firm entitlement and document it clearly. Alternatively, if you treat it as genuinely separate capital, be prepared to argue on sources – but be aware that tax authorities can still reclassify it as taxable income.

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Legal Issues and Supreme Court Findings

Issue	Supreme Court Conclusion
Deferred profit share under s850 ITTOIA	The traders had no contractual right to the profits in the original year, so s.850 does not apply. The profits held by the corporate member (GSAM) were not deemed the individuals’ shares for tax purposes.
Later payments (Special Capital)	The final payments were taxable. The decision-making and contractual rights in the CAP were a sufficient source to make the payouts income under s687. In effect, the sums ended up taxed as ordinary income when received by each trader.

How to Handle Deferred Payments and Partnerships

Clear entitlements: If using a partnership or LLP structure, ensure each member’s right to profits is well-defined. Section 850 requires a clear sharing arrangement so the tax position is known per year.
Documentation: Keep thorough records of any bonus or deferral agreements. If payments are discretionary, be aware they may be seen as voluntary. If not truly voluntary (e.g. governed by contract and duties), they can be treated as taxable income.
Tax advice: Before implementing a deferral scheme, consult specialists on how UK law views your plan. Small changes in contract terms can change the tax outcome.
Proactive review: Regularly review partnership deeds and remuneration policies to catch any unintended tax traps. For example, consider whether payments could fall under “employment income” or the sales of earnings rules (Chapter 4, ITA 2007) if structured differently.
HMRC compliance: If there is uncertainty about past arrangements, consider making a disclosure. Voluntarily correcting tax affairs can reduce penalties and interest compared to waiting for an enquiry.

Penalties and Disclosure

If income should have been declared but was not, HMRC may charge interest and penalties on the unpaid tax. The severity depends on factors like intent:

Reasonable care: If you can show you took care but still underpaid, penalties may be limited (review of 4–6 years back taxes).
Careless behaviour: Failing to take reasonable care can extend look-back periods (up to 6 years) and increase penalties.
Deliberate non-disclosure: If HMRC proves you knowingly hid income, you could face penalties on up to 20 years of tax owed. In severe cases, criminal charges are possible.
Offshore elements: Hidden offshore income triggers a longer disclosure period (up to 12 years).

It’s crucial to get professional help if your tax position is challenged. An enquiry into a complex partnership scheme can be costly and time-consuming, so early resolution or disclosure is often wise.

How We Help Businesses Manage Income Tax on Deferred Payments

Apex Accountants helps businesses and individuals navigate complex tax matters. We offer:

Partnership tax planning: Structuring LLPs and profit-sharing to meet tax requirements.
Remuneration advice: Guidance on bonus and deferred pay schemes, ensuring tax efficiency within the law.
HMRC enquiry support: Representation during tax investigations and appeals.
Compliance reviews: Review company and partnership tax filings to identify any past exposures.
Tax disclosure assistance: Helping clients make voluntary disclosures and manage potential penalties.

Our experts stay up-to-date with UK tax cases and legislation, ensuring advice reflects the latest legal standards.

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FAQs About Alexander Gerko’s UK Supreme Court Tax Ruling

Were Alex Gerko and colleagues “double taxed” by this decision?

No. The court found no double taxation. Originally, part of the profits was taxed at corporate rates in GSAM, and later the same amounts were taxed as personal income in the traders’ hands. The Supreme Court’s view is that this reflects the economic reality: the traders had not already been taxed on their entitlement, so tax was due on the later payment.

Can any deferred bonus scheme avoid income tax in the UK?

Generally, simply delaying payment won’t avoid tax if the payments are linked to your work. UK law taxes based on substance. If a scheme is genuine capital (rare), it might escape income tax. But if it effectively rewards services, it will usually be taxed, either via partnership rules or the catch-all provision.

What is the significance of having “no contractual right” to the profit?

Section 850 requires that, in the year profits are earned, each partner has a specific right to a part of them. In this case, the traders only had a hope (discretionary claim) and no legal entitlement until GSAM decided. Because of that, the partnership’s profit-sharing rules never assigned those amounts to them in that year, and so s850 did not apply.

What is a “source” of income under s.687?

A “source” means the activity or relationship from which income arises. The Supreme Court said the source here was the traders’ own work and the contractual framework (CAP/LLP deed). The payments were linked to the trading profits and the CAP decisions, which made them taxable income.

What should a trader or partner do to avoid these issues?

Make sure any deferred payments are properly accounted for tax-wise. If you want to defer legitimately, build in enforceable rights and document them. If using a corporate vehicle, get clear advice on tax timing. And always review whether HMRC might view any payments as income anyway.

Conclusion

The Supreme Court’s decision underscores that creative tax structures must align with the law’s substance. For high-earning individuals and partnerships, this means ensuring clear legal entitlements and transparent reporting. If you have complex profit-sharing arrangements, proactive tax planning and review are essential to avoid costly adjustments and penalties.

EPC Tax Relief for Landlords as Agents Call for Tax Breaks

Posted on 9 July 20269 July 2026 by Farazia Gillani

Letting agents and landlord bodies are pressing the government to make EPC tax relief for landlords available as private landlords face significant upfront costs under the confirmed 2030 Energy Performance Certificate (EPC) upgrade requirements. Without fiscal support, they warn, rental supply could shrink further at a time when housing demand is already outstripping availability.

What the Government Has Confirmed

Following its January 2026 consultation response, the government’s position is now settled. The key rules are:

Requirement	Detail
Minimum EPC standard	Band C for all privately rented homes in England and Wales
Compliance deadline	1 October 2030 — applies to new and existing tenancies
Spending cap	£10,000 per property (reduced from the proposed £15,000)
Qualifying spend start date	October 2025 — expenditure from this date counts toward the cap
Non-compliance penalty	Up to £30,000 per property per breach
Cost-cap exemption	Available where band C cannot be reached after £10,000 is spent; valid for 10 years

The government is also introducing a new assessment framework under the reformed Home Energy Model, covering fabric performance, heating system efficiency, and smart readiness. This change means the compliance target itself is evolving—EPCs assessed under the new methodology, expected from late 2026, may produce different ratings than those issued today.

Industry Pushes Back on Fiscal Imbalance

At the centre of current industry pressure is a structural inequity that agents’ bodies argue the government has not yet resolved: landlords bear the full cost of retrofit works but do not directly benefit. Once improvements are made, tenants see lower energy bills, while property owners do not benefit from the funding.

Propertymark, the professional body for letting and estate agents, has set this out directly in its response to the Warm Homes Fund consultation. The body is calling for:

An updated Landlord Energy Saving Allowance that allows retrofit costs to be offset against rental profits
Recognition of energy efficiency works for Capital Gains Tax (CGT) purposes
Stamp Duty and Council Tax incentives linked to verified EPC improvements
Low-interest or government-backed loans for smaller landlords, with repayment terms that reflect the lifespan of retrofit works
Eligibility for Warm Homes Fund support to be linked to the property’s EPC rating, rather than the income of the current tenant, so improvements benefit successive occupants

Propertymark warns that without accessible and tailored support, the requirements risk pushing landlords toward selling rather than upgrading, reducing the supply of rental homes and increasing pressure on tenants.

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Who Carries the Greatest Risk

The compliance burden is not falling evenly across the sector. Larger portfolio landlords can spread costs across multiple properties and manage cash flow disruption more readily. Smaller operators, particularly those with one or two properties, have far less room to absorb the outlay.

According to NRLA research, there are currently around 2.5 million rental homes in England that require improvements to meet the new standard. Smaller landlords are experiencing an accelerated exit due to the cumulative weight of Section 24 mortgage interest restrictions, rising income tax rates, and now mandatory retrofit costs. These are precisely the operators who supply housing in lower-demand markets where build-to-rent alternatives do not reach.

The 2030 deadline also presents a practical delivery challenge. The government’s own response references a growing shortfall of skilled retrofit tradespeople, meaning landlords who delay risk being unable to source qualified contractors in time, regardless of their willingness to invest.

What support exists for private landlord retrofit tax relief

Available support is means-tested and variable in reach. The table below summarises the main routes currently open to private landlords:

Scheme	What It Offers	Who Qualifies
Warm Homes: Local Grant	Up to £30,000 per property for energy upgrades and low-carbon heating	Tenants in EPC D to G properties with household income below £36,000 or on qualifying benefits; landlords receive full funding for one property and 50% thereafter
Boiler Upgrade Scheme (BUS)	£7,500 toward an air source or ground source heat pump; £5,000 for biomass boilers	Property owners in England and Wales replacing fossil fuel heating; it is not means-tested
Zero-rated VAT on qualifying measures	20% saving on eligible energy-saving materials including insulation and heat pumps	All landlords undertaking qualifying works

A notable point from the GOV.UK government response: third-party grant funding counts toward the £10,000 MEES cost cap. Landlords who secure grant support may reach the cap before spending their money to the ceiling, potentially unlocking the cost-cap exemption route sooner.

The Landlord Energy Saving Allowance, which once permitted deductions for cavity wall and loft insulation against rental income, was abolished in 2007. No equivalent has been introduced. Its reinstatement, in a form covering a broader range of qualifying measures, is central to demands for tax relief for private landlords undertaking retrofits.

The Tax Treatment Trap Behind EPC Tax Relief for Landlords

The absence of a dedicated allowance sits at the heart of the industry’s concern. Under current HMRC rules, how retrofit expenditure is treated for tax depends on the nature of the works:

Revenue expenditure (like-for-like repairs or replacements) can be deducted against rental profits in the year of spend, reducing income tax
Capital expenditure (improvements that enhance a property beyond its original condition) cannot be deducted against income; instead, it is added to the property’s base cost and reduces CGT only on eventual disposal

Most EPC-qualifying works, including heat pumps, solid wall insulation, and solar panels, are capital in character. They provide no in-year income tax relief. A basic-rate landlord funding a heat pump installation receives no direct tax saving until they sell the property, which may be many years away.

Propertymark’s proposal would treat qualifying energy efficiency expenditure as a deductible revenue expense, regardless of its capital character. This would provide immediate tax relief in the year costs are incurred and materially improve landlord cash flow. This is why EPC tax relief for landlords has become a central issue in the wider debate on funding retrofit works. The NRLA has gone further, calling for finance models that combine private investment with grants and tax incentives, allowing landlords to draw on multiple funding sources at the same time.

The Supply Consequence

The stakes extend beyond individual landlord finances. The private rented sector provides housing for a substantial proportion of UK households, and the current tax environment is already discouraging new investment. A further contraction, driven by landlords choosing to sell rather than retrofit, would compound an already acute housing shortage.

This is not simply a financial matter. The Warm Homes Plan targets up to five million home upgrades by 2030. If private landlords exit the market rather than upgrade, the government’s own targets become harder to meet, and the households in poorest-quality rented accommodation, often those most vulnerable to fuel poverty, lose out.

Propertymark’s recommendation that eligibility for Warm Homes Fund support be linked to the property rather than the tenant’s income would allow improvements to remain in the housing stock for successive tenancies. Under the current means-tested model, a qualifying upgrade in one tenancy provides no guaranteed benefit to the next occupant.

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How landlord EPC upgrade tax advice can help

The intersection of EPC compliance and UK tax law is more complex than many landlords appreciate. Landlord EPC upgrade tax advice can help clarify whether retrofit expenditure is deductible in the year it is incurred or whether it must be capitalised and set against future gains. Getting the classification wrong can be costly.

Apex Accountants & Tax Advisors works with private landlords, portfolio investors, and property companies to:

Classify retrofit expenditure correctly under HMRC guidelines to maximise available tax relief
Structure compliance costs in line with your overall portfolio strategy and cash flow position
Advise on the interaction between grant funding, the £10,000 MEES cap, and your income tax position
Plan for Making Tax Digital, which from April 2026 applies to landlords with qualifying rental income
Review CGT implications where EPC improvements affect the base cost of a property on disposal
Monitor legislative developments, including any reinstatement of retrofit allowances or new HMRC guidance

With the 2030 deadline approaching and government support still evolving, proactive tax planning is essential rather than optional.

Contact Apex Accountants today to review your EPC compliance position and ensure your retrofit strategy is as tax-efficient as possible. Book a free consultation with one of our specialist property tax advisers.

British Retailers Call for Action on Small-Parcel Import Tax Loophole

Posted on 3 July 20263 July 2026 by Farazia Gillani

British retailers are calling on the government to accelerate plans to close the loophole for small parcel import taxes, which allows overseas sellers to ship low‑value parcels into the UK without paying customs duty. Their appeal comes after the 2025 Autumn Budget confirmed that the longstanding low-value import (LVI) relief will be abolished by March 2029 at the latest. For companies competing with online marketplaces that ship millions of parcels valued at £135 or less, the wait for reform feels too long. Accelerating the closure of the loophole for small parcel import taxes would align the UK with reforms in the United States and European Union, helping restore a level playing field for domestic retailers.

A loophole that has grown too large to ignore

Under current rules, individual consignments valued at £135 or less can enter the UK duty‑free. The relief was originally designed for infrequent and low‑value transactions, but it has become a fundamental part of cross‑border e‑commerce. Parcel operators and customs intermediaries submit simplified declarations using a Bulk Import Reduced Data Set (BIRDS), which allows them to clear multiple consignments at once. This simplification has helped overseas sellers to flood the UK market with very cheap goods.

HMRC estimates that the number of consignments imported using BIRDS more than tripled between 2021 and 2024, reaching around 600 million parcels a year. During the same period, the value of low-value imports recorded in BIRDS rose from £3.8 billion to £5.9 billion.

Removing customs duty from these parcels made sense when cross-border parcel volumes were low, but the low-value import relief the UK now offers distorts competition. UK‑based retailers import goods in bulk and pay duties at standard tariff rates, while overseas sellers shipping individual parcels valued under £135 effectively avoid customs duty. The government acknowledges that this situation undermines fair competition and has committed to reforms that will require all sellers, regardless of their location, to pay duties on goods sold to UK consumers.

What the government proposes and why it matters

The 2025 Autumn Budget signposted an end to low-value import relief in the UK, describing it as an “unfair customs arrangement” that allows some online retailers to import goods duty-free. HM Treasury and HM Revenue & Customs have since published a detailed consultation outlining UK customs duty changes for parcels and the broader low-value import regime. The document proposes that the new arrangements take effect by March 2029. For UK high street chains, that timetable feels far away, particularly now that the US has removed its $800 de minimis threshold, and the EU plans to eliminate duty relief on consignments under €150 by 2028.

The government’s consultation suggests three key changes:

Duty liability shifts to sellers and online marketplaces

Under the proposed LVI customs arrangements, sellers and the operators of online marketplaces will be responsible for paying customs duty on consignments of £135 or less. This mirrors the existing VAT model, where marketplaces must charge and remit UK VAT on low‑value sales. By consolidating liability, duty could be collected through quarterly payments away from the border. That would reduce disruption at ports and ensure duty is visible at the point of sale, improving price transparency.

Potential introduction of an administrative fee

The government is considering a flat fee on low‑value imports to fund the extra customs and border costs associated with processing millions of parcels. This fee would be limited to the cost of services rendered and would be paid by sellers or the platforms facilitating sales. Similar fees have been proposed or introduced in other jurisdictions.

A simplified tariff schedule

To help sellers and marketplaces apply the correct duty without having to assign full commodity codes to every item, officials are exploring a “tariff bucket” system – effectively grouping products into bands with set duty rates. Simplifying classification could make compliance more manageable for overseas sellers unfamiliar with the UK Global Tariff schedule.

The consultation also proposes that overseas sellers without a UK presence appoint a fiscal representative in the UK who would be jointly liable for customs debts. The government intends to maintain the existing relief on gifts valued at £39 or less sent between individuals.

Why retailers want reform sooner

Retailers pressing for change argue that waiting until 2029 will allow overseas platforms to cement an even larger presence in the UK. The consultation notes that low‑value import volumes are already substantial, with an estimated 1.6 million parcels arriving every day. Since the United States abolished duty relief for imports under $800 in 2025 and the EU is moving to scrap its €150 exemption, the UK has become an outlier. Industry groups worry that global sellers will increasingly divert their parcels to UK consumers to exploit the remaining duty relief, further eroding domestic market share. They also highlight product safety concerns; when goods circumvent import duties, they often bypass quality checks.

From a revenue perspective, the low‑value import relief is becoming expensive. Once goods are subject to duty, receipts could help fund public services. Introducing an administrative fee of around £2.60 per parcel, as suggested by some retailers, could raise over £1 billion annually. However, designing and implementing new systems will take time, and businesses need certainty. HM Treasury has therefore signalled that reforms must balance fairness with the practicalities of collecting duty and data at scale.

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Practical steps for businesses

Although the new regime and UK customs duty changes for parcels may be several years away, businesses should not wait to prepare. Overseas sellers and marketplace operators should review their supply chains, ensure that systems can capture and report product data, and prepare for quarterly customs duty payments.

Those not established in the UK may need to appoint a fiscal representative and budget for administrative fees. UK retailers should assess how the changes could affect pricing and inventory strategies; some imports currently shipped under the £135 threshold may become subject to duty and higher costs.

All stakeholders can respond to the government consultation, which runs until March 2026, and help shape the final design of the new customs arrangements.

The abolition of LVI relief also interacts with VAT. Since January 2021, the UK has abolished the VAT exemption for goods under £15 and requires sellers dispatching goods valued at £135 or less to register for UK VAT and charge it at the point of sale. Businesses must continue to account for VAT correctly while preparing for future customs duties.

How Apex Accountants & Tax Advisors can help

Navigating cross‑border trade rules is complex. Apex Accountants & Tax Advisors works with retailers, online marketplace operators and logistics firms to interpret the evolving customs and VAT landscape. Our team can help you:

Analyse how the removal of the LVI relief and the potential small parcel import tax loophole closure will affect your cost base and pricing.
Register for UK VAT and design systems to collect customs duty and VAT on low‑value consignments.
Prepare for quarterly duty payments and develop processes for appointing fiscal representatives if you do not have a UK establishment.
Model the financial impact of possible administrative fees and simplified tariff schedules.

We collaborate closely with clients to ensure compliance with HMRC guidance, integrate duty calculations into accounting systems and plan for changes well ahead of the March 2029 target. Contact Apex Accountants today to discuss tailored strategies for your supply chain and e‑commerce operations.

Frequently asked questions

What is the low-value import relief, and why is it being removed?

The LVI relief allows consignments of goods valued at £135 or less to enter the UK without paying customs duty. The government plans to abolish it by March 2029 because the relief has been exploited by overseas sellers, distorting competition and undermining tax fairness.

When will the new customs arrangements come into force?

HM Treasury intends the new LVI customs arrangements to take effect by March 2029, but British retailers are urging the government to implement changes sooner.

Who will pay customs duty under the new regime?

The consultation proposes making sellers and online marketplace operators responsible for paying duty on low‑value consignments, aligning with existing VAT rules.

Will there be any exemptions?

The government plans to retain the relief for non‑commercial gifts valued at £39 or less sent between private individuals. All other consignments will be subject to customs duty and potentially an administrative fee.

What is the proposed administrative fee and why?

Officials are considering a flat fee on low‑value imports to cover the cost of processing millions of parcels. Retailers have suggested a fee of about £2.60 per parcel, but the government is still gathering views through its consultation.

How should businesses prepare?

Companies should ensure they are compliant with VAT rules, plan for quarterly customs duty payments and monitor the consultation. Overseas sellers without a UK presence may need to appoint a fiscal representative. Engaging with advisers, such as Apex Accountants, can help businesses adapt their systems and minimise disruption.

Digital Border Checks Expose Holiday Home Owners to Potential UK Holiday Home Tax Advice

Posted on 3 July 202621 September 2026 by Maliha Javaid

A system designed to count days rather than passports

The European Union’s new Entry/Exit System (EES) quietly changes how border officials record visits by non‑EU nationals, highlighting the need for clear UK holiday home tax advice for property owners.

Since 12 October 2025, the system has replaced manual passport stamping with a digital record of your arrival and departure. When a UK passport holder enters the Schengen area, biometric data – fingerprints and a photograph – are captured and stored for three years. The rationale is better security and to stop visitors overstaying. For holiday home owners who used to cross borders with few questions asked, the new system means the authorities will know exactly how long they have been in the EU.

EES applies only to Schengen members – a group of 27 continental countries – and does not include the Republic of Ireland or Cyprus. Registration is automatic at the border, costs nothing and takes place on arrival. However, the process can lengthen queues, as travellers must submit fingerprints and have their photograph taken. After completion, the digital record replaces passport stamps and is used each time you enter or exit the Schengen area.

Why counting days matters for UK holiday home tax advice

EES is a border security tool, but it also makes it easier for tax authorities to police residency rules. Under the Schengen “90‑days in any 180‑day period” rule, UK visitors cannot spend more than three months in the bloc without obtaining a visa. The digital record provides an irrefutable log of days spent in each country and can be cross‑referenced with local tax systems.

For example, Spain, France and Portugal treat anyone who spends more than half of the year in their territory as a tax resident. Previously, holiday home owners could argue about precise arrival dates when challenged; now, the system holds that information centrally.

For UK tax purposes, the statutory residence test is equally sensitive to day‑counting. HM Revenue & Customs (HMRC) says you are normally UK resident if you spend 183 or more days in the UK during the tax year, or if your only home was in the UK for 91 days or more and you stayed there at least 30 days.

Conversely, you are usually a non-resident if you spend fewer than 16 days in the UK or if you work abroad full-time and spend fewer than 91 days in the UK. Residency determines whether you pay UK tax on your worldwide income or just on your UK income. EES data will make it harder to argue residency status if your personal records do not align with your digital travel history, emphasising the importance of UK holiday home tax advice.

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Overseas property income is treated separately

UK residents must pay income tax on foreign rental income. HMRC’s property income manual explains that rent and other receipts from properties outside the UK are taxed as the profits of an overseas property business. Profits or losses are calculated like those of a UK property business, but they are taxed separately: losses from one cannot be set against the other.

The profits are chargeable to income tax only if the business is carried on by a UK resident. Before April 2025 some non‑domiciled individuals could elect to be taxed only on income remitted to the UK, but the Foreign Income and Gains (FIG) regime now generally subjects all UK residents to tax on their worldwide income.

HMRC guidance also notes that while most foreign income is taxed like UK income, there are special rules for pensions, certain employment and rent from property. If you have multiple overseas properties, you can offset losses between them but not against UK properties.

All foreign rental income must be reported in the foreign section of your Self Assessment tax return, following UK property tax guidance for overseas homes. If you owe tax, you must register for Self Assessment by 5 October following the end of the tax year. The return must include income already taxed abroad if you plan to claim foreign tax credit relief.

Risks for holiday home owners

Holiday home owners in Spain, Portugal or France often spend months at a time enjoying the sun or refurbishing their property. With EES registering each entry and exit, EU authorities can easily check when a visitor has surpassed the 90‑day limit. Some governments are expected to use this data to identify individuals who may be inadvertently meeting their domestic residency thresholds. If you stay in a country for more than 183 days, you may owe income tax there on your worldwide income. EES will also highlight repeated stays that may signal an undeclared holiday letting business.

From a UK perspective, lengthy stays abroad can complicate your residence status. Spending long periods in Spain or France reduces your days in the UK and could result in your becoming non‑resident, which would normally mean you pay UK tax only on your UK income. But even if you become a non‑resident, your overseas property profits may still be taxed in the country where the property is located. Meanwhile, UK‑resident owners must continue to pay UK tax on those profits. Coordinating tax obligations across two jurisdictions becomes more complex, and mistakes can trigger penalties or interest.

Another risk is failing to report the rental income of a foreign holiday home, which is why UK property tax guidance for overseas homes is essential. HMRC’s guidance makes clear that you must include foreign rental income on your tax return and cannot offset losses against your UK property business. The digital record created by EES, combined with data‑sharing agreements across Europe, makes it easier for tax authorities to match property ownership with travel patterns and identify unreported income. Those who have relied on the low visibility of short‑term lets may find themselves subject to scrutiny.

Practical steps and tax planning for holiday home owners

To reduce the risk of investigation, holiday home owners should do the following:

Track time spent in the EU – Keep a personal log of entries and exits that matches the EES record, which supports tax planning for holiday home owners. Plan trips to stay within the 90‑day‑in‑180‑day limit and ensure you do not inadvertently create tax residence in the country where your property is located.
Review your UK residency status – Use the statutory residence test as guidance. Remember that 183 days in the UK usually makes you resident, while fewer than 16 days normally means you are non‑resident.
Declare all foreign rental income – Register for Self Assessment if you have any foreign income. Use the foreign section of your tax return to report rents, even if tax was deducted overseas.
Keep separate accounts for overseas properties – because overseas property profits cannot be netted against UK property profits, you should maintain clear records of income, expenses and any tax paid abroad.
Monitor upcoming changes – The EU’s travel authorisation system (ETIAS) is expected to start in late 2026. Check the official guidance and ensure you obtain authorisation when required.

How Apex Accountants can help

Holiday home ownership brings lifestyle rewards and tax complexities. Apex Accountants & Tax Advisors combine expertise in UK tax law with an understanding of EU residency rules. We help clients evaluate how EES data may affect their tax residency, plan their time abroad to stay within the 90‑day rule, and organise their affairs to avoid dual‑taxation pitfalls. Our advisory services include:

Residence status reviews – We analyse your travel patterns and family ties to determine your UK tax residence and advise you on the implications.
Foreign income reporting – Our team prepares Self Assessment returns, ensuring that we correctly report overseas rental income and claim foreign tax credits where available.
Cross‑border tax planning – We work with partner firms in the EU to coordinate tax obligations, so you comply with both UK and local laws and avoid penalties.

Whether you are purchasing a holiday home, already own one, or plan to spend more time abroad in retirement, Apex Accountants can provide tailored advice to help you stay compliant with changing border and tax rules. Contact us today to discuss your circumstances and plan with confidence.

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Frequently asked questions

What is the EU Entry/Exit System, and when did it start?
The EU’s Entry/Exit System is a digital border record. From 12 October 2025, UK passport holders are required to provide fingerprints and a photograph at their first entry into the Schengen area. The system replaces passport stamps and stores your travel data for three years.

How long can UK citizens stay in the Schengen area without a visa?
You can stay for up to 90 days in any 180‑day period. The EES makes it easier to enforce this rule, and there is a penalty approach for exceeding it.

Do UK residents pay tax on income from overseas holiday homes?
Yes. If you are a UK resident, you normally pay UK income tax on foreign rental income. The profits from an overseas property business are calculated like a UK property business but taxed separately.

How do I know if I’m a UK resident for tax?
HMRC uses a statutory residence test based on the number of days you spend in the UK. Spending 183 days or more in the UK usually makes you resident, while fewer than 16 days usually makes you non‑resident. Other factors, such as having your only home in the UK or working full time here, can also make you resident.

What steps should I take if I rent my holiday home?
You must register for self-assessment and report your overseas rental income in the foreign section of your tax return. Keep detailed records of rents and expenses and seek advice on claiming any foreign tax credits.

Will the EES information be shared with HMRC?
The EES is operated by the EU for immigration control. While there is no public statement that data will be directly shared with HMRC, tax authorities across Europe are increasingly using digital records to enforce residency rules. Holiday home owners should therefore assume that HMRC may use their travel data to verify tax status.

Capital Gains Tax for landlords reshapes the buy-to-let sell-off

Posted on 25 June 202626 June 2026 by Farazia Gillani

Capital Gains Tax for landlords is now a decisive factor in whether owners hold, sell, refinance or restructure property portfolios. With borrowing costs testing margins, mortgage interest relief restricted, and tax allowances thinner than before, many landlords now treat disposal planning with the discipline once reserved for acquisition strategy.

The sale decision now starts with Capital Gains Tax for landlords

For individual landlords, a sale of a buy-to-let property can trigger Capital Gains Tax on the gain after allowable costs, losses and reliefs. The annual exempt amount is £3,000 for individuals and £1,500 for most trusts. That leaves far less shelter than long-term owners expected.

Residential property gains are taxed at 18% if they fall within the basic rate band and at 24% above it. Other taxable income can push more of the gain into the higher rate band. Salary, rental profit, pension income or dividends can change the final bill.

This is why timing matters. A sale completed late in the tax year may leave little scope for Capital Gains Tax planning for landlords, including income planning, loss use, ownership checks and the 60-day property return.

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Why Capital Gains Tax planning for landlords shapes exit plans

Landlords rarely let Capital Gains Tax alone drive their decision. Tax tends to be the final test on a wider commercial picture.

Several pressures now meet at the same point:

mortgage interest relief is restricted to a basic rate tax credit
additional dwellings in England and Northern Ireland face a 5 percentage point SDLT surcharge
repairs, licensing, energy standards and void periods affect net yield
the smaller annual exempt amount brings more gains into charge
payment deadlines arrive quickly after completion

Some landlords are selling weaker units, while others are seeking buy-to-let landlord tax advice before deciding whether to sell or hold. Others are delaying sales to control tax-year exposure. More owners are modelling incorporation, family transfers or staged disposals. Each route can carry tax, legal and lending consequences, so the arithmetic needs care.

The 60-day clock leaves little room for error

UK residential property disposals must be reported to HMRC and any Capital Gains Tax due paid within 60 days of completion. This is a short deadline for landlords who still need purchase records, improvement invoices, legal fees, valuations and ownership history.

Common risk areas include:

treating repairs and capital improvements incorrectly
missing periods where Private Residence Relief may apply
failing to claim allowable losses
using sale proceeds before tax has been reserved
assuming Self Assessment alone deals with the disposal

Private Residence Relief can reduce the gain where a property was the owner’s only or main home during part of ownership. However, relief is not automatic. Letting history, occupation periods and shared ownership can alter the calculation.

A portfolio decision, not just a tax return

The sharper question is whether the property still earns its place after tax. A gain crystallised today may fund debt reduction, pension contributions, business investment or a move into commercial assets. Equally, selling only to cut tax uncertainty can be costly if the property still produces strong cash flow.

Good planning starts before the estate agent is appointed, especially where buy-to-let landlord tax advice can shape timing, relief claims and cash reserves. Landlords should review the expected gain, current year taxable income, unused losses, ownership structure, completion date, cash needed for the 60-day payment and whether the property was ever a main residence.

This review can change the final decision. It may support a sale, delay completion, split disposals across tax years, or keep the asset.

Why you need Apex Accountants & Tax Advisors

Apex Accountants & Tax Advisors supports landlords who need clear advice before selling. Our team can calculate expected Capital Gains Tax, review reliefs, prepare 60-day reports, check rental accounts, advise on ownership structure and model disposal dates.

For landlords with several properties, the wider picture matters. A single sale can affect Self Assessment, payments on account, finance planning and future investment strategy. Careful reporting reduces HMRC risk and gives landlords stronger control over cash flow.

For practical advice before listing or completing a property sale, contact Apex Accountants today or book a free consultation.

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FAQs

Do landlords always pay Capital Gains Tax when selling a rental property?

No. Tax is due only on a chargeable gain after allowable costs, losses, the annual exemption and any available reliefs.

When must a landlord report a UK residential property sale?

Most UK residential property sales with Capital Gains Tax due must be reported and paid within 60 days of completion.

Can Private Residence Relief reduce tax on a former home?

Yes. It may apply if the property was the owner’s only or main residence for part of the period of ownership.

Can selling in a different tax year reduce the bill?

It can. Income levels, losses, ownership changes and annual exemptions may affect the result. Advice should be taken before exchange.

Disqualified Director Jailed for £3M Insolvency Fraud Funding Lavish Lifestyle

Posted on 21 June 202621 June 2026 by Muhammad Asif

A recent Insolvency Service investigation exposed a £3 million insolvency fraud by former director Tariq Sarwar (59), who syphoned money from the sale of his company’s only asset and hid it through other firms. Sarwar’s scheme left creditors – including HMRC – with over £500,000 unpaid, while he and his family enjoyed a luxury Cheshire lifestyle (even a Rolls-Royce). The fraud involved a network of companies and accounts managed by Sarwar and associate Christopher Francis (40), who laundered funds back to Sarwar. Both men have now been sentenced (see table).

Name (age)	Offence	Sentence
Tariq Sarwar (59)	Insolvency fraud: transferring £3.1m from company sale without paying debts; acting as a director while disqualified	4 years’ imprisonment<br>10-year director ban
Christopher Francis (40)	Money laundering: helped launder Sarwar’s funds	2 years 1 month (suspended 2 years)<br>250 hours unpaid work

Table: Key facts on the fraud and sentences (Insolvency Service press release).

How the £3 Million Fraud Worked

Background of the £3 million Insolvency Fraud Case:

Sarwar’s company, A Property Management Ltd, owned a Salford business park. In mid-2018, HMRC moved to wind it up for £130,000 unpaid tax. Sarwar knew the company was in trouble. In June 2018 he sold the property for just under £5.1 million.

Money Transfers

Instead of paying creditors, Sarwar ordered the remaining £3.1 million into KYCA Trading Ltd, run by Francis. Within days, the cash was shuffled through a web of six other companies to hide its origin. Investigators later traced hundreds of thousands back to Sarwar’s family business and personal accounts. In one audit trail, £645,000 went to a firm controlled by his relatives, and a further £748,980 went back into his own account.

Cover Story

When questioned, Sarwar denied involvement. Francis claimed (incredibly) that £700,000 was paid as a deposit on five penthouses – a transaction he couldn’t verify with any documents. Investigators found this story unbelievable. Records showed Francis’s own company, KYCA Trading, had just been slapped with a 6-year director ban in 2021 for poor accounts. (He told police his car with all business records had been stolen and burnt out overnight – another unverified excuse.)

Lifestyle Contrast

While creditors got little back (only “a limited return” eventually), Sarwar’s family was living large. He had a six-bedroom Cheshire farmhouse filled with designer goods, and his son appeared on TV show Rich Kids Go Skint in 2019 boasting he’d never been on a bus – the family owned a Rolls-Royce chauffeur for him. This stark contrast helped tip off investigators that something was amiss.

Read: When Director Bans in the UK Are Ignored – Lessons From a Landscaping Tax Case

Roles of the Two Men in the £3 Million Insolvency Fraud

Tariq Sarwar

Former director of the insolvent property firms. He admitted fraud charges: hiding company assets when winding-up was imminent, and illegally acting as a director while disqualified. (Sarwar had already been banned for 11 years in 2013 for siphoning company funds – a ban that ran until late 2024.) In June 2026 he pleaded guilty, receiving 4 years in jail and a 10-year ban from being a director.

Christopher Francis

Business associate and controller of KYCA Trading Ltd. He laundered Sarwar’s money through other companies. Francis was also disqualified in 2021 for accounting failures. He pleaded guilty to money laundering and got 2 years 1 month in prison, suspended for 2 years, plus 250 hours of unpaid work. (Suspended means he only goes to jail if he breaks the law again.)

The Insolvency Service is now pursuing confiscation of Sarwar’s ill-gotten gains to ensure he doesn’t keep what was never rightfully his.

Disqualification and Penalties

A company director disqualification means a person is legally barred from running a company. In the UK this is governed by the Company Directors Disqualification Act 1986 (CDDA). Key points:

Disqualification orders (for up to 15 years) are imposed by courts for “unfit conduct” – like fraud or abusing insolvency rules. Sarwar’s 2013 ban was for taking £260k from company funds when creditors were owed £1.6m.
While disqualified, a person must not act as a director or manage a company in any way. Breaking this is a criminal offence. Penalties include up to 2 years’ jail and/or a fine. The court can also extend the ban if someone re-offends.
Sarwar blatantly broke this rule by controlling companies between 2014–2018, despite his 11-year ban. Francis also breached his 2021 ban. Authorities can even hold enablers (those acting on behalf of a banned director) liable, and impose fresh disqualification periods on top.

In practical terms, disqualified directors are heavily restricted. They cannot form, promote or be involved in any UK company without special court permission. Also, any company debt they incur can be treated as a personal liability if they secretly direct a firm.

Practical Takeaways and Protection Tips

Check Director Status

Before doing business, always verify that company directors are not disqualified. The Companies House register shows director names. You can search by name or company to see current officers.

Watch for Warning Signs

If a company is sold suddenly at fire-sale prices or large sums move through unexpected accounts, ask questions. Insolvency agents look for unusual money movements and lifestyle clues (like expensive purchases) that conflict with business figures.

Record Keeping

Keep clear, independent financial records. The law requires directors to keep accounts and file taxes. Disqualified or unscrupulous directors often fail at this (as Francis did), which itself is a red flag.

Use Official Resources

The UK government’s Director Information Hub offers guidance on director duties and the signs of company distress. The Insolvency Service’s Investigations Unit can be contacted if fraud is suspected.

Report Suspicious Directors

If you know someone is acting as a director despite a ban, you can report them. The Insolvency Service suggests anonymously tipping off Crimestoppers (0800 555111).

Taking these steps helps protect your business and the wider economy. As experts, we at Apex Accountants emphasise compliance and transparency to avoid such traps.

Also Read: £20 Million VAT Carousel Fraud Case: Lessons for UK Directors and Businesses

How We Help Businesses Stay Compliant

At Apex Accountants, we specialise in corporate compliance, accounting and insolvency advisory. We help businesses and directors:

Maintain proper records: We ensure accounts are up-to-date and filed on time, avoiding penalties and suspicions of wrongdoing.
Navigate disputes: If your company faces cash flow trouble or creditor claims, we offer guidance on legal obligations and restructuring options.
Perform due diligence: Before mergers, investments, or major transactions, we conduct background checks on all directors and companies involved.
Advise on Insolvency: Our team assists with voluntary administrations, liquidations or negotiations with HMRC, ensuring the process follows the law.
Provide training: We offer workshops on director duties and early insolvency warning signs, so your management team stays alert to risk.

If you’re concerned about fraud risks, company debt or director misconduct, contact Apex Accountants. Our insolvency advisory services will guide you through UK regulations and help safeguard your business against illegal practices.

Conclusion

This case of £3 million insolvency fraud shows the severe consequences when directors flout the rules. Sarwar and Francis abused corporate structures to hide money, but the Insolvency Service’s investigation led to jail time and bans. It’s a stark reminder that disqualifications are serious. Keeping clear financial practices, performing checks on business partners, and acting lawfully are key. Our firm is dedicated to helping clients stay compliant and protect their assets – so fraudsters can’t exploit them.

FAQ

What is a disqualified director?

A director is disqualified when a court bans them (often up to 15 years) for misconduct. They legally cannot manage or run any company during that ban.

What does acting as a director while disqualified mean?

It means secretly directing or controlling a company despite a court ban. This is a criminal offence, punishable by up to 2 years in prison. In this case, Sarwar did so and received an extra 10-year ban.

How did Tariq Sarwar commit fraud?

He sold his company’s property for over £5 million, then diverted £3.1 million through other companies instead of paying creditors. This deprived HMRC and suppliers of funds they were owed.

Who was Christopher Francis and what did he do?

Francis ran KYCA Trading Ltd and helped launder Sarwar’s £3m. He admitted money laundering and got a suspended sentence and community service.

How were the fraud funds traced?

Investigators followed money through multiple firms. They tracked large sums back into Sarwar’s family companies and personal accounts, proving the scheme.

What happened to the creditors?

Creditors (including HMRC) were owed over £500,000 when the fraud emerged. HMRC and others were only later repaid in part after investigations.

What penalties did Sarwar face?

He pleaded guilty to fraud and breaching his disqualification. The court jailed him for 4 years and banned him from being a director for 10 years.

Can wronged companies or creditors get money back?

The Insolvency Service is working on confiscation proceedings to recover funds. In similar cases, recovered assets can go to creditors. In this case, HMRC was repaid in full later.

How can businesses avoid such fraud?

Always verify directors’ credentials on Companies House, keep diligent records, and watch for unusual transactions. Seek professional accounting advice if a partner’s behaviour seems suspicious.

What should I do if I suspect a director is behaving illegally?

Contact professionals (like our firm) for advice. You can also report suspicions to the Insolvency Service or anonymously via Crimestoppers (0800 555111) if a ban is breached. Acting early can prevent serious losses.

What Is the 67.5% Tax Trap and Where Does It Come From?

Scotland’s Six-Band System in 2026/27

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Why Scottish tax advice for high earners matters more now

Who Is Caught

Scottish income tax planning and adjusted net income

What Happens If Nothing Is Done

How tax advice from Apex Accountants for Scottish taxpayers can help

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Frequently Asked Questions

What Is the Online Marketplace VAT Liability Consultation?

Why Is the Government Doing This?

How Does Marketplace VAT Work Right Now?

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What Would Actually Change for UK Sellers?

Who Would Be Protected? The Threshold Question

Option 1: A Minimum Platform Threshold

Option 2: A VAT rate relief

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Who’s Excluded From the Proposed Rules?

Takeaway and Food Delivery Platforms Are Explicitly in Scope

What About the Flat Rate Scheme?

What Should Sellers and Their Accountants Do Now?

How We Help You Deal With the VAT on Online Marketplace Sales and the Proposed Changes

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Conclusion

Common Questions From UK Marketplace Sellers

Will this affect my Amazon, eBay or Etsy account?

Does this affect sales through my own website?

What if my turnover is under £90,000?

Will marketplaces ask for more information from sellers?

Are business-to-business sales included?

What is the new tax guidance for hair and beauty services?

HMRC employment status guidance for the hair and beauty industry – employment or self-employed

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When a worker is likely to be employed

When a worker is likely to be self-employed

Mixed work is common

Why getting employment status wrong is risky

VAT rules for chair rental

Who accounts for VAT on client takings

Signs that a stylist supplies clients directly

VAT registration for salons and beauty businesses

Flat Rate Scheme for Hair and Beauty

Self-Assessment for freelancers

Tips in hair and beauty

Making Tax Digital for Income Tax

Business rates for salon premises

Common mistakes to avoid

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How We Help Businesses Stay Compliant with HMRC’s New Tax Guidance for Hair and Beauty Services

Conclusion

Frequently Asked Questions About Hair and Beauty Tax Rules

Am I self-employed if I rent a chair?

Does chair rental include VAT?

Do beauty therapists need to register for VAT?

Do mobile hairdressers need a tax return?

Are tips taxable?

Does Making Tax Digital apply to beauticians?

Do hairdressers pay tax on tips?

What can a hairdresser claim on tax?

When does Making Tax Digital apply to salon owners?

High-Profile Trader Tax Appeal Outcome and What It Means

Partnership structure:

Intended tax result:

HMRC’s challenge:

Section 850 ITTOIA (profit-sharing arrangements):

Section 687 ITTOIA (miscellaneous income):

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How Deferred Bonuses are Taxed in UK

1. Profit-sharing rule (Section 850):

2. Miscellaneous income (Section 687):

Outcome:

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Key Insights and Lessons From Income Tax on Deferred Trader Profits Case

Economic substance matters:

A contractual right is essential:

Deferred payments can still be taxed later:

Plan with tax in mind:

Precedent matters: