Invoice financing – Liberating cash tied up in late payments  

Invoice financing – Liberating cash tied up in late payments  

SMEs in the UK have struggled with late payments for years and cash tied up in unpaid invoices can put pressure on your business’s ability to operate effectively.

Invoice financing can release funds locked up in late payments, giving a business an instant cash flow injection until the outstanding balance is settled.

Consistent late payments can significantly stunt business growth, especially for SMEs with thinner cash reserves.

What is invoice financing?

Invoice financing works by a lender using unpaid invoices as collateral for funding.

Lenders can advance up to 95 per cent of an invoice’s total value almost immediately, instead of waiting 30 days, 60 days or longer for payment from a customer.

The remaining balance of an invoice’s value can be settled once the customer has paid and lenders will deduct a service charge and discount depending on the value of the loan.

This means SMEs can instantly access capital that would be otherwise trapped, allowing them to offer more payment flexibility to clients.

When is it worth it?

This method of securing working capital is a great fit for firms that experience long waits for payment, either due to contract terms or overdue invoices.

Invoice financing helps keep cash flow healthy to cover running costs, begin new projects and reinvest money into business growth.

However, invoice financing is not a silver bullet. Businesses with narrow margins might not be able to use these services, as the fee structures can sometimes dent profitability.

Likewise, businesses with a small volume of invoices that are high value might face disproportionately high costs for advancing payments.

Also, if a business typically receives quick payment turnaround, a short-term overdraft loan may be more appropriate.

Seeking advice

Whether invoice financing is the right choice for you will depend on a number of factors, so getting a second opinion from a specialist can help you decide.

Our accountants can assess your position and advise which options will work best, helping you overcome the frustration of late payments.

Get in touch to find out more about invoice financing.

I have received a HMRC enquiry letter – What do I do now? 

I have received a HMRC enquiry letter – What do I do now? 

HMRC enquiry letters are sent to individuals to notify them that HMRC has chosen to formally investigate their tax affairs.

While some enquiries are carried out randomly, the majority are selected based on a risk assessment of a business.

These checks should not be seen as accusatory, as they are often a routine procedure to make sure your business is compliant and the correct amount of tax is being paid.

If you’ve received a letter, you need to know what to do.

Why are there more enquiries?

It is no surprise enquiries are on the rise when the UK’s estimated tax gap for 2024 to 2025 sits at £59.2 billion, up £6.4 billion on the previous year, according to HMRC.

The largest component of the tax gap by customer group is small businesses, accounting for 62 per cent of lost liabilities.

HMRC is feeling the fiscal squeeze and small businesses have been identified as a key target for closing the tax gap.

How should I respond?

After receiving an enquiry letter, you have 30 days to respond from the date printed.

Your first step should be to speak with your accountant and gather all the relevant documents and information that has been requested by HMRC, making sure each requirement is reasonable.

Next, the information should be reviewed to understand the context and implications of the information HMRC has asked for.

If you believe there is anything that might need to be disclosed, it is important that a disclosure is made as early as possible. HMRC reviews the timing of any disclosure when deciding on penalties.

Finally, when you are ready, respond to HMRC with the information alongside any explanations or clarifications.

If the deadline is not realistic, it is important to request an extension before a response becomes overdue.

How can an accountant help?

Accountants can help distinguish between information that is ‘reasonably required’ by HMRC and that which goes beyond their scope.

It is not uncommon for HMRC to ask for a response that is broader than what is required, but an accountant can explain where and when disclosure is needed.

Throughout the process, accountants can oversee communication with HMRC to minimise inconsistencies and handle extension requests properly.

HMRC enquiries can feel overwhelming. If you have received a letter, speak with our team at the earliest opportunity.

Companies House issues warning over scammers

Companies House issues warning over scammers

Companies House has issued warnings to directors after a rise in scam emails following the organisation’s new identity verification processes.

The scams are designed to create urgency and encourage directors to hand over personal information or click malicious links.

While the changes are intended to help tackle economic crime and improve trust in the UK company register, criminals are exploiting uncertainty around the new rules to target businesses.

What is the scam?

The scam typically starts with an email claiming that a company director, Person with Significant Control (PSC) or other company officer must complete an identity verification process.

The message often contains urgent language and may warn recipients that failing to act could result in penalties, restrictions or compliance issues. The aim is to pressure recipients into responding before they have time to verify whether the communication is genuine.

Many of the fraudulent emails closely resemble legitimate messages from Companies House.

In some cases, scammers have copied wording directly from official correspondence, making the emails appear authentic at first glance.

However, recipients are often directed to fake websites that have been created to collect personal information, login credentials or financial details.

Companies House has made it clear that these requests should be treated with suspicion.

What do fraudsters want my information for?

If criminals successfully obtain personal or company information, they may use it for a range of fraudulent purposes.

Information such as names, dates of birth, addresses and contact details can be used to commit identity theft or build a detailed profile of an individual director.

This information may then be used to impersonate them in future scams or financial crimes.

Fraudsters could also attempt to gain access to company accounts, submit unauthorised filings or impersonate directors when communicating with suppliers, customers or financial institutions.

If authentication codes or account credentials are compromised, criminals may be able to access sensitive information or make changes to company records.

In many cases, stolen data does not remain with a single criminal group. Personal and business information can be sold to other fraudsters and used in future phishing campaigns, banking scams, invoice fraud schemes or tax-related scams.

Once a director has been identified as a potential target, they may become the focus of increasingly sophisticated attacks.

What are the signs of a scam to look out for?

Business owners need to look out for signs of scams to ensure they do not fall victim to them. Signs to look out for include:

  • Emails sent from non-genuine email addresses that do not end in Gov.uk – all emails from Companies House will end in official government domains.
  • Messages that create a sense of urgency and demand immediate action.
  • Requests for information that do not have a clear reason.
  • Links to websites that do not use an official Government web address.
  • Emails with suspicious attachments, unusual wording or spelling mistakes.

If you have received an email from Companies House that you believe is a scam, report it immediately to: phishing@companieshouse.gov.uk and delete the email from all mailboxes. Full guidance on scams can be found here.

Summer season success: Don’t get caught out by the unique payroll requirements of seasonal workers

Summer season success: Don’t get caught out by the unique payroll requirements of seasonal workers

Seasonal workers are the backbone of many British businesses during the busy summer months.

However, employers must understand the unique payroll responsibilities for these workers to ensure that they are being paid correctly.

Setting up seasonal workers

It can be easy to think of seasonal workers as temporary support, but from a payroll perspective they must be treated like any other employee.

Before a new starter is paid, employers should gather the correct information to set them up on payroll properly.

This includes obtaining the employee’s National Insurance number and ensuring the correct tax code is applied.

Where a student is taking on their first job, employers may need to use starter checklist information until HMRC provides the correct tax code.

Minimum wage requirements

Seasonal workers tend to be younger employees, meaning employers must pay close attention to the National Minimum Wage and the National Living Wage rates.

The amount an employee should receive depends on their age and employment status.

The current rates of minimum wage in England (excluding London) are:

  • National Living Wage (21 and over): £12.71 per hour
  • 18–20-year-olds: £10.85 per hour
  • 16–17-year-olds: £8.00 per hour
  • Apprentice Rate: £8.00 per hour

As younger workers may qualify for different rates, employers must ensure that any birthday taking place during their employment is reflected in their payroll calculations.

Careful attention should also be paid to deductions that could inadvertently reduce pay below the legal minimum.

Holiday pay requirements

For many seasonal workers, this is their break from the academic year and they may have holidays planned during this time.

A common misconception is that seasonal workers are not entitled to holiday pay.

Seasonal workers accrue holiday entitlement in the same way as other employees and should receive the correct holiday pay for any leave taken during their employment.

If employment ends before holiday entitlement has been used, employers may need to include payment for any accrued but untaken holiday in the worker’s final paycheque.

A fluctuation in hours

Summer roles are often linked to unpredictable demand. Hospitality venues, attractions and retail businesses may all experience spikes in activity depending on weather or events.

As a result, seasonal workers often work varying hours and employers should ensure their payroll processes can accurately capture changes in working time, overtime and shift patterns to guarantee employees are paid accurately and on time.

How can we help?

Payroll for seasonal workers can often be confusing, with shorter contracts creating unique issues for payroll processes.

We can manage your payroll processes to ensure that all of your seasonal employees can be paid correctly and on time.

For support with seasonal payroll, get in touch with our team for guidance

Parents with teenagers could lose out on Child Benefit after 31 August

Parents with teenagers could lose out on Child Benefit after 31 August

If you or any of your employees have children aged 16 to 19, it is worth noting an important HMRC deadline that could affect household finances.

What is changing?

Child Benefit automatically stops on 31 August after a child turns 16, unless a parent confirms their teenager is staying in full-time education or approved training.

Parents with children in this age group need to update HMRC before 31 August 2026 to keep their payments going.

Missing the deadline could mean losing up to £1,406 a year in Child Benefit, so it is a straightforward reminder that could make a real difference to you and your staff.

How employees can extend their claim

Extending a claim is quick and can be done online through GOV.UK or via the HMRC app.

Employees simply need to search “extend Child Benefit” and confirm their child’s education or training status.

What about higher earners?

Employees or a partner earning more than £60,000 who extend their Child Benefits claim will still be liable for the High Income Child Benefit Charge.

This charge can now be collected directly through PAYE, rather than requiring a separate Self Assessment payment.

HMRC’s online Child Benefit tax calculator can be used to work out the benefit entitlement and the value of the charge.

What you can do

A short reminder in a staff newsletter, intranet post or team briefing could be enough to stop eligible employees losing out unnecessarily.

It costs nothing to pass on and could be worth over a thousand pounds a year to the right member of your team.

If you have any questions about the High Income Child Benefit Charge more broadly, please get in touch with our team.

MTD is here – What happens if you miss the first deadline on 7 August?

MTD is here – What happens if you miss the first deadline on 7 August?

Making Tax Digital (MTD) for Income Tax became mandatory this year for sole traders and landlords with qualifying income over £50,000 and the first quarterly update deadline hits in August.

Meeting the deadline

The first quarterly update period runs from 6 April to 5 July 2026, with a submission deadline of 7 August 2026.

Some customers use calendar quarters instead, with the first period running from 1 April to 30 June, but the submission deadline is the same nevertheless.

Quarterly updates must be sent through HMRC-recognised compatible software. This does not replace your annual tax return, which is still due by the usual 31 January deadline.

What happens if the deadline is missed?

HMRC has confirmed a soft landing for the first year of MTD. No penalty points will be issued for late quarterly updates during the 2026/27 tax year and missing the 7 August deadline will not trigger an immediate fine.

However, it is still a legal requirement to meet the deadline and HMRC will record those who have done so.

In the final weeks before the first deadline, HMRC confirmed that around 400,000 taxpayers were still to register for MTD, so the levels of non-compliance are expected to be high.

The initial concessions run out in April 2027 when the points-based penalty system comes into effect.

Under this system, each missed quarterly deadline earns one penalty point. Once you reach four points, HMRC issues a fixed £200 penalty, with a further £200 charged for every subsequent late submission while you remain at the threshold.

These points remain on your file until you submit all outstanding updates and you meet all subsequent deadlines for 24 consecutive months.

Make sure you avoid late submissions

Late submissions should be avoided at all costs.

You must keep digital records and report them on time. Falling behind now makes the next update and your eventual tax return more challenging to prepare.

Building the habit of timely digital record keeping now will make the shift to the full penalty regime next year far less stressful.

If you have not yet submitted your first quarterly update or you are unsure whether MTD applies to you, our team can help you get on track.

Get in touch for support with MTD and your quarterly reporting obligations.

New proposals recommend regular ITSA tax payments from 2029

New proposals recommend regular ITSA tax payments from 2029

A new consultation paper from the Government has set out how Income Tax Self Assessment (ITSA) payments could move to a more regular, in-year footing.

The new proposals, which formed part of the latest Tax Update, follow on from recommendations made in the Autumn Budget 2025.

How could tax payments change in future?

From April 2029, taxpayers with sufficient PAYE income will be required to make ITSA payments through PAYE each payday, based on their forecasted ITSA liability.

The forecast will be based on the taxpayer’s last filed tax return and divided into equal payments across the year.

Taxpayers will be able to update their forecast using more recent information, with payments adjusting accordingly.

It is proposed that the amount collected through PAYE in any pay period would be capped at 50 per cent of PAYE income.

The consultation asks whether this threshold needs more flexibility for certain groups.

Impact on employers

Employers collect PAYE, so this change will create extra work. Tax codes are likely to change more frequently and some employers currently paying PAYE quarterly may need to switch to monthly payments as amounts collected increase.

Views are being sought on what additional support employers might need through the transition.

Reform of payments on account

From April 2029, the Government may increase the frequency of Payments on Account (POAs) for those subject to Self Assessment outside of PAYE, potentially making them quarterly or monthly.

This would bring them forward so they fall within the same tax year as the income they relate to and will, most likely, rely on information provided via Making Tax Digital.

These direct ITSA POAs would be forecast from past Self Assessment returns, with taxpayers able to update their forecast if needed.

Actual liability would still be reported and balancing payments or repayments settled when the next return is completed.

Taxpayers will keep the ability to contact HMRC if their POA no longer reflects their liability and a wider use of payment plans is being considered.

Why is the change happening?

Under the current system, there can be a delay of up to 22 months between someone earning income and paying tax on it.

This can lead to unexpectedly high tax bills, sometimes referred to as bill shock, for some taxpayers.

Around one in five ITSA tax bills are currently paid late. Spreading payments more evenly across the year, closer to when the income is earned, should make budgeting easier and reduce the risk of falling into tax debt.

The reforms will not affect how much tax is owed, only when it is paid.

What to look out for

There will also be a transition year, where payments for the previous tax year continue alongside the new in-year payments.

The consultation closes on 4 August 2026, with a Government response expected in autumn 2026 and legislation to follow ahead of the April 2029 start date.

If you would like advice on the proposed changes to ITSA payments, please get in touch with our team.

Mixed picture for UK mergers and acquisitions– Where do the opportunities lie? 

Mixed picture for UK mergers and acquisitions– Where do the opportunities lie? 

Mergers and Acquisitions (M&A) are a core part of business growth and resilience.

Done well, the acquiring business benefits from a new market and the other company gets access to additional resources and support.

Government data has shown changes in the value of UK M&As, so it is necessary to understand how opportunities may manifest in the future.

How are mergers and acquisitions changing in the UK?

The Office for National Statistics (ONS) recently published data concerning M&As and the picture is mixed.

Compared to the previous quarter, the first quarter of 2026 saw a notable fall in the number of M&As, dropping from 495 to 352.

Inward M&As, those deals wherein foreign businesses acquired UK businesses, saw an £18.8 billion reduction in value, as it was only £14.2 billion compared to the previous quarter’s £33 billion.

Domestic M&As, those conducted between UK businesses, took a slightly smaller hit of £0.4 billion, resulting in a value of only £1.5 billion compared to the previous £1.9 billion.

Outward M&As bucked the trend as UK businesses acquiring overseas companies saw a £1.7 billion increase in value, taking the £3 billion generated in the last quarter to £4.7 billion.

What opportunities are there for mergers and acquisitions in the UK?

For UK businesses unsure about expanding overseas, the data might make the case that it is a worthwhile endeavour.

Using M&As to expand internationally gives UK businesses access to people who understand the market, language and culture needed to succeed in a new territory.

This will involve engaging with the existing team and learning from their lived experiences.

For businesses focused only on UK growth, M&As remain a viable expansion strategy even as value fluctuates.

It is worth remembering that the value of a business at the point where an M&A completes is not necessarily indicative of its long-term value, as your efforts could be the key to greater future growth once you have a place in that market.

Looking to expand your business?

Our team can help you understand all aspects of an M&A to ensure you are best positioned to find sustainable growth for your business and then support you through the process.

If you want to make the most of the opportunities mergers and acquisitions present, get in touch with our team.

Should I gift a lump sum from my pension to family? Understanding the Inheritance Tax implications

Should I gift a lump sum from my pension to family? Understanding the Inheritance Tax implications

You are likely aware of the upcoming inclusion of unspent pension pots for Inheritance Tax (IHT) calculations from 6 April 2027.

This has sparked a wave of interest in finding alternative ways to save for the future.

While it might seem necessary to reduce the amount contained in your pension pot, there are tax implications that must be considered.

Is it a good idea to gift a lump sum from my pension?

Accessing a lump sum of your pension can be useful for a range of reasons, as you or your loved ones could benefit from the money you have saved over years of work.

However, IHT is not the only tax implication of accessing pension lump sums, as these can be subject to Income Tax.

You can access up to 25 per cent of your pension tax-free and the most you can take across all pensions tax-free is £268,275 – a figure that only concerns those with pensions worth more than £1,073,100.

If you are under 75 and expected to live less than a year because of serious illness, you may take all of the money from your pension in a lump sum without paying tax, provided it is below the lump sum and death benefit allowance.

Knowing what is possible to withdraw then allows you to determine whether gifting is a viable strategy.

What are the tax implications of gifting a lump sum from my pension?

Gifting can reduce IHT exposure, even to nil, but the rate of tax exemption is determined by when the gift was given in relation to when you die.

The rates are as follows:

Years between gift and death IHT rate on the gift (above the Nil-Rate Band)
Less than three 40 per cent
Three to four 32 per cent
Four to five 24 per cent
Five to six 16 per cent
Six to seven 8 per cent
Seven or more 0 per cent (Exempt)

Since 2009, the Nil-Rate Band (NRB) has been frozen at £325,000 and this is set to remain the case until 2031.

Keeping an estate’s value below the NRB, something that can be made easier with other reliefs applied, keeps it out of scope for IHT.

While having less than a year to live can let you gift your entire pension as a lump sum, doing so would not move it out of scope for IHT.

Instead, gifts should be planned and given sooner rather than later to ensure that IHT is reduced or removed.

However, gifting from your pension too soon could leave you vulnerable if you later find that you need the money that was given away.

Align your pension plans with IHT

Taking a comprehensive approach to estate planning is vital for reducing IHT exposure without negatively impacting your quality of life.

Our expert team can review your estate and plans to determine the most effective strategy for you.

Keep Inheritance Tax exposure controlled without missing out on life now. Get in touch with our team.

Employee Ownership Trusts – What business owners need to know

Employee Ownership Trusts – What business owners need to know

With more than 2,400 businesses now operating through an Employee Ownership Trust (EOT) structure, this has become a mainstream option for business owners thinking about succession and exit.

The tax benefits that helped drive that growth have recently changed, but EOTs remain a competitive succession route. For many owners, the financial case was never the only consideration.

What is an Employee Ownership Trust?

An EOT is a structure through which a company becomes majority-owned by a trust on behalf of its employees.

The existing shareholders sell a controlling stake to the trust, which holds those shares for the collective benefit of the workforce.

Employees do not buy shares directly. Instead, they benefit through profit-sharing arrangements and a genuine stake in the long-term success of the business.

For the selling owner, it is a way to exit on their own terms while keeping the company’s culture and identity intact.

Capital Gains Tax (CGT) relief changes to EOTs

Until November 2025, qualifying owners could sell to an EOT and pay no Capital Gains Tax (CGT) on the gain, but that has now changed.

For disposals completing on or after 26 November 2025, 50 per cent of the gain is exempt from CGT, with the remaining 50 per cent taxed at the individual’s prevailing rate.

Business Asset Disposal Relief (BADR) and Investors’ Relief cannot be used alongside EOT relief to reduce the chargeable portion further.

For higher-rate taxpayers, the effective CGT rate on an EOT sale is around 12 per cent. This is still well below the 24 per cent that applies to most other business disposals.

The 2025 Budget also introduced a requirement for trustees to take all reasonable steps to ensure the price paid does not exceed market value, making a robust and defensible valuation more important than ever.

Why use an EOT as part of your exit strategy?

Tax efficiency is one factor, but it is rarely the only one. Many owners are drawn to EOTs because there is no external buyer imposing a new direction, no protracted trade sale negotiations and a genuine sense that the business and its people will be looked after.

Profit-sharing arrangements also tend to improve engagement, retention and productivity, which support the business through the transition and beyond.

Is an EOT right for your business?

EOTs tend to work best where there is a strong management team capable of running the business after the transition and a workforce with genuine engagement. They suit owners whose priorities go beyond maximising the headline sale price.

The process involves obtaining an HMRC-compliant valuation, preparing financial forecasts to show the business can meet deferred consideration over time and working with specialist advisers to structure the transaction correctly.

If you are exploring your exit options and want to understand whether an EOT could be the right fit, please get in touch with our team.