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Welcome to our Business Companion Newsletter for April 2026

Lorraine is Retiring Lorraine
Sadly (for us) our payroll officer, Lorraine Cybaniac, is retiring this month. Lorraine has provided steadfast support since taking over our payrolls at short notice in 2018, including processing our furlough claims and managing government changes to payroll and pensions.  Lorraine has provided a friendly and efficient contact for us all, despite many last minute and unusual payroll requests. I am sure we will all miss her. 

April 2026

• Payroll changes and Notes

• Key Tax Changes for 2026/27

• Pay structure for directors 2026/27

• Directors: Do your Digital ID check now!

 

Payroll Changes and Notes


New Payroll Officer
Lorraine will be handing over to Aakash Mehra during April. Aakash is an experienced payroll officer and he is looking forward to be working with all our clients, you can contact him at the usual email address, payroll@simpleaccounting.co.uk. 

Deadlines
As agreed in our engagement letters, please give us three working days notice for changes to the monthly payroll including new starters and specific hours worked etc. This will allow time for us to get back to you if we have any queries. It would be particularly helpful in April if you could email any changes/ instructions to Aakash as soon as you can: we will be having a system change and payslips and reports will change in format.  So, for example if you have a new starter at the beginning of April you don’t wait for the end of the month to tell us! 

We don’t Calculate Annual Leave
In general, we don’t calculate and monitor your staff’s annual leave for you as part of our payroll service.  This is the responsibility of the employer. Annual Leave entitlement should be stated within the employment contract for each staff member.  From 6 April 2026, employers have a duty to keep records of annual leave and holiday pay, which must be kept for a minimum of 6 years. Make sure you are following the latest legislation about holiday pay – see https://www.acas.org.uk/checking-holiday-entitlement/calculating-holiday-pay 

Pension Providers 
As part of our payroll service we are happy to upload pension contribution details for one pension provider for each client. Our preferred pension provider is the Peoples Pension and we recommend that you offer Employer-only contributions.  See our website page on Auto-enrolment.  If some of your employees wish to opt out of your main workplace pension provider and use another pension scheme for Employer (only) contributions you will need to check that it is a Pension Regulator Credited Scheme. You will need to manage the regular or one-off contributions made to this secondary scheme, we will not do it as part of our payroll service. 

Key Tax Changes for 2026/27


Making Tax Digital for Income Tax (MTDIT)
If your self-employment, letting income exceeds £50,000pa (assessed on last year, 2025-26’s income) you will now have to join Making Tax Digital for Income Tax (MTDIT).  This means frequent reports of income and expenses to HMRC from your books.  Ideally this will be done using MTDIT compliant software. You will have to make the reports up to 5 July, 5 October, 5 January and 5 April.  The HMRC even expects a final report after the tax year ends. Amazingly the tax return itself is not actually part of MTD IT.  So instead of making one Personal Tax Return every year, you will now have to submit six.  

Of course these reports will not generate themselves.  Overall they will have to agree to the Personal Tax Return covering the same five submissions from the same four quarters.  The whole process will not be free.  Some accountants will be charging heavily for preparing quarterly accounts for thousands of businesses that don’t want them.  Many accountants are not taking on new clients.  There is already a shortage of accountants in this, the country with one of the largest shares of accountants in its workforce internationally.    

Taxpayers joining MTDIT from this month will not be penalised for late filing in the first year.  Which is lucky, because the software is not yet working.  If your personal turnover exceeds £30,000 next year you will have to join MTDIT from 1st April 2027 after which the penalties will apply.  This massive increase in the reporting burden is quite enough to suggest that your self employment business should rapidly become incorporated precisely to avoid the quarterly filing requirements.  

A brief is available at https://simpleaccounting.co.uk/resources/tax-helpsheets/?hs=68

Dividend Tax
Dividend tax rates for will rise by 2% from 6 April 2026.  Basic rate rises to 10.75% and higher rate to 35.75%. 
S455 Corporation Tax on loans made to Director after 1 April 2026 will also be taxed on the Company at the higher rate of 35.75% 

Rental Income Tax
The tax rates on rental and savings income all rise by 2% from 1st April 2027 to 22%, 42% and 47%.  Mortgage costs are tax relieved at an increased rate of 22% from April 2027.

Capital Allowances Taxes
100% Full Year Allowances on zero-emission cars and charging points will continue for an extra year running to 1 April 2027.  If you want to buy an electric car – the clock is running.  

Pay Structure for Directors 2026/27


The best strategy remains the same as last year – minimum salary and then dividends.  But you need to consider a number of factors. The best split between salary and dividends depends on: whether you can claim Employment Allowance (EA), your Corporation Tax Rate and whether reserves in your company allow you to pay dividends.

Issues to Consider

1. Employment Allowance (EA) Eligibility 
Will the employer qualify? Businesses with only one employee who is a director/employee are not eligible for EA.  In order to be eligible there needs to be a second employee or director and both Directors/ Employees need to be paid at or above the secondary threshold (£5,000) to qualify.

If the Employer qualifies, is there any spare EA (up to £10,500) left to use on the proprietor’s salary?

If the Employer NI on your director salary is covered by EA then it will probably be best to pay yourself a £12,570 salary and any remainder as dividends.

But if you can’t use EA to cover your Employer NI then you should pay a minimum salary of just £6,500pa.  Beyond this a combination of interest and dividends may be more effective than more salary.   

2. NI Credits
We recommend a salary that gives a full year of NI credit (in order to qualify for a full state pension).  So your salary will need to be at least at the Lower Earnings Limit ie £6,500pa.  You may have to pay some Employer NI on this.

3. Corporation Tax
Consider the effect rate of CT relief on company profits (19% or 26.5%)? Is the company claiming R&D tax credits? If so, lower tax rates make dividends more tax-efficient. If you are paying a Corporation Tax at the higher rate, then paying extra dividends will become more expensive so you should prioritise salary over dividends.

4. Reserves
We need to consider whether dividends can be afforded from past company profits, even if current profits are poor.
    
For more detailed advice about your particular situation just contact us.

Directors: Do your Digital ID check now! 

If you haven’t already done your Digital ID check as a company director or Person with Significant Control (PSC) it is time to do it now!

The early months of implementation by Companies House have revealed systemic problems, low compliance rates, and significant administrative burdens for companies and advisers alike.  So assuming that you may not find the process straightforward do it now before you receive warning letters from Companies House.

If you are a Company Director and/or Person with Significant Control (PSC) you have to go through the digital ID process.  At the end of the ID check process you will receive an 11 digit personal code in the form XXX-XXXX-XXXX which is required in order to process your company’s confirmation statement.  The personal code is specific to you, not your company, so if you are a director of several companies you only need to do the Digital ID process once. 

We issued guidance on getting your ID checked in our October Newsletter.  However many of our clients are struggling with the Companies House systems.

Here are some common issues and concerns: 

Post Office ID Checks 
For some people (e.g. those without an up-to-date Smartphone) the option of completing the process at a Post Office may sound like an easy solution, however some of our clients have not found it easy at all.  

Companies House have issued this guidance for using the Post Office to do your digital ID.  In order to get the letter with the QR code you need to start the process on a computer and enter your details and the type of physical ID you are using for the verification. You also have to select which Post Office you are using. 

Once you have been to the Post Office you should receive an email giving you your personal code.  Alternatively follow these instructions for retrieving your code – 
 
1.      Go to this site and login https://www.gov.uk/guidance/verify-your-identity-for-companies-house
2.      it then says We’re taking you to GOV.UK One Login to sign in to this service. click on the green box at the bottom of the page Go to GOV.UK One Login 
3.      then scroll down to ‘sign in’ at the bottom. Enter your email address and password (for gov.uk)
4.       the system should then send a security code to your phone.  
5.      If your identity check was successful, you’ll:
– see a message that says ‘You have already proved your identity’
– need to select ‘Continue’ to see your Companies House personal code
– be able to view your personal code in the ‘Manage account’ section of your Companies House account”

Name Mismatch Errors 
The most common technical failure is the “name mismatch” problem. Identity verification is typically completed using a passport or driving licence, which often shows a person’s full legal name (e.g. William George Jones). However, Companies House records may show a shortened or preferred name (e.g. Bill Jones). When the ID code is linked, Companies House checks for an exact match — and rejects many submissions. While Companies House allows “preferred name” explanations, many users are unaware of this option, causing avoidable delays.

Directors Who Are Also PSCs Are Being Missed
If an individual is both a director and a PSC, the code must be submitted twice, once for each role (we will do this for you). The system does not assume they are the same person unless records align perfectly. Failure to submit both leads to overdue PSC filings, even where the director record is compliant.

Submission Windows 
A submission window is a limited period during which Companies House allows a personal ID code to be linked to a specific directorship or PSC role. Submission windows are visible on the Companies House company record, under the People tab, for each director and PSC individually. They are often different even where the same individual is both director and PSC. For advisers managing dozens or hundreds of companies, this creates a logistical nightmare. The Companies House system will not allow early submission, even if all information is ready. Missed windows result in overdue statuses and warning letters.

Future Penalties for non-compliance?
Legally, the obligation for completing digital ID checks sits with the company and its officers. Companies House now has enhanced civil penalty powers. Initial enforcement has focused on warning letters, but fines are expected to follow as the regime matures

Feedback please! 
We need all our clients who are directors or PSCs to give us their personal codes as soon as possible. We will hold these on file for filings at Companies House. Please can you also give us feedback on how you have found the process and any problems you experienced.  Email us at admin@simpleaccounting.co.uk.  

Need Help?


Please contact us if we can help you with these or any other tax or accounts matters.

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About Us


Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Xero.

‘All clients using these software packages can benefit from our support. Visit our website www.simpleaccounting.co.uk for a look at the resources on offer.’
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