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Business Companion Newsletter December 2025
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Welcome to our Newsletter for December 2025.

Christmas Payroll Deadlines
Please email details of your December payroll to payroll@simpleaccounting.co.uk by this Friday,19th December.  We will then return your payslips and reports to you by Tuesday 23rd December to allow everyone time to be paid before Christmas. If there are any late changes they will be processed after 28th December.

Wishing you a Happy Christmas and a successful New Year!
Jennifer, Lorraine & Mark

December 2025

• Tax Refunds in Pension Schemes

• Salary Sacrifice Pension Schemes

• Income Tax Increases

• Paying the High Income Child Benefit Charge via PAYE

Tax Refunds in Pension Schemes


A client writes:  ‘I’ve just received this message from my pension scheme – can I claim free money?  What’s your advice?’

The Pension Scheme is talking about employee contributions from post-tax income. These contributions are from employee cash which is net of Employer NI, Employee NI and income tax. The ‘offer’ is to return tax for any extra contributions by grossing them up for 20% of the missing income tax. This is what the offer calls ‘the money you can still claim’.  You can also get the rebate on the Employee NI through the payroll system.

But the Employer NI is never refunded.  And higher rate taxpayers have to reclaim the missing 20% (ie the 40% taxpayers pay less the 20% Pension Scheme refund) through a personal tax return.

The simple solution is to avoid all this by making an employer pension contribution, which is tax free – and therefore doesn’t set up any of these complex mechanism to refund taxes back to you. 

Salary Sacrifice Pensions 


Many employers offer salary sacrifice schemes enabling employees to give up some of their salary in exchange for an equivalent employer’s contribution into their pension

If you sacrifice some of your salary to your pension, the amount you give up is not counted as taxable income. This can be mutually beneficial for employees and employers due to the national insurance contributions (NICs) and income tax saved. There is currently no limit on the amount that can be sacrificed and avoid NICs, but income tax relief is subject to an annual allowance of £60,000 after which contributions are charged at the individual’s highest marginal tax rate.

The Chancellor has announced that from April 2029 annual salary sacrifice employer pension contributions above £2,000 will attract employer’s NI (currently 15%) and employee’s NI at standard rates (currently 8% or 2% depending on earnings).

The answer is to have a non-contributory pension scheme. This is the standard scheme we offer.  If your contract terms avoid an annual salary sacrifice then your employer can pay up up the full £60k without incurring Employer NI. 

If you currently choose to sacrifice some of your salary in order to qualify for tax free childcare or child benefit you may be better off continuing to do so, even if it results in higher NICs.

Income Tax Increases


The Chancellor will add two percentage points to the rates of tax paid on income received from dividends, savings and property from April 2026.

If you receive dividends; interest and other savings; or income from a property you rent out as a sole trader landlord, you will see an increase in the amount of tax you have to pay on these sources of income.

Dividends will be taxed at 10.75% basic rate; and 35.75% higher rate (currently 8.75%; and 33.75%). Property and savings income will be taxed at 22% basic rate; 42% higher rate; and 47% additional rate (currently 20%; 40%; and 45%). The hike on dividend tax will be effective from April 2026 while the increased tax on savings and/or property income will be imposed in April 2027.

The most significant tax raising measure is the freezing of the personal tax thresholds for a further three years. The personal allowance (the amount you can earn before paying any income tax) will remain at £12,570, with the higher rate and additional rate thresholds fixed at £50,270 and £125,140 respectively until April 2031. This means that as income increases as a result of inflation, more people will be drawn into paying tax at the increased tax rates that apply above these thresholds.

ISA allowance
Currently you are allowed to invest up to £20,000 per year in an Individual Savings Account (ISA) and any interest you receive is tax free. From April 2027 the ISA allowance will be amended so that while the maximum investment will remain at £20,000, £8,000 of this must be invested in non-cash ISAs such as stocks and shares ISAs. This effectively reduces the maximum annual amount that can be put into cash ISAs to £12,000.

Taxpayers over 65 will still be able to invest up to £20,000 in cash ISAs.
 

Paying the High Income Child Benefit Charge via PAYE


HMRC now offers an online service for parents to register for the High Income Child Benefit Charge (HICBC) to be collected automatically from their payslip.  But we would usually recommend against using it. 

The HMRC has made lots of changes to make this penal and confusing tax more palatable.  Now they want to offer staff earning £60K + the opportunity to pay the HICBC directly through their PAYE tax code without completing a self assessment tax return. Taxpayers with income from other sources such as property or self-employment income will still be required to file a self assessment tax return and will not be able to use the new HICBC service.

When you register, HMRC will check that you have deregistered from self assessment and ask questions to confirm whether you or your partner has the higher adjusted net income. Where your partner receives child benefit, HMRC will use their national insurance number to verify the exact amount of child benefit payments made to them.

If you have income above £60k and you or your partner currently receive child benefit payments, our general advice would be to cease claiming child benefit.  The dreadful Erridge Case covered in our June 2024 newsletter shows the HMRC’s mercilessness if you get this wrong. 

Need Help?


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

In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.

New Clients Welcome


If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.

See details of our Business Companion Service.

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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