We’re pleased to share the November 2025 edition of the Mercian Accountants Newsletter. With the Autumn Budget set for 26 November, attention is turning to how the Chancellor will balance the public finances while maintaining her pledge not to raise Income Tax, VAT, or National Insurance. As we mark Remembrance Sunday, we also take a moment to honour the service and sacrifice of the Armed Forces community.

This month also sees the introduction of Companies House identity verification rules for company directors and LLP members, effective from 18 November 2025. All affected businesses should take immediate action to meet the new requirements.

In this issue, we highlight the upcoming Budget changes, new guidance on Making Tax Digital, the Companies House verification process, and updates to Advisory Fuel Rates and tax tribunal decisions.

We will provide a complete summary of the Autumn Budget’s key announcements and their implications following the Chancellor’s statement. If you would like tailored advice or a post-Budget briefing, please get in touch with us today.

Remembrance Sunday: Honouring Service and Sacrifice

This November, we join others across the country in marking Remembrance Sunday, a time to honour the courage, service, and sacrifice of the Armed Forces community, past and present.

Mercian Accountants encourages everyone to support the Poppy Appeal this November, recognising the importance of remembrance and the continuing work of the Royal British Legion. If you would like to make a donation or learn more about their work, please visit the British Legion website here.

Autumn Budget 2025: What To Expect On 26 November

Chancellor Rachel Reeves will deliver the Autumn Budget on 26 November 2025, outlining the government’s plans to address the public finance deficit while maintaining its pledge not to raise the main headline taxes – Income Tax, VAT, and National Insurance.

The focus is expected to shift to wealth and inheritance taxation, with draft restrictions to Agricultural and Business Property Relief already scheduled for introduction from April 2026. Analysts also anticipate potential adjustments to capital gains tax, property taxation, and the Making Tax Digital timetable.

In our October 2025 newsletter, we examined these proposed reforms in greater detail, including their potential impact on business owners and individual taxpayers. You can revisit that analysis here: Read the October Newsletter.

Planned Inheritance Tax Relief Restrictions From April 2026

In the Autumn Budget 2024, the Chancellor announced that restrictions on the amount of Agricultural Property Relief (APR) and Business Property Relief (BPR) will apply from 6 April 2026. APR and BPR currently give up to 100% relief from Inheritance Tax (IHT) on qualifying agricultural and business property.

Draft legislation for the restrictions was published in July 2025.

What Is Expected To Happen?

A new £1m allowance will apply to the combined value of business and agricultural property assets that qualify for 100% relief under APR or BPR. The new allowance is in addition to the existing IHT nil-rate bands and exemptions.

Where the combined value of business and agricultural property assets exceeds the £1m allowance, the rate of relief will be reduced to 50% on the value of any qualifying relievable property over the £1m allowance.

For individuals, the £1m allowance will cover:

• Property in an estate at death.
• Lifetime transfers to individuals in the seven years before death.
• Chargeable Lifetime Transfers (CLTs) where there is an immediate lifetime charge (e.g. most transfers into trust).

In addition, BPR will be reduced to 50% on shares designated as ‘not listed’ on the markets of recognised stock exchanges – this means that 100% BPR will no longer be available on AIM shares.

What Is The Impact Of The Restriction?

A simple example would be an individual whose estate includes shares in an unquoted trading company valued at £2 million. Under the current rules, 100% BPR would be available, meaning none of the shareholding is subject to IHT. If the proposed restriction applies, only £1 million BPR is available. The remaining £1 million of the shareholding would be subject to 50% BPR, meaning £500,000 would form part of the estate subject to IHT. The £325,000 nil rate band would still be available to offset against the estate subject to IHT.

What Can Be Done Now?

It is impossible to plan effectively until the potential tax exposure is known, so the first step is to establish the potential exposure to IHT as a result of the changes and estimate the scale of any IHT liabilities which may arise from 6 April 2026. This step should include a comprehensive analysis of all likely assets and liabilities in a person’s estate, along with how they will be distributed under their Will.

Wills should also be reviewed carefully from an IHT perspective – there may be some simple changes which might improve the overall IHT position.

As noted above, the changes announced are proposals and not yet law. While it may be wise to start to plan, remember that we do not yet know the final rules. If the proposals affect you, please speak to us.

Companies House Identity Verification Rules for Company Directors and LLP Members – Action Required

From 18 November 2025, all company directors and members of Limited Liability Partnerships (LLPs) must complete identity verification with Companies House by their due date.

The Companies House register will be updated on that date to display due dates for each role held.

How To Verify Your Identity

Verification is a two-step process:

1. Verify your identity and obtain your Companies House personal code.

2. Provide your personal code to confirm your identity for each role you hold.

You can verify your identity using the Companies House online service via GOV.UK One Login, which guides you through the process depending on your ID and device.

If you have already verified your identity for Companies House, you do not need to do so again – but you must provide your personal code for each role you hold.

Filing Requirements

From 18 November, you will not be able to file a company or LLP confirmation statement unless all directors and members have verified their identity and their personal codes are included. Filings will be rejected if these are missing.

These new verification rules are part of broader economic crime reforms aimed at preventing fraud and enhancing transparency in the UK business sector. Companies House aims to create a more secure and trustworthy business environment for legitimate firms. For most users, the process takes only a few minutes and needs to be completed once.

Failing to verify your identity will be considered an offence for the individual, company, and LLP. Companies House may take enforcement action, including financial penalties and potential prosecution.

All company directors and LLP members should complete the verification process promptly. For more information or to begin verification, visit: Verify your identity for Companies House

Making Tax Digital: Advice For Digitally Excluded Taxpayers

HMRC has published long-awaited guidance on how digitally excluded individuals should apply for an exemption from Making Tax Digital (MTD) for Income Tax. Gaining HMRC’s agreement that a person is digitally excluded is essential.

What Does ‘Digitally Excluded’ Mean?

The MTD legislation defines digitally excluded individuals as those who are unable to use electronic communications or keep electronic records due to their religion, age, disability, location, or any other reason. Unfortunately, HMRC’s guidance does not tell us how they intend to interpret the legislation, although they say they will not accept applications for an exemption if the only reason for applying is one of the following: 

• The individual previously filed a paper return. 
• The individual is unfamiliar with accountancy software. 
• The individual has a small number of digital records to create each tax year. 
• It will take extra time or cost for the individual to sign up for and use MTD for Income Tax.

Applying For Exemption Due To Digitally Excluded Status

To apply for digital exclusion, you or your representative should either call HMRC’s self-assessment general enquiries line (0300 200 3310) or write to:

Self Assessment
HM Revenue and Customs
BX9 1AS
United Kingdom.

If you would like a friend or family member to call/write on your behalf, you should authorise them to do so, either over the phone or by writing to HMRC.

The application should include the following information:

• Your name, address and National Insurance number.
• Details of how you currently submit your tax return (including if someone else helps you do this). 
• The reason you think you are digitally excluded. This should include any additional information to support the claim. 
• Whether you have an agent (for example, an accountant) and what they will do for you. 
• Any additional needs you have, so that HMRC can provide the right support.

Written applications should use the following title: ‘Making Tax Digital for Income Tax – digitally excluded application’

HMRC should respond within 28 days. If HMRC disagree that you are digitally excluded, you can appeal, in writing, to the address provided in the decision letter.

Individuals Already Excluded From MTD For VAT

If you are already digitally excluded for MTD for VAT purposes, please get in touch with HMRC by phone or in writing using the contact details provided above. Provided your circumstances have not changed, HMRC will agree that you are exempt from MTD for Income Tax. HMRC will need the following information:

• Your National Insurance number. 
• Your VAT registration number. 
• The reason you are digitally excluded from sending VAT returns using MTD compatible software, and if your circumstances have changed.

For more information, please get in touch with us – we can discuss your situation and help you plan your approach to MTD for Income Tax.

VAT: When Is Biscuit ‘Chocolate Covered’?

In a recent First-tier Tribunal (FTT) case, Ferrero Ltd v HMRC, the FTT ruled that Nutella Biscuits are zero-rated for VAT.

VAT legislation provides that biscuits are zero-rated unless they are wholly or partly covered in chocolate or a substance that is similar to chocolate. HMRC argued that the Nutella Biscuits should be standard-rated on the basis that they were covered in a chocolatey substance.

Nutella Biscuits are constructed in layers, with Nutella filling and a ring made of a chocolate-like substance sitting within two baked biscuit elements that represent the outer surface of the product.

The FTT agreed that the chocolatey ring was visible between the two baked biscuit elements, but it did not form part of the outer surface of the biscuit, so it could not be considered ‘covering’.

As such, the FTT found that the biscuits were not covered in anything and could therefore be zero-rated.

When introducing a new food product, it’s essential to consider its VAT rating, as errors can be costly. As demonstrated in the Nutella Biscuit case, the legislation is complex; therefore, please do not hesitate to contact us if you require advice.

Partial Win For Taxpayer In SDLT/ATED Relief Case

In a recent Upper Tribunal (UT) case, Investment and Securities Trust Limited v HMRC, the UT found that a company was entitled to Annual Tax on Enveloped Dwellings (ATED) relief as it held an option over a property exclusively for the purpose of developing and reselling that property, in the course of its property development trade.

The First Tier Tribunal (FTT) had previously ruled that neither ATED relief nor higher rate Stamp Duty Land Tax (SDLT) relief were available in respect of the property option.

The company had acquired the option for three purposes:

• Addressing the director/shareholder’s pressing need for funds.
• Preventing a sale to a third party.
• Allowing time to raise development funds.

The UT agreed with the FTT that relief from the higher rates of SDLT was not available because the legislation requires the chargeable interest to be acquired exclusively for development or redevelopment of land and resale. This test was not met.

The UT found that the FTT had misinterpreted the statutory test for ATED relief, however. The test was whether the interest was held exclusively for development and resale. It followed that once the company had acquired the option, purposes 1 and 2 had been met, and the sole reason for the company holding the option was to develop it.

For these reasons, the UT allowed the ATED relief appeal but dismissed the higher rate SDLT relief appeal.

Advisory Fuel Rates: Electric Car Charging

In the previous edition of this newsletter, we showed HMRC’s Advisory Fuel Rates (AFRs) applicable from 1 September 2025. You may have noticed a new rate for fully electric vehicles that are charged using public charging facilities. This means that we now have two electric car rates, which from 1 September are as follows:

Where the vehicle is charged at home:                                8p per mile

Where the vehicle is charged using public chargers:          14p per mile

Updated quarterly, AFRs help employers reimburse employees for fuel costs incurred during business travel in company cars. They’re also used to calculate the VAT element of business fuel. Additionally, employees may use these rates to repay their employer for the cost of any private fuel usage.

The following updates have been made to HMRC’s AFR guidance:

• If the cost per mile of a public charger exceeds the AFR, employers or employees may use a higher rate, provided they can demonstrate that the cost per mile was indeed higher.
• For journeys where a company car is charged at both public and residential locations, you may apportion the mileage to reflect the proportion of charging at each location.
  • Any apportionment should be carried out on a fair and reasonable basis.

Diary of Main Tax Events

November / December 2025

November Reflections and What Lies Ahead

With the Autumn Budget just weeks away, now is an ideal time to review your business and personal tax position, ensure your reporting processes are up to date, and prepare for any forthcoming changes to reliefs and compliance requirements. The new Companies House identity verification rules, proposed APR and BPR restrictions, and continuing developments in Making Tax Digital all highlight the importance of early preparation.

November also offers a moment of reflection as we mark Remembrance Sunday and acknowledge the service and sacrifice of the Armed Forces community. We encourage everyone to show their support by donating to the Royal British Legion’s Poppy Appeal, which provides vital assistance to serving personnel, veterans, and their families.

At Mercian Accountants, we are here to help you stay informed, compliant, and ready for whatever the Budget brings. If you would like advice tailored to your specific circumstances or assistance with preparing for upcoming changes, please contact our team.

N.B. This document is for information only and does not constitute tax advice

Related posts:

October 2025 Newsletter September 2025 Newsletter Autumn Statement 2022: Key Tax Change Highlights Inheritance Tax (IHT) Receipts by HMRC Up 18% Since 2022