July 2026 Newsletter

July arrives against a backdrop of significant political change. Keir Starmer’s resignation on 22 June has raised questions about the direction of tax policy ahead of an Autumn Budget, and clients with disposals or transactions under consideration should read the planning section below before acting. Alongside the politics, July brings two back-to-back payment deadlines, the close of the first Making Tax Digital quarterly period, an important update on mileage rates that most businesses need to act on now, and a major change coming to Companies House filings.

As ever, the businesses that act early rather than react are the ones that avoid unnecessary costs and penalties. If anything in this newsletter raises questions for your situation, the team at Mercian is here to help.

Making Tax Digital – Your First Quarterly Submission Deadline Is Here

If your gross qualifying income from self-employment or property exceeded £50,000 in the last tax year, you have been operating under Making Tax Digital for Income Tax since 6 April 2026. The first quarterly period – 6 April to 5 July 2026 – has now closed, and the deadline for submitting that first digital update to HMRC is 7 August 2026.

If you have been keeping digital records in compatible software throughout the quarter, the submission itself should be straightforward. If records are incomplete, now is the time to address them – gaps are far easier to fix before submission than after.

Before you submit, check:

• All income and expense records are captured in your MTD-compatible software
• Transactions are correctly categorised
• Your software is properly connected to your HMRC account

Note that while a soft-landing approach to penalties applies in 2026-27 – meaning penalty points will not accrue for late submissions this year – you still need to file all four quarterly updates before you can submit your Final Declaration in January. Skipping is not a free option.

From April 2027, the threshold drops to £30,000, and from April 2028 to £20,000. If you are not yet in scope but expect to be, now is the time to start building compliant record-keeping habits.

Political Change and Tax Policy – What Starmer’s Resignation Means for Planning

Keir Starmer’s resignation on 22 June has created a period of political uncertainty that is directly relevant to tax planning. Andy Burnham is the frontrunner to succeed him, and while no formal policy announcements have been made, the direction of travel is worth noting.

Burnham is aligned with the Tribune group of Labour MPs, who have advocated bringing capital gains tax rates closer to income tax rates. He has also signalled support for landlords paying National Insurance contributions on rental income. Any changes of this nature would most likely be introduced at an Autumn Budget – expected in October or November 2026, once a new leader is in place.

What this means for planning now:

• If you are considering selling a business asset, shares, or a second property, it may be worth taking advice sooner rather than later. CGT rates could move again before the end of the tax year.
• Landlords should monitor the NI on rental income question closely. Nothing is confirmed, but it could be costly if introduced.
• Director-shareholders should be aware that further changes to dividend and remuneration structures may come in the autumn.

We are watching developments closely and will update clients as the picture becomes clearer. In the meantime, if you have a transaction or disposal under consideration, early planning remains the best protection against unforeseen changes.

Self-Assessment Payment on Account – Due 31 July

The second payment on account for 2025-26 is due on 31 July 2026. This is calculated as half of your prior year’s tax liability and may feel disconnected from your current trading – particularly if this year has been quieter or your income has changed significantly.

If your 2025-26 profits are likely to be lower than last year, you can apply to reduce your payment on account. This must be done before the payment date, not after. If you underpay and your final liability proves higher, HMRC will charge interest on the shortfall.

Contact us before the end of July if you would like to review your position. We can assess whether a reduction is appropriate and help you make the claim correctly.

P11D Class 1A NIC – Due 19/22 July

Following the 6 July P11D submission deadline, the next step is paying the employer Class 1A National Insurance charge on benefits in kind provided during 2025-26.

• 19 July – payment deadline for non-electronic payments
• 22 July – payment deadline for electronic payments (cleared funds required)

The Class 1A rate is 15% on the taxable value of benefits provided. If you paid your benefits rather than reporting them via P11D, the charge still applies to the same dates.

If you discover an error in your P11D submissions after the 6 July deadline, contact us promptly. Amended returns can be submitted, but acting quickly limits exposure to penalties and interest.

Mileage Allowance Increase – Have You Updated Your Records?

For the first time in 15 years, the HMRC-approved mileage rate for cars and vans increased on 6 April 2026 – from 45p to 55p per mile for the first 10,000 business miles in the tax year (the rate above 10,000 miles remains at 25p).

This is backdated to the start of the 2026-27 tax year, which means:

For employers: If you have been reimbursing employees at the old 45p rate since April, you owe them the additional 10p per mile for all business travel since 6 April. This should be corrected and paid promptly to avoid the shortfall being treated as a taxable benefit.

For employees using their own vehicles: If you have been claiming at 45p, you can submit an updated claim for the additional 10p per mile through PAYE or your self-assessment return.

For the self-employed: If you use the simplified mileage method, the 55p rate applies to all qualifying business travel from 6 April 2026. Review any records prepared since April and update your figures accordingly.

This change affects the vast majority of businesses where staff or directors use personal vehicles for work. It is worth checking now rather than discovering the discrepancy when preparing year-end accounts.

ISA Reform 2027 – New Tax on Cash Interest Inside Stocks and Shares ISAs

From 6 April 2027, a flat 22% tax charge will apply to interest earned on uninvested cash held within Stocks and Shares and Innovative Finance ISAs. The annual Cash ISA limit also falls from £20,000 to £12,000 for under-65s, and transfers from investment ISAs back into Cash ISAs will be banned for this group.

To illustrate the impact: a saver with £40,000 of uninvested cash earning 4.5% interest would face a £396 annual tax bill – money previously entirely sheltered.

Over-65s are fully exempt – their £20,000 limit and full flexibility remain unchanged.

The 2026-27 tax year is the last under the current rules. If you hold uninvested cash or Money Market Funds inside a Stocks and Shares ISA, get in touch before April 2027.

Companies House Filing Changes – What You Need to Know Before April 2028

This week, we published a detailed post on the significant changes coming to the way companies file their accounts at Companies House. The reforms stem from the Economic Crime and Corporate Transparency Act 2023, and while the implementation date is set for 1 April 2028, the changes are substantial enough to begin preparing now.

Three things are changing:

1. Profit and loss accounts will become compulsory to file

Currently, small companies and micro-entities can file “filleted” accounts that omit the profit and loss account. From April 2028, this will no longer be permitted – meaning turnover and profitability will become visible to Companies House.

The current thresholds (for financial years beginning on or after 6 April 2025) are:

You must meet two of the three criteria to qualify.

2. Paper and web filing will close for accounts

All accounts must be submitted in iXBRL format via compatible commercial software. The Companies House web portal will remain open for other filings, such as confirmation statements, but not for accounts.

3. A publication opt-out will be available

Small companies and micro-entities can choose not to publish their P&L on the public register while still filing it with Companies House. The information reaches Companies House, but directors can keep it off the publicly searchable register.

If you currently file your own accounts via the Companies House web portal, that route will close. You will need a presenter account and compatible software well before April 2028. Read our full post for more details, and get in touch to discuss how this affects your specific arrangements.

VAT Rate Change – Prepare for the September Reversal

The temporary 5% VAT rate on children’s meals, family cinema and theatre tickets, and admissions to attractions such as museums, zoos, and soft play venues runs until 1 September 2026, when the standard 20% rate automatically reinstates.

If your business updated its point-of-sale systems, invoicing, and VAT records before 25 June, diarise the reversal now and ensure anyone responsible for pricing or billing is aware of it. Your next VAT return may straddle the rate change – make sure transactions at each rate are clearly distinguished in your records.

What Businesses Should Be Doing Now

MTD-Registered Sole Traders and Landlords

• Finalise digital records for 6 April – 5 July and submit your first quarterly update by 7 August
• If records are incomplete, address this now rather than in August

Self-Assessment Taxpayers

• Review your 31 July payment on account – if your 2025-26 income is lower than last year, consider applying to reduce it before the deadline

Employers

• Pay Class 1A NIC by 19 July (non-electronic) or 22 July (electronic)
• Check whether mileage reimbursements since April have been paid at the new 55p rate – if not, top up the difference

Self-Employed and Employees Claiming Mileage

• Update mileage records to reflect 55p per mile from 6 April 2026 and submit any backdated claims

VAT-Registered Businesses

• Diarise the 1 September VAT rate reversal and plan your system updates accordingly

ISA Holders

• If you hold uninvested cash or Money Market Funds inside a Stocks and Shares ISA, review your position before April 2027 – the current tax year is the last under the existing rules
• Over-65s are unaffected, but should be aware of the changes when advising family members

Limited Companies

• Review your accounts filing arrangements in light of the April 2028 Companies House changes
• If you currently file via the web portal, start investigating software alternatives

Anyone Considering a Disposal or Transaction

• With political uncertainty around CGT rates, take advice before proceeding – early structuring decisions can make a significant difference

Did You Know?

The Domesday Book Was Essentially a Tax Survey

William the Conqueror commissioned the Domesday Book in 1085 as a comprehensive survey of England’s landholdings, property values, and resources. Its primary purpose was to establish exactly who owned what and what tax they owed the Crown. It remains one of the most ambitious administrative exercises in English history – and evidence of the deep roots of the impulse to know who owes what.

The Window Tax Created Bricked-Up Windows

Between 1696 and 1851, England taxed windows. The more windows a property had, the more tax was owed. Thousands of windows were bricked up across the country to reduce liability, and you can still see evidence of this on older buildings today. It also gave rise to the phrase “daylight robbery.”

VAT Was Introduced in the UK in 1973

Value Added Tax replaced Purchase Tax when the UK joined the European Economic Community. The initial rate was 10% and applied to far fewer goods than the standard rate covers today. It has since risen, fallen, been split into multiple rates, and generated an entire industry of advisers dedicated to working out which rate applies to which product – a question that, as this summer’s temporary reduction demonstrates, remains very much alive.

Diary of Main Tax Events – July and August 2026

Looking Ahead

August is quieter for deadlines, but the 7 August MTD submission gives self-employed individuals and landlords in scope an early focus. The more significant horizon is October or November, when a new Prime Minister is expected to deliver an Autumn Budget. Given the signals around capital gains tax, rental income, and the ISA reforms already confirmed for April 2027, clients with investments, disposals, or property portfolios under review should use the summer months to take stock and plan, rather than waiting to react.

We will keep you updated as political and policy developments become clearer. In the meantime, get in touch with the team at Mercian if you would like to discuss any of the above.

This newsletter is for general guidance only and does not constitute professional advice. Please contact us to discuss your specific circumstances.

Related posts:

April 2026 Newsletter May 2026 Newsletter March 2026 Newsletter October 2025 Newsletter