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As we move into September, there are several important tax developments and reminders for businesses and individuals to keep in mind. This month’s newsletter looks at the opportunity to recover VAT on certain pre-registration costs, as well as an important change to the way Incorporation Relief must now be claimed. We also look at when Stamp Duty Land Tax may apply to property transactions and highlight the recently announced date for the next UK Budget. Finally, our Tax Diary provides a useful reminder of the key filing and payment deadlines for September and October. We hope you find this month’s newsletter informative and useful.

Recovering VAT on pre-registration costs

Businesses that register for VAT may be able to reclaim VAT paid on certain goods and services purchased before VAT registration. 

There are specific time limits for claiming pre-registration VAT. VAT on goods can generally be reclaimed where the goods are still held by the business or have been used to produce other goods that are still held by the business. The claim must relate to goods purchased within 4 years before the date of registration.

VAT on services can usually be reclaimed where the services were purchased within 6 months before registration. In both cases, the costs must relate to the business that is now registered for VAT and be attributable to its taxable activities.

Pre-registration VAT should be included on the business’s first VAT return. Businesses should ensure they hold valid VAT invoices and records to support the claim, including details of how any business and private use has been calculated.

There are special rules for certain situations, including partially exempt businesses, businesses with non-business income and significant capital assets covered by the Capital Goods Scheme. These rules can affect the amount of VAT that can be recovered.

It is therefore important for businesses to check the pre-registration rules carefully to ensure that all eligible VAT is identified and claimed correctly.

Incorporation Relief may reduce your CGT bill

When a sole trader or the partners in a partnership transfer a business to a limited company, Capital Gains Tax (CGT) may arise. This is because business assets are normally treated as being transferred at their market value, which may be considerably more than their original cost.

However, Incorporation Relief can allow some or all of the resulting gain to be deferred.

Broadly, the relief may be available where a business is transferred to a company as a going concern, together with all its assets, other than cash if desired, and the consideration received is wholly or partly in shares in the company.

Where the conditions are met, the gain eligible for relief is deducted from the CGT base cost of the shares received. This means that CGT is generally postponed until the shares are eventually sold or otherwise disposed of. If cash or other consideration is received alongside shares, the relief is normally restricted to the proportion of the transfer represented by shares. Part of the gain may therefore become immediately chargeable to CGT.

Incorporation Relief must now be claimed

An important change applies to businesses transferred to companies on or after 6 April 2026. Previously, Incorporation Relief applied automatically where the necessary conditions were satisfied. For transfers from 6 April 2026, the relief must instead be claimed. The claim will normally be made through the Self-Assessment tax return for the tax year in which the transfer takes place.

The claim must be made on or before the first anniversary of 31 January following the tax year in which the business transfer took place. For example, for a transfer during the 2026/27 tax year, the claim deadline will normally be 31 January 2029.

Failing to make a valid claim could therefore result in CGT becoming payable on gains arising when the business is transferred to the company.

Incorporation Relief is not necessarily the best option in every case. Before incorporating a business, it is worth considering the immediate CGT consequences, whether other reliefs may be available and the potential tax position when the company shares are eventually sold.

Professional advice should therefore be obtained before completing a business incorporation, particularly where the business has significant goodwill, property or other assets that have increased substantially in value.

When do you pay Stamp Duty Land Tax?

Stamp Duty Land Tax (SDLT) is a tax that may apply when you buy land or property in England or Northern Ireland. It is important to check whether SDLT applies before completing a purchase, as the tax can represent a significant additional cost.

SDLT can apply when you buy a freehold property, a new or existing leasehold property, a property through a shared ownership scheme, or when land or property is transferred in exchange for payment. The amount of SDLT due depends on factors including the type of property, the purchase price and whether any reliefs or exemptions apply.

For residential property purchases in England and Northern Ireland, SDLT is charged on a banded basis, meaning different portions of the purchase price are taxed at different rates. The current rates for a standard residential property purchase are:

• 0% on the first £125,000
• 2% on the portion from £125,001 to £250,000
• 5% on the portion from £250,001 to £925,000
• 10% on the portion from £925,001 to £1.5 million
• 12% on the portion above £1.5 million

Different rules apply for certain buyers. First-time buyers may qualify for relief, while those purchasing an additional residential property will usually pay an additional 5% on top of the standard rates. Non-UK residents may also be subject to different rates.

SDLT only applies to property and land transactions in England and Northern Ireland. Scotland has a separate tax called Land and Buildings Transaction Tax (LBTT), while Wales has Land Transaction Tax (LTT). 

An SDLT return normally needs to be submitted to HMRC and any tax due paid within 14 days of a property purchase completion. Your solicitor or conveyancer will usually deal with this as part of the purchase process.

Budget date announced

The new Chancellor of the Exchequer, John Healey has confirmed, in a video message, that the next UK Budget will take place on Wednesday, 28 October 2026. Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s first Budget speech in October.

HM Treasury is inviting written representations for the Autumn Budget 2025 from individuals, interest groups, MPs and organisations. Submissions should propose evidence-based policy ideas or comment on existing policies, with clear rationale, costs, benefits and deliverability. The deadline for submissions is 23:59 on Wednesday, 9 September 2026.

The Budget will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR). This forecast will be in addition to that published for the Spring Statement and fulfil the obligation for the OBR to produce at least two forecasts in a financial year, as is required by legislation.

The OBR has executive responsibility for producing the official UK economic and fiscal forecasts, evaluating the government’s performance against its fiscal targets, assessing the sustainability of and risks to the public finances and scrutinising government tax and welfare spending.

How dividends are taxed

Dividends are taxed differently from other types of income, with separate allowances and tax rates that depend on your overall level of income. You do not pay tax on dividends that fall within your Personal Allowance (2026-27: £12,570), and there is also a separate tax-free dividend allowance of £500 each year. Any dividend income above these allowances is taxable.

The rate of tax you pay on dividends depends on your Income Tax band.

For the 2026-27 tax year, the rates are:

• Basic rate: 10.75%
• Higher rate: 35.75%
• Additional rate: 39.35%

To determine which rate applies, your dividend income is added to your other income. This means dividends can push you into a higher tax band and / or can be taxed across more than one rate.

If you receive up to £10,000 in dividends you can ask HMRC to change your tax code and the tax due will be taken from your wages or pension, or you can enter the dividends on your self-assessment tax return, if you already fill one in. You do not need to notify HMRC if the dividends you receive are within your dividend allowance for the tax year.

If you have received over £10,000 in dividends, you will need to complete a self-assessment tax return. If you do not usually send a tax return, you need to register by 5 October following the tax year in which you received the relevant dividend income.

Tax-free gifts for Inheritance Tax purposes

Making gifts during your lifetime can be an effective way to reduce the value of your estate for Inheritance Tax (IHT) purposes.

One of the most commonly used exemptions is the annual exemption. This allows an individual to give away up to £3,000 each tax year without the gift forming part of their estate for IHT purposes. If the exemption is not used in full, any unused amount can be carried forward to the following tax year, although only for one year. This means that someone who made no qualifying gifts in 2025-26 could potentially give away up to £6,000 in 2026-27 free of IHT.

There is also a useful exemption for small gifts. You can give as many gifts of up to £250 per person each tax year as you wish, provided no other exemption has been used for the same individual. This is known as the small gift allowance.

Special rules apply to wedding and civil partnership gifts. Parents can give up to £5,000 to a child tax-free, grandparents and great-grandparents can give up to £2,500, and anyone else can give up to £1,000. In many cases these exemptions can be combined with the annual exemption.

Another valuable relief covers gifts made out of surplus income. There is no fixed monetary limit, but the gifts must form part of normal expenditure, be made out of income rather than capital, and leave the donor with enough income to maintain their usual standard of living. This exemption can be very useful for individuals with excess pension or investment income who wish to help children or grandchildren on a regular basis. Keeping clear records is important, as HMRC may ask for evidence that the conditions have been met.

Gifts between spouses or civil partners are generally exempt from IHT, provided both parties are permanently domiciled in the UK. Gifts to charities are also normally exempt.

Increase in approved mileage rates

The Chancellor of the Exchequer, Rachel Reeves updated Parliament on 21 May 2026 on the Government’s economic response to the war in Iran and the wider measures being taken to support households and businesses with rising cost pressures. One of the measures announced was an increase in approved mileage rates for those using their own vehicles for work.

The approved mileage rates for cars and vans will increase from 45p per mile to 55p per mile. This increase has been backdated to the start of the tax year, 6 April 2026.

This rate applies only to the first 10,000 business miles in each tax year, with the approved mileage rate remaining at 25p per mile for any additional mileage over the threshold. The change is intended to support employees and the self-employed who rely on travel for work. It has been confirmed that all other mileage rates remain unchanged for the time being although this may be reviewed again at the next Budget.

If an employer reimburses mileage at less than the approved rates, the employee may claim the shortfall through Mileage Allowance Relief (MAR). This ensures tax relief is given on the difference. For example, if an employer reimburses 35p per mile, tax relief may be claimed on the remaining 20p per mile for qualifying business journeys (excluding ordinary commuting). If no mileage allowance is paid then tax relief can usually be claimed on the full 55p per mile rate (up to 10,000 business miles).

The approved mileage rates for motorcycle journeys remain at 24p per mile and for bicycle journeys at 20p per mile. Where employees carry colleagues on business journeys, employers may also pay an additional 5p per passenger per mile. There are no overriding distance limits for these payments.

Tax Diary September/October 2026

1 September 2026 - Due date for corporation tax due for the year ended 30 November 2025.

19 September 2026 - PAYE and NIC deductions due for month ended 5 September 2026. (If you pay your tax electronically the due date is 22 September 2026)

19 September 2026 - Filing deadline for the CIS300 monthly return for the month ended 5 September 2026.

19 September 2026 - CIS tax deducted for the month ended 5 September 2026 is payable by today.

1 October 2026 - Due date for Corporation Tax due for the year ended 31 December 2025.

19 October 2026 - PAYE and NIC deductions due for month ended 5 October 2026. (If you pay your tax electronically the due date is 22 October 2026)

19 October 2026 - Filing deadline for the CIS monthly return for the month ended 5 October 2026.

19 October 2026 - CIS tax deducted for the month ended 5 October 2026 is payable by today.

31 October 2026 - Latest date you can file a paper version of your 2025-26 self-assessment tax return.