20th March 2026 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

MAKING TAX DIGITAL FOR INCOME TAX
Making Tax Digital (MTD) for income tax is the new regime for self-employed individuals and landlords that will start to apply from April 2026 if they have business and/or property income (i.e. total takings, not net profits) of more than £50,000 per annum. The regime requires digital record-keeping and quarterly updates to HMRC, with the first such update due by 7 August 2026.

Last month, HMRC published a press release to confirm that the changes will affect 860,000 individuals. They are keen to encourage action now and to highlight the benefits of spreading tax compliance administration throughout the tax year.

If you are one of the 860,000 individuals moving into the new regime from April 2026, HMRC are also keen to stress that a normal annual tax return will still be required for the tax year to 5 April 2026. This means that in addition to providing HMRC with quarterly updates on the year to 5 April 2027 during that tax year, your annual 2025/26 tax return will still need to be filed by 31 January 2027.

We are already working behind the scenes on a new solution to support our clients through the transition to MTD and will be sharing more details soon

OVERPAYMENT RELIEF FROM HMRC
If you have paid too much tax, perhaps because you made an error on a return, or because you believe a sum determined by HMRC as being due is incorrect, there is a general rule that a refund cannot be claimed more than 4 years after the end of the relevant tax year. For example, a refund claim in relation to the 2021/22 tax year would need to be made by 5 April 2026.

However, if you do believe you’ve paid too much tax in the past, you may be able to claim it back through a mechanism known as “overpayment relief”. This is a formal claim made to HMRC, and it serves as a vital safety net. Understandably, HMRC checks on any such claims are thorough and a number get rejected.
HMRC has recently updated its guidance to help individuals successfully claim back any tax monies owed. In particular, overpayment relief claims must be made in writing and must state:

• that the claim is for overpayment relief
• the tax year for which the claimant thinks they have paid too much tax, or too much tax has been assessed
• why too much tax has been paid or assessed
• how much has been overpaid or over-assessed
• if an appeal has, or has not, been previously made for the same payment or assessment (the term “appeal” must be used)

The claim must also include a declaration saying the details given are correct and complete to the best of the information and belief of the person making the claim and it must be signed by them personally.

Undertaking the right steps in the right order is critical and we would be pleased to support with this, should you believe you have paid too much tax.

ADVISORY FUEL RATES FOR COMPANY CARS
HMRC have published new advisory fuel rates from 1 March 2026. These are the suggested reimbursement rates for employees' private mileage using their company car. Where the employer does not pay for any fuel for the company car, these are the amounts that can be reimbursed in respect of business journeys without the amount being taxable on the employee.

The petrol, diesel and home charging rates have remained static this quarter, while the LPG and public charging rates have changed. 

The new rates per mile are:

1400cc or less
    •    Petrol: 12p (12p)
    •    Diesel: 10p (11p)
    •    LPG: –
    •    Electric (Home charger): 7p (7p)
    •    Electric (Public charger): 15p (14p)

1600cc or less
    •    Petrol: –
    •    Diesel: 12p (12p)
    •    LPG: –
    •    Electric (Home charger): 7p (7p)
    •    Electric (Public charger): 15p (14p)

1401cc to 2000cc
    •    Petrol: 14p (14p)
    •    Diesel: –
    •    LPG: 12p (13p)
    •    Electric (Home charger): 7p (7p)
    •    Electric (Public charger): 15p (14p)

1601 to 2000cc
    •    Petrol: –
    •    Diesel: 13p (13p)
    •    LPG: –
    •    Electric (Home charger): 7p (7p)
    •    Electric (Public charger): 15p (14p)

Over 2000cc
    •    Petrol: 22p (22p)
    •    Diesel: 18p (18p)
    •    LPG: 19p (21p)
    •    Electric (Home charger): 7p (7p)
    •    Electric (Public charger): 15p (14p)

Previous rates are shown in brackets.

*Fully electric cars only. Note that for hybrid cars, you must use the petrol or diesel rate.

You can also continue to use the previous rates until 31 March 2026.

Employees using their own cars
For employees using their own cars for business purposes, the Advisory Mileage Allowance Payment (AMAP) tax-free reimbursement rate continues to be 45p per mile (plus 5p per passenger) for the first 10,000 business miles, reducing to 25p per mile thereafter.

Input VAT
Within the 45p/25p AMAP payments, the amounts in the above table represent the fuel element. The employer is able to reclaim 20/120 of the fuel amount as input VAT provided the claim is supported by a VAT invoice from the filling station. For a 1300cc petrol-engine car, 2p per mile can be reclaimed as input VAT (12p x 20/120).

EMPLOYER-PROVIDED VEHICLES AND TAXABLE BENEFITS IN KIND
On the topic of company cars, it should be remembered that as we head into a new tax year, the flat-rate figures used in the computation of some employer-provided vehicle benefits-in-kind calculations will be increased for inflation. From 6 April 2026:

• The flat-rate van benefit charge will be increased from £4,020 to £4,170.
• The flat-rate van fuel benefit charge will be increased from £769 to £798.
• The multiplier for the car fuel benefit charge will be increased from £28,200 to £29,200.

Where an employer provides an employee or a director with a company car, this is usually a taxable benefit-in-kind. The taxable amount of the benefit depends on the vehicle’s power supply, its manufacturer's list price and CO2 emissions. A reduction is given for any periods where the car is unavailable.

Pool cars owned by the employer and used by a number of employees will not normally lead to a taxable benefit-in-kind. Certain conditions need to be met, including the car only having very low or incidental private use and it being used by different employees, none of whom normally take it home at night.

Great care needs to be taken with company vehicles and tax. Indeed, in a recent tax tribunal case, a company director learned this lesson the hard way, after relying on an informal agreement reached with HMRC over 25 years earlier. In MWL International Ltd and Maywal Ltd v HMRC [2026], the business had treated a number of cars as pool cars and reported no benefit in kind for over two decades. During a later PAYE audit, HMRC decided the vehicles did not genuinely qualify as pool cars because the conditions had not been properly met. Significant National Insurance bills then followed. The company fought back but the Upper Tribunal ruled that HMRC cannot be prevented from applying the correct tax rules, regardless of any past informal agreement.

The case is a stark reminder that a vehicle must genuinely satisfy all of the pool car conditions in practice, not just on paper, and that an informal nod from HMRC, however long ago, offers no lasting protection.
 
SOURCING LABOUR FROM THIRD PARTIES? DUE DILIGENCE REQUIRED!
Just a final reminder for any businesses sourcing workers from third parties (e.g. through agencies or ‘umbrella companies’) that new rules come into effect from 6 April 2026 that may make you jointly and severally liable for the PAYE and NIC costs of those workers, should the third party fail to pay HMRC. To avoid unexpected tax costs, we strongly recommend that supply chains are reviewed and the new rules are understood.