May 2026 Newsletter

Welcome to our May newsletter, where we bring you the latest tax and business updates to help you stay informed and prepared in the months ahead. As we move further into the new tax year, it is important to keep up to date with changing rules, reporting obligations, and opportunities for tax planning that could benefit you or your business.

In this edition, we explain how bonuses are taxed and what employers and employees need to be aware of when additional payments or rewards are made. We also highlight the growing number of Winter Fuel Payment scams and share HMRC’s advice on how to stay safe from fraudsters impersonating official organisations. For business owners considering incorporation, we outline how Incorporation Relief works and when it may help defer Capital Gains Tax liabilities.

We also take a closer look at HMRC’s Personal Tax Account, a useful online service that allows taxpayers to manage many aspects of their tax affairs quickly and securely. Finally, our regular tax diary includes important deadlines for May and June to help ensure nothing is missed.

If any of the topics covered raise questions or you would like tailored advice for your own circumstances, please do not hesitate to contact us. Our team is always happy to help.

How bonuses are taxed

Bonuses are treated as taxable earnings, so both employers and employees need to understand how they are taxed and reported.

For cash bonuses (including vouchers that can be exchanged for cash), the rules are straightforward. The payment is added to an employee’s normal salary and taxed through the Pay As You Earn (PAYE). This means employers must deduct Income Tax and National Insurance (Class 1) in the usual way through payroll.

Bonuses can sometimes push employees into a higher tax band for that pay period, so the net amount received may be lower than expected.

For non-cash bonuses, such as gifts or rewards, the treatment depends on what is provided. If the item is considered as something that can easily be turned into cash then it is taxed in the same way as cash through PAYE. Other benefits may instead be treated as benefits in kind. A list of typical expenses and benefits and their tax treatment can be found at https://www.gov.uk/expenses-and-benefits-a-to-z

It is important for employers to ensure they apply the correct treatment and reporting method for bonuses, as errors can lead to underpaid tax or penalties.

Beware Winter Fuel Payment scams

Pensioners are being urged to stay vigilant for any Winter Fuel Payment scams. HMRC is starting to recover Winter Fuel Payments issued for winter 2025 from those earning over £35,000 a year. While the process will affect nearly two million people, most will see the repayment handled automatically through adjustments to their PAYE tax code from April 2026, meaning there is no need to contact HMRC directly.

However, the scale of the recovery operation has created an opportunity for scammers. Over the past year, HMRC recorded more than 25,000 scam reports linked to Winter Fuel Payments. Officials are warning that fraudsters may now exploit confusion around the repayment process. Fake texts, emails, and phone calls are expected to increase, often impersonating HMRC and individuals may feel pressured to hand over personal or financial details.

For those submitting self-assessment tax returns online, the payment should appear automatically in their 2025-2026 return which is due to be submitted by the 31 January 2027. Taxpayers are also advised to check carefully and add the payment manually if they are liable. Paper filers will need to include it themselves.
HMRC stresses that it will never request repayment or bank details via text or email. As HMRC’s Chief Customer Officer, said:

‘Criminals are great pretenders and often use fake letters, emails, calls and texts to impersonate HMRC and trick people into giving them money.

I’d encourage anyone who’s unsure to use our online tool at GOV.UK to check whether and how their payment will be recovered - there’s no need to call us.’

Tax relief when incorporating a business

When a sole trader or partnership transfers a business to a company, a chargeable gain may arise. This is calculated by reference to the market value of the business assets at the date of incorporation (including goodwill), compared with their original base cost. The resulting gain would ordinarily be subject to Capital Gains Tax.

In many cases, however, the transfer is structured to qualify for Incorporation Relief. Broadly, this requires that the whole business is transferred as a going concern, together with all of its assets (other than cash), in exchange wholly or partly for shares issued by the company.

Where the conditions are satisfied, Incorporation Relief applies automatically and no formal claim is required. The effect of the relief is to defer the gain by reducing the base cost of the shares received, thereby postponing the tax charge until those shares are subsequently disposed of.

A taxpayer may elect for the relief not to apply. This election must be made in writing by 31 January, two years after the end of the tax year in which the incorporation takes place. For example, for a transfer in the current 2026-27 tax year, the election deadline is 31 January 2030. This deadline is reduced by one year if the shares are disposed of in the tax year following that of incorporation.

Do you have a personal tax account yet?

Your Personal Tax Account (PTA) is an easy and secure way to manage your tax online. You can use it to check your tax code, claim a refund and update your details, all in one place, without needing to contact HMRC by phone or post.

Every UK taxpayer has a PTA, but you will need to register through the Government Gateway or GOV.UK One Login to start using it. You may also be asked to confirm your identity during the setup process. This is to keep your details safe and normally involves using photo ID such as a passport or driving licence.

Currently, the following services are accessible through your PTA:

• check your Income Tax estimate and tax code
• fill in, send and view a personal tax return
• claim a tax refund
• check your Child Benefit
• check your income from work in the previous 5 years
• check how much Income Tax you paid in the previous 5 years
• check your State Pension
• check if you will benefit from paying voluntary National Insurance contributions and if you can pay online
• track tax forms that you’ve submitted online
• check or update your Marriage Allowance
• tell HMRC about a change of name or address
• check or update benefits you get from work, for example company car details and medical insurance
• find your National Insurance number
• find your Unique Taxpayer Reference (UTR) number
• check your Simple Assessment tax bill.

Tax Diary May/June 2026

1 May 2026 - Due date for corporation tax due for the year ended 30 July 2025.

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

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

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

31 May 2026 - Ensure all employees have been given their P60s for the 2025/26 tax year.

1 June 2026 - Due date for corporation tax due for the year ended 31 August 2025.

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

19 June 2026 - Filing deadline for the CIS300 monthly return for the month ended 5 June 2024.

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