September 2026

Technical and Client Update

In this issue

HMRC using third-party information to target landlords

Advisory fuel rates for company cars

Making Tax Digital for Income Tax first quarter statistics published

What should your employment law reform priorities be?

HMRC using third-party information to target landlords

HMRC has begun writing to landlords where the information it holds from third parties does not appear to match the taxpayer's records. The letters encourage recipients to review whether all rental income has been declared and remind them of their obligations under Making Tax Digital (MTD) for Income Tax.

HMRC receives information from a variety of sources, including tenancy deposit schemes and other statutory reporting systems. This data is increasingly being used to identify landlords whose tax returns may not accurately reflect their property income.

If you receive one of these letters, it is important not to ignore it. HMRC asks landlords to review their position and take action by the deadline stated in the correspondence. Where there is undeclared rental income, HMRC expects the taxpayer to make a disclosure. If there is nothing to declare, HMRC should still be informed using the contact details provided.

The stakes can be significant. HMRC warns that if it later opens a compliance check or criminal investigation, any disclosure made at that stage may be treated as a "prompted" disclosure, potentially leading to higher penalties.

The letters also remind landlords to consider whether they have any capital gains tax obligations following the disposal of a rental property and whether they fall within MTD for Income Tax.

For landlords, the message is clear: ensure rental income is fully declared and maintain accurate records. If you receive such a letter, please notify us as soon as possible, as we can help.

Advisory fuel rates for company cars

The table below sets out the HMRC advisory fuel rates from 1 September 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.

Engine Size

Petrol

Diesel

LPG

1400cc or less

14p
(14p)

11p
(11p)

1600cc or less

15p
(15p)

1401cc to 2000cc

17p
(17p)

13p
(13p)

1601cc to 2000cc

16p
(17p)

Over 2000cc

27p
(26p)

22p
(23p)

20p
(21p)

Previous rates are shown in brackets.

You can also continue to use the previous rates for up to one month from the date the new rates apply.

Note that for hybrid cars, you must use the petrol or diesel rate.

For fully electric vehicles the rate is 7p (7p) per mile where the vehicle is charged at home. The rate applicable to vehicles charged using public facilities is 15p (15p) per mile.

Employees using their own cars

For employees using their own cars for business purposes, the Approved Mileage Allowance Payment (AMAP) tax-free reimbursement rate was increased on 6 April 2026 to 55p per mile (plus 5p per passenger) for the first 10,000 business miles, reducing to 25p per mile thereafter. Note that for NIC purposes the employer can continue to reimburse at the 55p rate regardless of mileage as the 10,000 mile threshold does not apply.

Input VAT

Within the 55p/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 1500cc diesel-engine car, 2.5 pence per mile can be reclaimed as input VAT (15p x 1/6).

Making Tax Digital for Income Tax first quarter statistics published

HMRC to begin signing up taxpayers they believe need to register

Under Making Tax Digital (MTD) for Income Tax, sole traders and landlords with income of more than £50,000 have been required to keep digital records and send quarterly updates to HMRC since 6 April 2026.

The first quarterly submission deadline, covering the first three months of the 2026-27 tax year, passed on 7 August 2026. HMRC have since issued a press release confirming that 436,000 taxpayers filed their first quarterly tax update by the deadline and reminding those who have not submitted their update to do so using HMRC-recognised software.

Slow uptake

HMRC’s press release reveals that as of 12 August 2026, over 570,000 taxpayers had signed up for MTD for Income Tax.

In August 2025, based on 2023-24 figures, HMRC estimated that some 864,000 taxpayers would need to sign up from April 2026, meaning that around one third of taxpayers who should have registered for MTD for Income Tax from April 2026 had not signed up.

HMRC’s response

From September, HMRC will sign up taxpayers who are required to use MTD for Income Tax for 2026-27, but who have not yet registered for the service themselves.

Taxpayers can avoid being signed up by HMRC by signing themselves up now, ensuring their MTD details are correct at the outset.

If you receive a letter from HMRC about being signed up, please let us know and we will be pleased to help you navigate the sign-up process.

MTD for Income Tax should not be ignored, with HMRC reminding taxpayers that it is a legal requirement for sole traders and landlords earning more than £50,000 from self-employment and property to comply, unless exempt (e.g. due to digital exclusion).

Taxpayers are also reminded that from April 2027, those earning more than £30,000 from self-employment and property will be required to comply.

Penalties

While HMRC have confirmed that there will be no penalty points for late quarterly updates in 2026-27, penalties will still apply for late tax returns and late payments.

Quarterly updates do not replace the Self Assessment tax return. Those within scope of MTD for Income Tax must submit their quarterly updates in order to file their tax returns by 31 January.

A points-based penalty system will be introduced from 6 April 2027. Taxpayers will receive one point for each missed quarterly deadline and a £200 fixed penalty once four points have accumulated.

If you have not yet registered for MTD for Income Tax and are concerned that it may apply to you, or you receive a letter from HMRC about registering, contact us as soon as possible so we can help you assess your obligations.

What should your employment law reform priorities be?

Acas provides advice and resources for employers

Acas's Julie Dennis has set out how HR teams should approach the Employment Rights Act 2025, one of the most significant changes to UK employment law in recent years, which became law on 18 December 2025 and is being phased in through 2026–2027.

Several changes are already in force, including:

  • Statutory sick pay from day one (with the lower earnings limit removed).
  • Day-one paternity and unpaid parental leave rights.
  • A new bereaved partner's paternity leave.
  • Stronger whistleblowing protection for those reporting sexual harassment.

For these changes, employers should have already reviewed related policies, payroll, and manager guidance, and communicated with staff. It is important to be clear that day-one leave rights don't always mean day-one pay rights.

Further reforms are still to come, covering unfair dismissal, harassment, flexible working, and zero-hours contracts, meaning businesses need a staged plan rather than treating this as a single change with one start date. This should not be a single compliance project; regular policy reviews will be essential, and businesses should not wait for the remaining reforms to take effect.

The compliance environment is also tightening. The new Fair Work Agency will consolidate enforcement powers, and employers must keep compliance records for six years, including holiday pay and annual leave records.

Acas recommends businesses:

  1. Know the timeline: separate what has already changed from what is expected later.
  2. Prioritise policy and contract review, especially sickness, family leave, flexible working, harassment, dismissal and records.
  3. Train line managers. They need to understand the processes they are expected to follow and feel confident having early, fair and consistent conversations.
  4. Strengthen compliance systems. Review how decisions are recorded, how evidence is kept and how employees are told about their rights.

Acas points readers to its dedicated Employment Rights Act 2025 hub and a free recorded webinar for further detail.

The information provided within our E-Newsletters are general in nature to raise awareness of certain issues that may affect our clients. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from a professional advisor before you take any action or refrain from action.

Whilst we endeavour to use reasonable efforts to furnish accurate, complete, reliable, error free and up-to-date information, we do not warrant that it is such. We disclaim all warranties.

The information can only provide an overview of the regulations and matters for consideration in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice.