Legislation Day 2025: What You Need to Know (Without Falling Asleep)

If you’ve been glued to your inbox, chasing invoices, or just trying to remember the last time you had a lunch break, you might have missed it: Legislation Day quietly dropped on 21 July 2025. And while it didn’t come with fireworks or fanfare, it did come with a hefty pile of tax-related updates, draft laws, and a roadmap for the future of HMRC.

So, whether you’re self-employed, side hustling, or just financially curious, here’s the lowdown on what it all means—minus the jargon headache.

Tax Gap, Meet Tightening Net

Let’s start with the headline: HMRC is turning up the heat on tax dodgers.

Draft legislation aims to close the tax gap (a fancy way of saying “money HMRC thinks it's owed but isn’t getting”). Key to this? Requiring tax agents to register with HMRC if they’re dealing with them on behalf of clients. No more rogue reps.

Then there’s Making Tax Digital (MTD)—a phrase that might already trigger eye rolls from anyone who's been following HMRC updates. But the goal is clear: reduce errors, improve compliance, and gently (or not so gently) nudge us all into a digital-first tax system.

More on that in a moment.

A “Fairer and More Sustainable” System (Depending on Who You Ask)

HMRC also released proposals they say are designed to make the system fairer. Whether you agree might depend on whether you own farmland, a small business, or a classic car collection.

Here’s the big stuff:

• Inheritance Tax Relief is being shaken up. From April 2026, 100% relief will be capped at £1 million for both Agricultural and Business Property Relief (APR & BPR). Everything above that? 50% relief only.
• Pension pots inherited after April 2027 could soon be included in someone’s estate for IHT purposes.
• Employee Car Ownership Schemes may be reclassified as company cars—hello, benefit-in-kind rules.

In short: a few classic tax planning routes are getting a makeover.

Plug-In Hybrids, PISCES, and Puzzling Acronyms

Staying with the vehicle theme, draft proposals include a temporary fix for BiK tax on plug-in hybrids, which could spike if new Euro 6e emissions standards land in the UK.

Also debuting: PISCES. No, not the star sign—the Private Intermittent Securities and Capital Exchange System, a proposed new market that lets private companies trade shares intermittently. HMRC has released tax guidance on it, but unless you're running a start-up with investors on speed dial, you might not need to panic just yet.

HMRC’s Grand Digital Plan: The Transformation Roadmap

Big news here: HMRC wants 90% of customer interactions to be digital by 2030. (Currently, we’re at 76%.)

The newly published Transformation Roadmap is HMRC’s vision board for a leaner, faster, paper-less tax authority. Key points include:

• A move toward digital letters and reminders (goodbye, brown envelopes… eventually).
• Streamlined Self Assessment registration and exit processes.
• A tool to let parents paying the High Income Child Benefit Charge opt in via tax code, avoiding the dreaded SA registration.
• A revamped informant reward scheme, now targeting serious non-compliance from large corporates, offshore schemes, and high-net-worth individuals.

Long-term plans include:

• Pre-filled tax returns with Child Benefit data (from April 2026).
• A digitised IHT service (from 2027/28).
• Simplified refunds and payments, including faster NI contribution refunds.
• The Single Customer Account Programme, which aims to give you a full picture of your tax life in one digital dashboard.

And a sigh of relief for businesses: MTD for Corporation Tax is officially off the table. For now.

Making Tax Digital: The Update

MTD for Income Tax is still marching toward us, with a launch date of 6 April 2026. The draft regulations now include a few notable tweaks:

• More people are exempt, including ministers of religion, Lloyd’s underwriters, and people who donate Power of Attorney (finally, a reward for all that paperwork).
• Certain types of income—like foster care payments and UK earnings of some non-residents—are now outside MTD's scope.
• Latency is the new buzzword: this means that new trades or property businesses don’t trigger MTD until the start of the tax year after a return is due. Translation? More breathing room.

The bottom line: if your combined self-employment and property income exceeds £50,000, you’re in the first wave of MTD mandating in April 2026. Next wave? Those earning £30,000–£50,000 from 2027.

Expect quarterly updates, digital record-keeping, and a lot more button-clicking.

Inheritance Tax Reforms—Still Not Winning Popularity Awards

If you were hoping for a rethink on those IHT changes announced in Autumn Budget 2024… well, sorry.

The government’s pressing ahead with the APR and BPR relief cap (£1m at 100%, then 50% after that) from April 2026. No updates, no amendments—just confirmation.

A few olive branches, though:

• Instalment payments for IHT over 10 years will now be interest-free for any APR/BPR-eligible property.
• The £1 million cap will be indexed to CPI (but frozen until 2029/30, in line with the nil-rate band freeze).

Still, if you’re a business owner or farmer, this won’t be a welcome change.

National Insurance Glitch: Did You Get Charged When You Shouldn’t Have?

Some self-employed taxpayers might have noticed a mysterious £358.80 Class 2 NICs charge appear out of nowhere for 2024/25. Not exactly a fun surprise.

Turns out, this is a glitch related to recent NICs reforms. HMRC says they've already corrected it for some people, and if you were affected, you’ll get a message and a revised tax calculation soon. Sit tight, and keep an eye on your Self Assessment portal.

Upcoming Tax Deadlines: Add These to Your Diary

Because we love a to-do list:

Final Thoughts: Change Is Coming (Again)

Legislation Day 2025 didn’t bring radical changes, but it did signal a tightening, modernising, and streamlining of the UK tax system. From digital-first plans and inheritance tax reforms to more careful tracking of side hustles and corporate compliance—HMRC is laying down its long-term cards.

Will it all run smoothly? History suggests… maybe not. But at least we’ve got a roadmap. And, with any luck, less paper post.

Now, if only filing a tax return felt as easy as reading this article...

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Categories: Positive Accountant