27/04/2026
Happy Monday! We hope you had a great weekend.
Check out our Monday Over To You post:
Q (from client):
“I have an agreed Time to Pay arrangement with HMRC, so why do they keep adding penalties to the amount I owe?”
A (from us):
A Time to Pay (TTP) arrangement stops enforcement, but it doesn’t stop penalties and interest that were already triggered before the plan was agreed. With VAT, once a payment is late, HMRC’s late-payment penalty clock starts - and under the new regime, penalties continue accumulating until the VAT is paid in full.
Even if you’re honouring the TTP, HMRC still treat the VAT as late, so both:
First late-payment penalty (2% of the overdue VAT at 15 days, and again at 30 days), and Second penalty (a daily penalty of 4% per year until the debt is cleared)
will keep running until the balance is fully settled.
A TTP doesn’t pause these. It simply spreads the repayments.
If you’d like, we can:
Check HMRC’s calculations to confirm the penalties have been applied correctly.
Consider whether any part could be appealed due to delay or error.
Rebuild your cash flow forecast so you’re not hit again next quarter.
Explore short-term finance options with a reputable broker - HMRC is one of the most expensive lenders you can have.
Q (from LI connection):
“My accountant says I can no longer claim for the interest on my mortgage. Is that right?”
A (from us):
Not quite - but the rules have changed, and that’s probably what your accountant is referring to.
You can no longer deduct mortgage interest from your rental income to reduce your taxable profit. That part is correct.
This change was phased in between 2017 and 2020, with the old relief fully removed from April 2020. Since then, HMRC have replaced it with a basic-rate (20%) tax reducer. Instead of reducing your rental profit, the relief is taken off your final tax bill.
In practice:
If you’re a basic-rate taxpayer, your overall tax bill may look similar - the relief simply appears in a different part of the return.
If you’re a higher, or additional-rate taxpayer, you will probably pay more tax overall, because relief is now capped at 20%.
If your income sits close to the £50,270 higher-rate threshold, the shift from a deduction to a tax reducer can push you into higher-rate tax sooner than expected, even if your rental profits haven’t changed. This often comes as a surprise.
