TaxDigit

Category: blog

The Capital Goods Scheme — the VAT rule that follows an expensive asset around for years after the invoice is paid — is about to get a great deal smaller. From 29 July 2026, computers and computer equipment leave the scheme altogether, and the threshold for land, buildings and civil engineering works rises from £250,000 to £600,000 excluding VAT. As chartered certified accountants in Surrey advising VAT-registered businesses across the UK, here is what the reform changes, what it leaves untouched, and what you should do about it now.

Capital Goods Scheme reform effective 29 July 2026 - computers removed from the scheme and the land and buildings threshold rises from £250,000 to £600,000 - TaxDigit accountants in Surrey

What Is the Capital Goods Scheme — and Why It Matters

The Capital Goods Scheme (CGS) is a VAT adjustment mechanism for expensive, long-life assets. Rather than fixing your VAT recovery in the quarter you buy the asset, the CGS makes you revisit it across an adjustment period — five intervals for computer equipment and ten for land and buildings — and adjust the VAT you originally claimed if the way you use the asset changes. It bites hardest on partly exempt businesses, property investors and anyone whose taxable-to-exempt use shifts over time. Our earlier guide to the Capital Goods Scheme explains the mechanics in more detail.

What Changes From 29 July 2026

Two changes take effect, given legal force by the Value Added Tax (Amendment) Regulations 2026 (SI 2026/765):

  • Computers and computer equipment leave the scheme. Capital expenditure on computers and items of computer equipment will no longer be a capital item at all. No five-interval adjustment, no CGS register entry, no annual recalculation.
  • The property threshold rises to £600,000. The CGS will only apply to land, buildings and civil engineering works where the capital expenditure is £600,000 or more, exclusive of VAT — up from the long-standing £250,000 limit.

The government’s stated aim is simplification: to reduce the administrative burden on smaller businesses that have been carrying complex, time-consuming CGS calculations for assets that, in cash terms, were never especially significant. In practice, far fewer assets will now need the five or ten-year VAT-recovery adjustment.

The Transitional Rule — Existing Capital Items Keep Running

This is the point most commonly misunderstood, and the one that causes errors. The new rules apply only to expenditure incurred on or after 29 July 2026. Anything already inside the scheme stays inside the scheme and runs its full adjustment period to the end.

So a server bought in 2024 remains a capital item until its five intervals are exhausted, even though computers are no longer in the scheme. A £300,000 office refurbishment completed in 2025 remains a capital item for its full ten intervals, even though it now sits well below the new £600,000 threshold. You do not get to switch off an existing CGS item simply because a new asset of the same kind would fall outside the rules.

Who Benefits — and Who Should Still Pay Attention

The clearest winners are businesses with material IT spend and no property in the scheme: their CGS obligations may disappear entirely for new expenditure. Owner-managed companies and smaller partly exempt businesses that were tripped into the scheme by mid-sized property works will also see meaningful relief, as the £250,000-to-£600,000 band drops out for new spend.

Attention is still needed where a business is partly exempt, where a property project sits close to the £600,000 line, or where an option to tax changes the VAT profile of a building mid-adjustment. And every business with existing capital items must keep its CGS register alive until those items run out.

What VAT-Registered Businesses Should Do Now

  • Review the timing of planned expenditure. For property works and large IT purchases scheduled around July 2026, the date the expenditure is incurred determines the regime that applies for up to ten years. That is a decision worth taking deliberately rather than by accident.
  • Audit your CGS register. Separate items that must keep running under the transitional rule from spend that will fall outside the scheme from 29 July 2026.
  • Drop computers from CGS tracking — prospectively only. New computer expenditure needs no CGS entry. Historic computer capital items still do.
  • Model the £600,000 line on property projects. Phasing, scope and what counts as capital expenditure on the works all affect which side of the threshold a project lands on.
  • Keep your evidence. Simplification does not reduce the standard of record-keeping HMRC expects on the items that remain.

Frequently Asked Questions

Does the Capital Goods Scheme still apply to computers bought before 29 July 2026

Yes. Computer capital items already in the scheme continue through their full five-interval adjustment period. Only expenditure incurred on or after 29 July 2026 falls outside the scheme.

Is the new £600,000 threshold inclusive of VAT

No. The £600,000 threshold for land, buildings and civil engineering works is exclusive of VAT.

What happens to property expenditure of, say, £400,000 incurred after 29 July 2026

It falls below the new threshold and is not a capital item, so no CGS adjustment period applies. The same £400,000 spent before 29 July 2026 would have been caught, and would continue to run.

Do the changes affect input VAT recovery in the quarter of purchase

No. Normal partial exemption and input tax recovery rules still determine your initial claim. The reform only changes whether that claim must be revisited over an adjustment period.

How TaxDigit Can Help

The CGS sits at the intersection of VAT, partial exemption and property — exactly the territory where a small timing decision has a ten-year consequence. Our Guildford-based team reviews CGS registers, models the £600,000 threshold against planned works, and advises on the timing of expenditure either side of 29 July 2026. Our VAT specialists handle the compliance, while our tax advisory and planning service builds the reform into your wider capital expenditure strategy. The legislation itself is available as the Value Added Tax (Amendment) Regulations 2026.

Plan Ahead With TaxDigit

The reform takes effect on 29 July 2026 — which means the planning window is now, not later. If you are budgeting property works or a significant IT investment, a short conversation before you commit the spend can be worth a decade of avoided adjustments. As premier accountants in Surrey serving clients across the UK, TaxDigit will help you get the timing and the treatment right. Call 01483 230 777, email info@taxdigit.co.uk, or visit our contact page for bespoke advice.

22% charge on cash in investment ISAs effective 6 April 2027, with £12,000 Cash ISA limit and £20,000 overall allowance - TaxDigit accountants in Surrey

In the intricate landscape of UK savings taxation, the humble ISA has long been a rare pocket of simplicity: pay in, and your returns grow free of tax. That reputation is about to be tested. As part of the Budget 2025 ISA reforms, HMRC has confirmed a new 22% charge on interest earned on cash held inside non-Cash ISAs, alongside a package of anti-circumvention rules. As accountants in Surrey serving clients across the UK, we are already fielding questions from investors, and here is what you need to know.

What Is Changing — and Why

From 6 April 2027, the annual Cash ISA allowance falls from £20,000 to £12,000 for savers under the age of 65, while those aged 65 and over keep the full £20,000 cash limit. The overall ISA allowance remains £20,000 across all ISA types. The government’s aim is to nudge more people towards Stocks & Shares ISAs and build a stronger retail investment culture.

The obvious workaround would be to open a Stocks & Shares ISA and simply hold cash in it — sidestepping the lower Cash ISA limit entirely. To close that door, HMRC has introduced targeted anti-circumvention rules.

The 22% Charge on Non-Cash ISA Interest

The headline measure is a 22% charge on interest (or the equivalent “alternative finance return”) paid on cash holdings within Stocks & Shares ISAs and Innovative Finance ISAs — the “non-Cash” ISAs. Crucially, this charge applies universally: it does not matter how old you are, which income tax band you fall into, or even whether you are a taxpayer at all. Interest on genuinely invested holdings is unaffected; it is idle cash sitting in an investment ISA that is targeted.

Two Further Anti-Circumvention Rules

The 22% charge does not stand alone. The confirmed rules also prevent transfers from non-Cash ISAs into Cash ISAs for savers under 65, and prevent holding 100% Money Market Funds within a non-Cash ISA — another route through which cash-like returns could otherwise be sheltered. Together, these measures are designed to keep the reduced Cash ISA limit meaningful. HMRC has said further operational detail will follow in its next Tax Free Savings newsletter.

What It Means for Savers and Investors

For most people who use their Stocks & Shares ISA to actually invest, the practical impact is limited. The change bites for those who park significant sums of cash inside an investment ISA — whether waiting to invest, de-risking, or using it as a de facto savings account. From April 2027, that strategy carries a 22% cost on the interest earned. Reviewing where your cash actually sits, and whether a Cash ISA, a General Investment Account or your reduced Cash ISA allowance is the better home, will matter more than ever.

How TaxDigit Can Help

These reforms sit at the intersection of savings, investment and tax planning — exactly where careful advice pays off. Our Guildford-based team helps clients structure their allowances efficiently ahead of the 2027 changes, and our personal tax specialists can review how the new rules interact with your wider position. For high-net-worth individuals and business owners, our tax advisory and planning service builds ISA strategy into a broader, forward-looking plan. You can read the government’s own confirmation in the Tax update 2026 policy paper.

Plan Ahead With TaxDigit

The 22% charge does not take effect until 6 April 2027 — which means there is time to plan, but not time to ignore it. As premier accountants in Surrey serving clients across the UK, TaxDigit will help you make the most of your allowances before the rules change. Call 01483 230 777, email info@taxdigit.co.uk, or visit our contact page for bespoke advice.

TaxDigit branded graphic - HMRC Timely Payments for Self Assessment, pay tax in-year via PAYE from April 2029

In the evolving landscape of UK personal taxation, few proposals carry the power to reshape a taxpayer’s cash flow as quietly — and as profoundly — as HMRC’s plan to collect Self Assessment liabilities sooner. On 23 June 2026, as part of its “Tax Update 2026” package, the Government opened a consultation on “timely payments” in Income Tax Self Assessment (ITSA). For the company directors, landlords and high-earning professionals we advise, it signals a meaningful shift in when, not just how much, tax falls due.

What is HMRC proposing?

At its heart, the proposal moves Self Assessment closer to payday. From April 2029, taxpayers who hold sufficient PAYE income alongside their Self Assessment sources would pay a forecast of their ITSA liability in-year, through PAYE, in each pay period — rather than waiting to settle the bill after the tax year ends. Someone paid monthly, for example, would pay their 2029/30 liability across twelve instalments, each equal to 8.3% of their forecast ITSA bill, with that forecast based on their 2028/29 return.

Crucially, these are payments on account, not a final reckoning. Taxpayers will still file a Self Assessment return, report their actual liability and reconcile through a balancing payment — or a repayment from HMRC — exactly as they do now. Forecasts can be updated where circumstances change.

Who will be affected?

HMRC estimates that of the roughly 12 million people within Self Assessment, around 7 million also receive PAYE income — and approximately 2.1 million of those are expected to have enough PAYE income to fall within the new in-year rules. The Government is separately consulting on whether other Self Assessment taxpayers, including the c. 2.5 million who currently make twice-yearly payments on account, should pay more frequently, potentially monthly or quarterly.

Directors and landlords: take note

If you draw a salary through your company and top up with dividends, or you run a property portfolio alongside employment, you sit squarely in HMRC’s sights. Spreading payments may ease the January cash-flow squeeze — but a forecast pitched too high could tie up working capital you would rather deploy elsewhere. Getting the forecast right becomes a planning discipline in its own right.

Why is this happening now?

The direction was first signalled at Budget 2025, and Tax Update 2026 fleshes out the detail. The Government’s stated aim is simplification, modernisation and fairness: smaller, regular payments, it argues, reduce tax debt and spare taxpayers the shock of large, infrequent bills. For well-advised clients, the headline is less about the principle and more about preparation — the time to model the cash-flow impact is now, well ahead of the 2029 start date.

How TaxDigit can help

As accountants in Surrey serving clients across the UK, our Guildford-based team helps directors, investors and business owners stay ahead of change rather than react to it. We can model how in-year payments would affect your cash position, keep your ITSA forecasts accurate so you never overpay, and integrate the new regime into a broader personal tax and tax advisory and planning strategy. You can also read HMRC’s full proposals in the official GOV.UK consultation.

Speak to a specialist

Change in the timing of tax is rarely as simple as it first appears. If you would like a clear, bespoke view of how HMRC’s timely-payments proposals could affect you or your business, our advisers are ready to help. Call TaxDigit on 01483 230 777, email info@taxdigit.co.uk, or visit our contact page to arrange a confidential consultation with our Guildford-based team.