Given that it is the biggest overhaul to the way that taxes are filed in decades, it is no wonder that Making Tax Digital (MTD) for Income Tax has a whole host of additional considerations to manage.
More than £55 billion worth of side hustle sales data is to be handed to HMRC by platforms, as the tax authority ramps up compliance on small online traders and service providers.
The deadline for Making Tax Digital (MTD) for Income Tax is now less than three weeks away, yet the majority of affected taxpayers have still not registered.
Fresh off a wave of regulatory changes designed to improve transparency and efficiency with filings, business owners are having to take stock of new administrative responsibilities.
When a business sells an asset such as property, land or equipment, the resulting gain can trigger a Capital Gains Tax (CGT) liability.
If your business offers employees perks such as company cars or private health insurance, you need to be aware of the upcoming changes to how these are taxed and reported.
The revised version of FRS 102 accounting standards has already brought new reforms for accounting periods starting on or after 1 January 2026 and now the rules are changing again.
The Financial Reporting Council (FRC) has announced further amendments to FRS 102 and FRS 105, affecting how certain businesses present their financial statements.
With the changes taking effect over the next two years, now is the time to understand what is coming and how it could affect you.
Why are the FRS 102 rules changing again?
The updates follow the introduction of IFRS 18, which replaces IAS 1 on the presentation of financial statements.
To ensure they are aligned with international accounting standards, the FRC has introduced amendments to UK GAAP.
However, after consultation, it stopped short of adopting the full IFRS 18 model.
What are the new FRS 102 changes?
The latest amendments apply to entities using updated Companies Act formats. They include:
These changes are taking effect for accounting periods beginning on or after 1 January 2027.
Alongside this, earlier reforms came into force from 1 January 2026 and changed revenue recognition and lease accounting.
Revenue must now follow a five-step control-based model and businesses must reassess customer contracts.
Most leases must also now be recognised on the balance sheet as a right-of-use asset with a corresponding lease liability.
Instead of a single lease expense, businesses will record depreciation and interest separately.
How can you prepare?
To prepare for the current FRS 102 changes, you should now be reviewing contracts and lease liabilities and ensuring you have the correct presentation formats.
If you are unsure how the new FRS 102 rules will affect your business, now is the time to seek professional advice.
From April 2026, the National Minimum Wage rates will increase once again, driving up employment costs for many businesses and requiring them to review their payroll processes.
If you haven’t considered how these new rates will affect your business, you should do so now.
What’s changing in minimum wage rates?
From April 2026, the new rates will be:
| Current rate | New rate from 6 April | |
| 21 and over (National Living Wage) | £12.21 per hour | £12.71 per hour |
| 18–20 | £10 per hour | £10.85 per hour |
| Under 18 | £7.55 per hour | £8.00 per hour |
| Apprentices | £7.55 per hour | £8.00 per hour |
These rates are mandatory and businesses must comply to avoid penalties. This includes making sure that their payroll processes are up to date and account for employees’ ages changing and any deductions that could affect their base pay.
Steps to prepare
As the clock is now ticking to the new rates being introduced, employers should:
By updating your business processes, you can manage the National Minimum Wage increases effectively without disruption. If you need any support with these payroll changes, please get in touch.
For business owners preparing to sell or exit their company, a stricter interpretation of the qualifying conditions for Business Asset Disposal Relief (BADR) and increased scrutiny from HMRC will soon be introduced.
These changes may affect the timing of a sale, the structure of your business and the tax you will pay on any gains.
What is Business Asset Disposal Relief?
BADR allows qualifying business owners to pay a reduced rate of Capital Gains Tax (CGT) on the disposal of business assets or shares. The relief currently applies up to a lifetime limit of £1 million.
Gains above this limit are taxed at the standard higher-rate CGT of 24 per cent.
What are the changes to BADR?
In April 2025, we saw the BADR rate on qualifying gains increase to 14 per cent, up from 10 per cent.
In April 2026, we will see a further increase to 18 per cent.
To put that rise into perspective, if you sold your shares and made a gain of £1m, before 6 April 2026, your tax bill would be £140,000. A sale after this date will result in a £180,000 bill.
BADR eligibility
To qualify for BADR, the following must apply for at least two years up to the point your business is sold:
For further information on eligibility criteria, visit Business Asset Disposal Relief: Eligibility – GOV.UK.
Structuring your sale
Two common exit strategies are Management Buyouts (MBO) and Employee Ownership Trusts (EOT).
EOTs can reward key employees while maintaining business continuity, though CGT relief is now limited to 50 per cent of the gain.
MBOs transfer ownership to the management team, providing continuity but requiring careful attention to funding and tax timing.
Next steps for business owners
You can start by asking whether the current structure reflects a trading business, whether all shareholders are aligned and if phased disposal could improve the tax position.
Review shareholdings and employee or director roles to ensure they meet the criteria.
You should also consider whether financial separation of non-trading assets will boost BADR eligibility.
Finally, forecast your tax exposure to understand the financial impact it will have on your retirement.
The new tax year is just a few weeks away, starting on 6 April, so allow us to refresh your memory of the key changes in store for 2026/27.
Personal tax
The Government has decided to continue the Income Tax threshold freeze until at least April 2031, while keeping the tax-free personal allowance at £12,570.
With these rates and thresholds remaining unchanged, we will see more individuals dragged into higher tax bands.
Inheritance Tax (IHT)
From April 2026, the 100 per cent Agricultural Relief and Business Relief will be capped at £2.5m per individual.
A 50 per cent rate of relief will apply to assets above this threshold.
However, the Government have confirmed that it will be transferable between spouses and civil partners.
Business tax
The main rate of writing down allowance will drop from 18 to 14 per cent from April 2026.
However, a new first-year allowance of 40 per cent for main‑rate assets will be available to ensure start-ups are not too disadvantaged.
Business owners looking to exit their business using an Employee Ownership Trust (EOT) will also be required to pay Capital Gains Tax (CGT) on 50 per cent of their profits, following the removal of the existing 100 per cent relief.
Will there be a wealth tax?
No, but the ordinary and upper rates of tax on dividend income will increase by two percentage points from April 2026. The additional rate will remain unchanged.
There are additional changes to consider, including new separate tax rates for property income and a new mansion tax.
However, these changes will not come into effect until April 2027 and April 2028, respectively.
Get advice for the new year
With so many changes to prepare for, or non-changes in some cases, understanding your position early gives you more options as the new tax year approaches.
To get your affairs up to date, book your 2026/27 tax planning consultation.
