What UK Small Businesses Need to Know Now
If it feels like the goalposts for UK business owners are moving again, you aren’t imagining it. Between the full rollout of Making Tax Digital (MTD) and a new wave of AI-driven accounting standards, 2026 is proving to be a landmark year for the British economy. At Evans & Co, we believe that "forewarned is forearmed." Here is a breakdown of the three major shifts currently impacting your bottom line and how to stay ahead of them.
Making Tax Digital (MTD): The End of the Annual Return
As of April 2026, the way you report income has fundamentally changed. If you are a sole trader or landlord with a qualifying income over £50,000, the old "once-a-year" self-assessment is officially a thing of the past.
Quarterly Updates: You are now required to send a summary of your income and expenses to HMRC every three months.
Digital-Only: Paper ledgers and simple spreadsheets are no longer enough. You must use MTD-compatible software to maintain "digital links" between your records and HMRC.
Why it matters: Missing these quarterly deadlines can now lead to a points-based penalty system. The goal is real-time tax, but for the unprepared, it can feel like a full-time job.
2. The Dividend and Capital Gains "Squeeze"
The 2025 Autumn Budget ripples are being felt across this year's tax returns. If you take your income via dividends or are planning to sell business assets, your strategy likely needs a refresh.
Tax Type 2026/27 Rate (Basic) 2026/27 Rate (Higher)
Dividend Tax 10.75% 35.75%
Capital Gains (Business Assets) 18% 18%
With the gap between dividend tax and employment income narrowing, we are working with many clients to reassess their "salary vs. dividend" mix to ensure they aren't overpaying into the Treasury's coffers.
3. FRS 102: New Standards for Leases and Revenue
It’s not just tax—the very rules of how we "do" accounting have shifted. The new FRS 102 standards (effective for periods starting Jan 1, 2026) mean that almost all leases must now appear on your balance sheet.
The Impact: This can significantly change your EBITDA and debt-to-equity ratios.
The Warning: If you have bank loans with "covenants" (rules about your financial health), these accounting changes might technically put you in breach of your loan, even if your cash flow hasn't changed. We recommend a "Covenant Health Check" sooner rather than later.
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