As we head into a new tax year, there are some changes to that may affect how you run your business and could affect future planning. To help you stay ahead, we’ve highlighted three key updates you should have on your radar as a business owner.
Making Tax Digital
For an estimated 864,000 sole traders and landlords, the new tax year marks the beginning of Making Tax Digital (MTD) for Income Tax. Many more will follow in April 2027 and April 2028.
Sole traders and landlords with gross income above £50,000 in the 2024/25 tax year are being mandated were mandated into MTD for IT from 6 April. Being within MTD will mean keeping digital records and using compatible software to submit quarterly updates to HMRC, as well as an end-of-year tax return.
MTD will be a significant change in how income tax responsibilities are handled for landlords and sole traders, and it pays to be as prepared as possible.
There are some limited exemptions available. Some are provided automatically, whereas others need to be applied for.
If you are within MTD from April 2026, you should have received a letter from HMRC telling you this and explaining how to sign up. Please note that you will not be automatically signed up. This is something you need to take care of, if you haven’t already!
If you are not sure what to do or whether MTD applies to you, please give us a call and we will be happy to help you. You can find out more information and download our handy guide here.
Reduction in capital allowances
The main rate of writing-down allowance (WDA) is being reduced to 14% from 18%. This means you will get less relief on assets your business owns that are being given tax relief in this way.
However, in January 2026 a new 40% first-year allowance (FYA) was announced, and the annual investment allowance continues to apply. These allowances mean that it should be possible to gain favourable tax relief on many new asset purchases.
If you are considering a purchase and would like to ensure that tax relief will be available, please contact us and we will be happy to advise you.
CIS rules become more stringent
The changes that came into play regarding the Construction Industry Scheme (CIS) on 6 April have given HMRC increased powers.
If a business knows or should have known that a CIS-related payment was connected to fraud, HMRC will be able to:
- Immediately remove gross payment status from the business.
- Make the business liable for the tax loss.
- Charge penalties to the business or the officers of the business.
The time limit for reapplying for a gross payment certificate after its removal will be increased from one year to five years.
These changes underscore the importance of remaining compliant with CIS.
If you need help staying compliant with tax or to see whether there are ways to optimise your tax position for 2026/27, please get in touch. We would be happy to help you!
