UK Compliance Update: What Businesses Need to Prepare for in 2026 and Beyond
Staying compliant with HMRC and Companies House requirements is becoming increasingly important — and increasingly digital. Over the next 2–24 months, UK businesses will face some of the biggest changes to bookkeeping, tax reporting, and statutory filing in years.
Below is a clear summary of the key compliance changes on the horizon, what they mean in practice, and how to prepare.
Making Tax Digital (MTD) for Income Tax: A Major Shift
HMRC is pressing ahead with Making Tax Digital (MTD) for Income Tax, which will significantly change how sole traders and landlords report their income.
From April 2026, many unincorporated businesses will be required to:
Keep accounting records digitally
Use MTD-compatible software
Submit quarterly income updates to HMRC
Submit an end-of-year final declaration
This replaces the traditional once-a-year Self Assessment process.
What this means for businesses
Bookkeeping will need to be kept up to date throughout the year, not just at year-end
Spreadsheets alone will not be sufficient unless connected to approved bridging software
HMRC will receive information more frequently, increasing visibility and reducing scope for late corrections
Even if your business is not yet in scope, HMRC’s long-term direction is clear: digital record-keeping will become the standard for all.
Companies House Reforms: More Transparency, Less Flexibility
Significant reforms are also underway at Companies House, aimed at improving accuracy, transparency, and fraud prevention.
Key changes being introduced include:
Mandatory digital filing of accounts using approved software
Identity verification for company directors and people with significant control (PSCs)
Submission of full profit and loss accounts, even for small and micro-entities
Paper filing and abridged accounts will be phased out.
Why this matters
There will be less room for error and fewer opportunities to amend filings later
Financial information will be more visible and more closely scrutinised
Poor bookkeeping could lead to delays, rejections, or penalties
Preparing early by ensuring your records are accurate and software-ready will make this transition far smoother.
VAT Compliance: Digital Records Remain Essential
For VAT-registered businesses, MTD for VAT continues to be a key compliance focus for HMRC.
Businesses must:
Maintain digital VAT records
Submit VAT returns through MTD-compatible software
Ensure proper digital links between systems (manual copy-and-paste is not compliant)
HMRC continues to review VAT compliance closely, particularly where businesses are using spreadsheets or older systems incorrectly.
Increased Use of Automated Checks
Both HMRC and Companies House are increasing their reliance on automated systems to cross-check data.
This means:
Inconsistencies between filings are more likely to be flagged
Late submissions are harder to excuse
Inaccurate or incomplete records increase enquiry risk
Common problem areas include missing expense documentation, incorrectly reported income, and inconsistent figures between returns.
Good bookkeeping is no longer just best practice — it’s a key line of defence.
Quick Tips for Clients
- Software check: Ensure your accounting solution supports MTD and digital filing
- Keep digital records: Don’t rely on spreadsheets or paper receipts alone
- Professional support: For complex tax questions, get advice from a qualified accountant rather than free AI tools
- Plan for future deadlines: Especially those in 2026–27 (MTD and digital filing requirements)
Final Thought
The direction of travel is clear: digital, accurate, and up-to-date bookkeeping is becoming essential for compliance. Businesses that prepare early will face fewer surprises, fewer penalties, and far less stress as these changes come into force.
If you’re unsure how these changes affect your business, or whether your current bookkeeping setup is compliant, now is the right time to review it.
Contact Flex Bookkeeping Solutions and we’ll be happy to discuss your bookkeeping and accounting needs and concerns.
