Tax Update 2026: What HMRC’s Changes Mean for Small Business Owners
On 23 June 2026, HMRC published their Tax Update 2026, aimed at simplifying, modernising and adding fairness to the tax and customs system. Most of it is still at consultation stage, but there are already strong indicators of how you’ll be paying, reporting and dealing with HMRC over the next few years. Here’s what small business owners in particular should have on their radar.
Smaller, more regular tax payments
A new consultation looks at spreading Income Tax Self Assessment payments through the year rather than in one or two large lumps. If you’re a sole trader or director who also has PAYE income, more of your forecasted liability could be collected through PAYE from April 2029. The government is also consulting on reforming Payments on Account for other Self Assessment taxpayers.
Direct Debit set to become mandatory for VAT and PAYE
Following on from Budget 2025, a consultation has now opened on making Direct Debit the required payment method for VAT and PAYE return liabilities, with some exceptions still to be defined. The proposals would move businesses away from manual bank transfers, CHAPS and Faster Payments, which currently account for the bulk of how VAT is paid. If your business relies on one of these methods, it’s worth planning ahead for what this could mean for your cashflow around payment dates, particularly if money can be tight in the run up to a VAT deadline.
HMRC is taking a tougher line on smaller tax debts
HMRC says that over 750,000 lower value debts, worth more than £2 billion between them, remain uncollected after nine months and ten or more attempts to make contact. A new consultation proposes powers to recover these debts directly from a customer’s account in instalments, where someone can pay but simply hasn’t responded. For small business owners, if you’re struggling to pay, talk to HMRC or your accountant sooner rather than later.
E-invoicing is coming, even if it feels a long way off
The government has confirmed that Peppol will be the core network behind the UK’s move towards e-invoicing, ahead of a mandate expected in 2029. If you’re using accounting software already, this is unlikely to cause you any headaches when the time comes, but it’s worth knowing the direction of travel if you’re choosing new systems or software over the next few years.
A better starting point for new small businesses
HMRC is carrying out a full review of the customer journey for people starting a small business, looking at every stage from setting up through to ongoing compliance. The aim is to spot where the process trips people up and make it easier to understand what’s expected of you from day one.
How Mitchell Charlesworth can help
Much of this is still at consultation stage, but indicates HMRC wants tax paid more regularly, collected more efficiently and reported digitally wherever possible. If you’d like to talk through what any of these changes could mean for your business, from Self Assessment payments to how you handle VAT and PAYE, get in touch with our team.
