HMRC has published a major package of tax consultations and policy announcements that could change how businesses and individuals report, manage and pay tax over the coming years.
Published on 23 June 2026, the Tax Update 2026: Simplification, Modernisation and Fairness covers everything from more frequent Self Assessment tax payments and mandatory e-invoicing to Capital Gains Tax relief and the taxation of payments to company shareholders.
Many of these measures are currently proposals rather than confirmed changes to the law.
However, they give businesses a useful indication of where the UK tax system could be heading: more digital, more real-time and increasingly data-driven.
For small businesses, landlords, sole traders and company directors, understanding these changes early could make it much easier to prepare.
Here, A&C Chartered Accountants explains some of the most important proposals and what they could mean for you.
Could Self Assessment tax payments become more frequent?
One of the most significant proposals is HMRC’s consultation on Timely Payments for Self Assessment taxpayers.
Currently, many Self Assessment taxpayers make payments in January and July through the Payments on Account system.
The Government is exploring whether more tax could instead be collected throughout the year.
For taxpayers who receive both PAYE income and Self Assessment income, the proposals could result in more of their tax liability being collected through PAYE from April 2029.
HMRC is also considering wider reforms to Payments on Account for other Self Assessment taxpayers.
Under the proposals, taxpayers could be required to pay their forecast tax liability during the tax year, followed by a balancing payment or repayment once their final tax position is established.
What could this mean for sole traders and landlords?
There are potential advantages.
Paying tax more frequently could make budgeting easier and reduce the prospect of facing a substantial tax bill in January.
However, there’s another side to it.
If tax has to be paid sooner than under the existing system, businesses and individuals may have less cash available during the year.
For sole traders, landlords and other Self Assessment taxpayers, cash-flow forecasting could therefore become increasingly important if these proposals eventually become law.
HMRC is reviewing Benchmark Scale Rates
HMRC is also reviewing Benchmark Scale Rates (BSRs) and Overseas Scale Rates (OSRs).
These rates allow employers to reimburse employees for qualifying expenses such as meals and travel using agreed flat rates rather than checking every individual receipt.
The Government is considering whether the existing rates accurately reflect current costs and whether the overall system can be simplified.
For businesses with employees who regularly travel for work, a simpler system could reduce administration and make expense claims more consistent.
Employers should therefore keep an eye on the outcome of the review.
Mandatory e-invoicing is coming to the UK
Another important development for businesses is the continued move towards electronic invoicing, or e-invoicing.
The Government has confirmed that the Peppol framework will form the core network supporting the UK’s planned e-invoicing system.
But what exactly does that mean?
What is e-invoicing?
E-invoicing isn’t simply creating an invoice and emailing it to your customer as a PDF.
Instead, invoice information is created in a standardised digital format and transmitted directly between accounting and finance systems.
This can reduce manual data entry, improve accuracy and potentially speed up invoice processing.
Peppol is an international framework designed to allow different accounting and finance systems to exchange invoice information securely and consistently.
When will e-invoicing become mandatory in the UK?
The Government is working towards mandatory e-invoicing from 2029, primarily covering VAT invoices for business-to-business and business-to-government transactions.
Businesses are expected to exchange invoices through approved software providers rather than uploading invoices to a central Government platform.
A more detailed implementation roadmap is expected later in 2026.
What should small businesses do about e-invoicing?
There’s no need for small businesses to overhaul their systems immediately.
However, this is another strong reason to consider how digital your bookkeeping currently is.
Businesses already using modern cloud accounting software are likely to be better positioned for the transition than businesses relying heavily on spreadsheets, paper records or manual invoicing.
At A&C Chartered Accountants, we already work with businesses using cloud accounting systems such as Xero, helping them streamline bookkeeping and financial processes.
Moving towards good digital bookkeeping isn’t simply about complying with future HMRC requirements. It can also give business owners better visibility over cash flow, invoices, expenses and overall business performance.
Proposed changes to CGT Holdover Relief
The Government has also published draft legislation intended to correct an anomaly in the calculation of Capital Gains Tax (CGT) Holdover Relief for gifts of business assets.
Holdover Relief can allow a capital gain arising when certain business assets are gifted to be deferred until the person receiving the asset subsequently disposes of it.
The proposed legislation would amend the calculation used for certain share transfers so that the relief operates as intended.
Why could this matter for business owners?
The change could be particularly relevant where shares are being transferred as part of:
- Business succession planning
- Family ownership arrangements
- Company restructures
- Transfers of business assets
The measure isn’t yet law.
However, if you’re currently considering a transaction that could be affected, it may be worth taking professional tax advice before proceeding.
Depending on the circumstances and the final legislation, the timing of a transaction could potentially affect the tax outcome.
Changes to how company payments to shareholders are taxed
The Government is also examining the rules governing how certain payments made by companies to shareholders are taxed.
Many of the existing rules have developed over decades and can be complicated.
The consultation considers areas including distributions, returns of capital, company reorganisations and interactions with the loans to participators rules.
There are no immediate changes for owner-managed businesses as a result of the consultation.
However, it is an area worth watching.
For company directors and shareholders, future reform could potentially affect the tax treatment of dividends, extracting money from a company and certain company restructures.
HMRC’s increasing focus on digital tax compliance
A wider theme running through the 2026 Tax Update is HMRC’s continued investment in digitalisation and tax compliance.
Several consultations look at ways of tackling tax evasion, fraud and inaccurate reporting.
Proposals include extending VAT liability rules for online marketplaces, introducing software standards designed to combat electronic sales suppression and creating a new offence relating to reckless untrue statements in direct tax matters.
For businesses already complying with their tax obligations, these measures are primarily intended to target businesses and individuals that deliberately understate sales or avoid tax.
However, they reinforce an important trend.
HMRC is increasingly using technology and data to administer and enforce the UK tax system.
Accurate bookkeeping and robust financial records are therefore becoming more important, not less.
What does the HMRC Tax Update mean for small businesses?
Most of the measures announced on 23 June 2026 are consultations or proposals rather than immediate changes to tax law.
There is therefore no need for businesses to make rushed decisions.
But taken together, the announcements give us a useful indication of the direction in which UK tax administration is moving.
We expect four themes to become increasingly important:
- Greater digitalisation – businesses will increasingly need accounting systems capable of communicating digitally with HMRC and other businesses.
- More real-time tax reporting and payment – the gap between earning income, reporting it and paying the associated tax could become shorter.
- Greater use of data and compliance technology – HMRC will continue to use digital information to identify errors and potential non-compliance.
- Simplification of existing tax rules – some long-standing and complicated areas of taxation are being reviewed.
What should businesses do now?
The key message from A&C Chartered Accountants is prepare rather than panic.
Many of these proposals won’t take effect for several years, and some could change significantly following consultation.
But businesses can still take sensible steps now.
Keep your accounting records accurate and up to date. Review whether your bookkeeping and invoicing systems are ready for an increasingly digital tax system. Monitor upcoming changes that could affect your business and consider cash-flow forecasting if the timing of tax payments changes.
Most importantly, seek advice before making significant decisions based on proposed tax changes.
Preparing your business for the future of tax
HMRC’s Tax Update 2026 isn’t simply a collection of technical tax consultations.
It provides a glimpse of what running a tax-compliant business in the UK could look like towards the end of this decade.
Digital bookkeeping, electronic invoicing, more timely tax payments and increasingly sophisticated HMRC data analysis are all part of that picture.
Businesses that prepare gradually should be in a much stronger position than those that wait until new requirements become mandatory.
This article is intended for general information only and does not constitute tax or financial advice. Many of the measures discussed are proposals or consultations and may change before implementation. Individual circumstances vary, so professional advice should be obtained before taking action.
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