As we head towards the new tax year, many small and medium-sized enterprises (SMEs) are asking how to stay up to date with changes from HMRC. The rules around taxation and digital reporting are always evolving, and it can be hard to keep track of what applies to your business. We understand that you want to focus on running your company, not constantly studying legislation, so we have outlined the key points you should know this year.
Making Tax Digital (MTD) expansions
MTD has been an ongoing initiative that encourages businesses and individuals to use software for tax reporting. HMRC now requires more sectors to sign up, and deadlines for MTD for income tax (MTD IT) have shifted since its initial introduction.
If you are required to sign up for MTD, you must ensure you choose compatible software. If you need more official details visit HMRC’s dedicated Making Tax Digital page.
Changes to tax thresholds and allowances
Many personal and business tax thresholds remain frozen until April 2028, but it is still wise to monitor adjustments that might impact your earnings. The personal allowance stands at £12,570, while the higher rate threshold remains at £50,270. For businesses, corporation tax sits at 25% for profits above £250,000, with a small profits rate of 19% still available for profits up to £50,000. If your profits fall between these limits, you will pay a marginal rate, so it helps to plan ahead.
The dividend allowance has been reduced in recent years. Currently it stands at £500 for all taxpayers, affecting many directors and shareholders who take dividends as part of their income. If you rely heavily on dividends, you might need to adjust your remuneration strategy or allocate funds differently.
Penalties and interest charges
Penalties for late payments or incorrect returns can be significant. If you file late or submit inaccurate figures, HMRC may impose fines and backdated interest. In some cases, repeated offences can lead to investigations, which consume valuable time and resources.
The penalty regime usually considers the severity of the error. If HMRC believes you have acted carelessly or deliberately concealed information, the fines increase. This year, we encourage you to focus on accuracy. Check your data, reconcile accounts regularly and conduct internal audits. If you notice errors, correct them as soon as possible. Early action can show that you are committed to compliance and may reduce the risk of harsher penalties.
For more details on penalties visit these links:
- Self-Assessment: https://www.gov.uk/self-assessment-tax-returns/penalties
- Corporation Tax: https://www.gov.uk/company-tax-returns/penalties-for-late-filing
- VAT: https://www.gov.uk/government/collections/vat-penalties-and-interest.
Common pitfalls for SMEs
One frequent mistake is leaving tax planning until the last minute. Many SMEs file returns right before the deadline, which makes errors more likely. This leads to missed opportunities for reliefs and allowances.
Another common pitfall involves mixing personal and business expenses. Keeping separate bank accounts for business transactions can simplify bookkeeping and reduce the chance of confusion.
How we can help
We stay on top of HMRC changes so you do not have to. If you have concerns about MTD or want to fine-tune your tax strategy for 2025/26, we are here to help. Our approach focuses on solving issues quickly, and we keep jargon to a minimum. By acting as a strategic partner, we can help you explore cost-effective ways to reduce your tax burden and plan for the future.
Practical tips to stay compliant
- Review thresholds regularly: Keep track of your turnover and profit levels to avoid missing any registration requirements or changes in tax rates.
- Use compatible software: Ensure your tools meet HMRC’s standards for digital reporting. Run updates often and double-check that your data is secure.
- Plan ahead for allowances: Allocate your remuneration in a way that makes the most of allowances, such as dividends, pension contributions and other reliefs.
- Schedule timely checks: Set monthly or quarterly reminders to review your accounts, reconcile bank statements and back up records.
- Ask for professional help: Reach out to us if you need guidance on the 2025/26 rules, penalty mitigation or any other accounting and tax issues.
Key takeaways
Staying up to date with HMRC’s requirements is not just about meeting deadlines. It is about making informed choices that support your company’s growth. By monitoring changes in tax thresholds, using approved software and checking your books on a regular basis, you can reduce the risk of penalties and keep your financial health on track. We can also support your business with our outsourced accounting services and virtual CFO services, please get in touch.
We would be happy to discuss your tax obligations and show you how to streamline your processes. Contact us today to learn more about keeping your business compliant this year and beyond.
Disclaimer: The information contained in this website is for general information purposes only. The information is provided by Specialist Accounting Solutions Ltd and while we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
