August has been a significant month for UK tax and accounting developments, with HMRC releasing new guidance, consultations closing, and several major policy changes moving closer to implementation. For small businesses, landlords, and accountants, these updates will shape compliance obligations heading into the final quarter of 2026 and the October Budget.
This round‑up highlights the most important changes — and what they mean for your business.
1. Draft Finance Bill Legislation Continues to Dominate Industry Discussion
Following the publication of draft legislation on “L‑Day” (13 July 2026), August saw continued analysis across the accounting profession. Key measures include:
Mandatory foreign permanent establishment exemption
UK‑resident companies will be required to exclude profits and losses from foreign permanent establishments from corporation tax calculations for periods beginning 1 January 2027.
OECD Pillar Two implementation
The government’s “Side‑by‑Side” package will apply to accounting periods beginning 1 January 2026, aligning the UK with global minimum tax standards.
New 35% Oil & Gas Revenue Levy
This permanent levy will replace the Energy Profits Levy when it expires in March 2030.
Securities Transfer Tax (STT)
Stamp Duty and SDRT will be merged into a single STT from 2027, simplifying the tax treatment of securities transactions.
What this means for SMEs:
While these measures primarily affect larger corporates, they signal a continued push toward simplification, digitalisation, and international alignment — trends that will eventually filter down to smaller businesses.
2. VAT Consultations Raise Concerns for Online Marketplaces
Across the profession, AI is now handling tasks like reconciliation, document HMRC’s June consultation on tightening VAT rules for online marketplaces remained a hot topic in August. Professional bodies, including ICAEW, questioned whether the proposals would meaningfully reduce non‑compliance.
Other VAT updates include:
New VAT relief for social housing
Aimed at reducing development costs and accelerating construction.
Updated capital goods scheme guidance
HMRC has clarified how adjustments should be applied for high‑value assets.
Impact for businesses:
Online sellers and marketplace operators should prepare for stricter VAT oversight in 2027. Construction‑related businesses may benefit from targeted relief.
3. HMRC to Automatically Enrol Taxpayers into MTD ITSA
One of the most significant August announcements:
From September 2026, HMRC will begin automatically signing up taxpayers who fall within scope of Making Tax Digital for Income Tax but have not enrolled themselves.
This follows ongoing issues highlighted in HMRC’s MTD developer updates, including:
- Missing quarterly obligations
- Failed submissions
- Delays in calendar‑quarter elections
Impact:
Many sole traders and landlords will be moved into MTD whether they are ready or not — increasing the urgency for digital bookkeeping adoption.
4. Concerns Over Earlier Income Tax Payment Proposals
ICAEW raised concerns that proposals for more timely payment of Income Tax Self Assessment could:
- Create cash‑flow pressure for taxpayers
- Increase administrative burdens for employers
- Complicate payroll processes
Impact:
If implemented, this would significantly change how self‑employed individuals plan for tax payments.
5. HMRC Employer Bulletin — August 2026 Highlights
HMRC’s latest Employer Bulletin included several important updates:
Warning about payroll tax fraud schemes
Employment agencies and employers are being targeted by fraudulent schemes claiming to reduce liabilities using fake tax credits.
Mandatory payrolling of benefits in kind (BIKs)
The phased rollout continues — employers should prepare now.
Mileage rate updates for the 2026–27 tax year.
Consultations on lower‑value tax debts
HMRC is exploring new approaches to recover small outstanding amounts more efficiently.
NIC recovery time limit alignment
Proposals aim to bring NIC recovery rules in line with Income Tax.
Impact:
Payroll teams must prepare for mandatory payrolling of benefits and remain vigilant against fraudulent schemes.
6. HMRC Performance Update — Q1 2026/27
HMRC’s quarterly performance report revealed:
£966.4bn in tax revenues collected in 2025–26
Over £50bn compliance yield — the highest ever
Recruitment of 5,500 new compliance caseworkers by 2030, with 250 added between April and June 2026
Impact:
Expect more compliance activity, more enquiries, and faster intervention — particularly around VAT, payroll, and income tax.
7. Budget 2026 Confirmed for 28 October
The Chancellor confirmed that the 2026 Budget will be delivered on 28 October, with a focus on:
- Fiscal credibility
- Decentralisation
- Continued tax system simplification
- Digitalisation of reporting and compliance
Impact:
Businesses should expect further announcements affecting MTD, VAT, payroll, and SME support.
What UK Businesses Should Do Now
Prepare for automatic MTD enrolment
Ensure bookkeeping systems are fully digital and compatible with MTD ITSA.
Review payroll processes
Mandatory payrolling of benefits is coming — update systems and workflows now.
Strengthen VAT compliance
Online sellers and marketplace operators should prepare for tighter VAT rules.
Monitor Budget 2026 developments
October’s Budget is likely to include major changes affecting SMEs.
Stay alert to payroll fraud schemes
HMRC has issued multiple warnings — agencies and employers should be cautious.
How Your Ledger Can Help
We provide a complete range of bookkeeping and financial support services, including:
- Professional bookkeeping
- Bank reconciliation
- VAT returns
- Management accounts
- Cash flow forecasting
- HMRC compliance
- Cloud accounting support
- Financial reporting
Whether you’re just starting your business or looking to improve your existing financial processes, we’re here to help you stay organised, compliant and in control.
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