Considerations to Change

HMRC has intensified its focus on how founders structure the sale of their businesses, in particular earn-outs, equity rollovers, and other deferred, share-based or performance-linked payments that have been standard practice in deals for years. The central question HMRC is increasingly asking: are these payments genuinely a capital gain, or are they employment income linked to the founder's continued involvement?

Proceeds from a sale have traditionally been treated as a capital gain, taxed at lower rates. But where payments are tied to the founder staying on and continuing to work, HMRC is increasingly challenging whether they should instead be taxed as employment income, at higher income tax rates plus National Insurance, collected through PAYE. For some founders, this could significantly increase the tax due on an exit they spent years building towards.

• This is not necessarily a change in the rules, but a change in how closely existing rules are being applied. Structures that were waved through for years may now attract closer examination.
• If you are planning a sale, or have an earn-out or equity rollover in place, early and robust tax advice is essential. Getting the analysis right from the outset is far less costly than a reclassification dispute after completion.
• It is part of the same direction of travel seen across Making Tax Digital and the Companies House reforms: more scrutiny, more data, and far less room for “the way it has always been done.”

HMRC has been given significant additional funding and thousands of extra compliance staff, with a stated mandate to close the UK tax gap, estimated at around 46.8 billion pounds in HMRC's most recent Measuring Tax Gaps publication. VAT remains one of the largest areas of focus, and reported figures point to a marked rise in VAT investigations into businesses. Penalties for late VAT payments have also been increased.

This is less about new rules and more about scrutiny. HMRC is looking back over what has already been filed, applying closer attention to past decisions. Much of what gets challenged is not deliberate wrongdoing, but judgement calls, grey areas and honest interpretation in an increasingly complex system. You can be compliant by yesterday's understanding and exposed by today's scrutiny.

• Revisit your VAT position, records and documentation now, rather than waiting for a review to prompt it.
• The businesses that come through an investigation well are the ones whose records are clean, accurate and genuinely understood, not just filed and hoped for.
• Keep clear evidence supporting any judgement calls or positions taken, so they can be explained if questioned.

Under the Economic Crime and Corporate Transparency Act 2023, Companies House has confirmed major reforms to how companies file their annual accounts. From 1 April 2028, all accounts must be filed using commercial software in iXBRL format, and the Companies House web and paper routes will close for accounts filings (they remain open for other statutory filings). Small companies and micro-entities will be required to file profit and loss accounts, as larger companies already do, with the option to opt out of having that profit and loss information published on the public register (the opt-out detail is to be confirmed). Small companies will also no longer be able to file abridged accounts. Companies have 21 months to prepare.

Most of the public conversation has focused on the profit and loss change and the opt-out. But the more significant point is quieter: software filing becomes mandatory for every company, and the free, do-it-yourself routes close. This is the same direction of travel already seen with Making Tax Digital for VAT and Income Tax, now extended to company accounts.

• If you currently file your own accounts on the Companies House website or by paper, you will need to move to commercial software, or an accountant, before 1 April 2028.
• The 21-month lead time is there to be used. Moving to software filing sooner, rather than at the deadline, gives you time to learn it properly and file with confidence.
• If you are a small company or micro-entity, consider now how the profit and loss requirement, and the publication opt-out, will affect you.

From 18 November 2025, companies are no longer required to keep their own statutory registers of directors, directors' residential addresses, secretaries, and people with significant control (PSCs). That information is now held centrally by Companies House instead, and companies can no longer elect to hold officer information on the central register. Companies must still keep a register of shareholders (members) at their registered office or SAIL address, and if you previously held that register at Companies House, you now need to create and maintain your own.

Another quiet step in the same direction: information that companies used to hold and control themselves now sits centrally with Companies House. The detail is different, but the pattern is the same one running through all of these changes, more data, held centrally, by design.

• Make sure the information registered at Companies House is accurate and kept up to date, as it is now the central record.
• If you previously held your register of members at Companies House, create and maintain your own register at your registered office or SAIL address, and keep it available for public inspection.
• As with every other change here, the question is the same: have you kept your own records? Just a different set of records this time.

For the first time in 15 years, HMRC has increased the Approved Mileage Allowance Payment (AMAP) rate. From the 2026/27 tax year, which began on 6 April 2026, the rate for the first 10,000 business miles in a car or van rises from 45p to 55p per mile. The 25p rate for each business mile over 10,000 stays the same. The 45p rate had been frozen since 2011, while fuel, insurance and running costs climbed year on year.

Anyone who uses their own vehicle for business, the self-employed, directors, and employees claiming mileage allowance relief, can now claim or be reimbursed at a higher tax-free rate. It is a genuinely overdue change that puts real money back into the pockets of people who drive for work.

• Self-employed: apply the new 55p rate when preparing your 2026/27 tax return. No action is needed before then.
• Employers: you are not obliged to pay the AMAP rate, but if you do, you can now reimburse at 55p per mile tax-free.
• Employees: if your employer reimburses below 55p, you may be able to claim Mileage Allowance Relief on the difference through Self Assessment or form P87.
• Payroll and bookkeeping software updates can lag behind rate changes. It is worth checking your provider has updated to the new rate.

The government's free “File your accounts and Company Tax Return” online service closed on 31 March 2026. From 1 April 2026, annual accounts and Company Tax Returns must be filed using commercial software, or through an accountant. Paper filing is now only permitted with a reasonable excuse, or when filing in Welsh.

The free, do-it-yourself route that many small companies relied on for years has gone. If you previously filed your own accounts and tax returns through that service, you now need commercial software, or an accountant, to do it.

• If you used the free service, make sure you have your own copies of previously filed accounts and tax returns. Many accountants strongly advised downloading historical filings before the service closed, as ongoing access could not be relied upon.
• You will need to choose a commercial software package (HMRC and Companies House both publish lists of approved providers), or appoint an accountant.
• This is the first clear signal of the direction of travel: filing is moving onto software, by design.