Author: Glenn

Many small businesses rely on a mix of overdrafts, card facilities and short term loans to maintain day to day cash flow. During the past year banks and alternative lenders have become more cautious, and several indicators suggest that credit conditions will tighten further during 2026. For business owners, a little early preparation can make a noticeable difference.

Lenders are placing greater emphasis on consistent record keeping, realistic forecasts and clear evidence that a business understands its cash cycle. This means that up to date bookkeeping is no longer just a compliance task. Regular management information can demonstrate stability, provide reassurance to lenders and highlight any seasonal pressures that may need attention.

It is also sensible to review existing credit facilities. Many overdrafts and business loan agreements include renewal terms, and these can be harder to negotiate if left until the last moment. Checking the renewal dates, interest rates and any security requirements can help avoid unexpected changes that affect cash flow.

Businesses that rely heavily on card funded working capital or revolving credit should consider whether these facilities remain suitable. Even a small increase in interest rates or a reduction in limits can put pressure on margins, particularly in sectors with tight cost structures.

Planning ahead can reduce risk and improve financial resilience. Reviewing cash flow forecasts, maintaining timely financial records and having early conversations with lenders can help small businesses enter 2026 with greater confidence and fewer surprises.

The daily charge for driving within the London Congestion Charge zone will rise from £15 to £18 from 2 January 2026. This is the first increase in several years and forms part of Transport for London’s wider plan to manage traffic levels, improve air quality and support sustainable travel across the capital.

Transport for London has said that without an updated charge the central zone is likely to experience a noticeable increase in vehicle volumes during the next year. The higher charge is intended to discourage unnecessary journeys, smooth traffic flow and reduce delays that affect both businesses and individuals.

A significant change for drivers of electric vehicles is also being introduced. The current 100% discount for electric cars will end on 25 December 2025. From January 2026 electric cars registered for Auto Pay will move to a reduced rate that reflects a new tiered discount structure. Electric vans, heavy goods vehicles and quadricycles will also have revised discounted rates. This marks a shift away from the long-standing full exemption that has been used to encourage uptake of electric vehicles.

Residents who live within the congestion charging zone will continue to receive a 90% discount, although new applicants from March 2027 will only qualify for this reduction if they drive an electric vehicle. Existing residents with the discount will keep their entitlement regardless of vehicle type.

For business owners, delivery companies and anyone regularly travelling into central London, these changes will require some forward planning. Vehicle choice, travel habits and the cost of regular visits to the zone may all be affected. It may be useful to review travel arrangements ahead of the January 2026 increase in order to understand the cost impact on budgets and operations.

The Department for Business & Trade has recently published a report that outlines the government’s enforcement of the National Minimum Wage (NMW) and National Living Wage (NLW) for the 2024–25 financial year.

The Government is committed to ensuring that all workers receive the minimum wage to which they are entitled, and HMRC enforces this on its behalf through a strategy known as ‘Promote, Prevent and Respond’.

The ‘Promote’ strategy aims to address non-compliance due to lack of understanding rather than deliberate underpayment, focusing on improving information for employers so they can meet their legal obligations. If employers continue to neglect compliance, full enforcement actions are taken.

The ‘Prevent’ strategy targets employers who intentionally underpay workers, by highlighting the consequences of non-compliance to deter such behaviour.

The ‘Respond’ strategy comes into play when HMRC identifies non-compliance, either through worker complaints or its targeted enforcement activities. If an employer is found to have underpaid workers, HMRC issues a Notice of Underpayment (NoU), requiring the employer to repay the wages within 28 days and imposing penalties. Serious cases may result in a labour market enforcement undertaking (or order). In the most serious cases criminal prosecution can also be pursued by HMRC.

The budget for enforcement increased from £31.2 million in 2023-24 to £31.5 million in 2024-25, enabling HMRC to expand its compliance team and increase its investigative efforts to improve wage compliance and protect workers’ rights.

As a reminder, the current NMW and NLW rates took effect on 1 April 2025. The current hourly rate for the NLW is £12.21. For those aged 18 to 20, the NMW is £10.00 per hour. Workers aged 16 to 17 and apprentices are entitled to £7.55 per hour.

Many businesses are still unaware that the VAT late filing and late payment rules now operate on a points-based system, where repeated delays can quickly lead to a £200 penalty and added interest.

The VAT late filing penalties regime changed for accounting periods beginning on or after 1 January 2023. Under the new system, there are penalty points for late filing of VAT returns and for the late payment of VAT liabilities.

The revised system operates on a points-based approach. A taxpayer receives one penalty point for each VAT return that is submitted late. Once a specific threshold of points is reached, a financial penalty of £200 is charged and the taxpayer is notified.

The penalty thresholds based on VAT return frequency are as follows:

• For monthly VAT returns, the threshold is five penalty points
• For quarterly VAT returns, the threshold is four penalty points
• For annual VAT returns, the threshold is two penalty points

For example, a business that files VAT returns on a quarterly basis will receive a £200 penalty once it accumulates four late submission points. To remove the penalty points and return to a clean compliance record, the taxpayer must submit all VAT returns on time for a continuous period of twelve months. There are also statutory time limits after which a penalty point cannot be issued for a particular late return.

Late payment penalties are applied separately. If VAT remains unpaid between 16 and 30 days after the due date, a first penalty of 2% of the outstanding tax is charged. If the VAT is still unpaid 31 days or more after the due date, a second penalty of 4% of the outstanding amount applies.

In addition, late payment interest is charged from the day payment becomes overdue until it is paid in full.

The free HMRC tax app now provides quick access to tax codes, income history, self-assessment details, National Insurance records and even payment options, all from your phone.

HMRC’s free tax app is available to download from the App Store for iOS and from the Google Play Store for Android. The latest version of the app includes some updated functionality.

To set up the tax app for the first time, open the app and enter your Government Gateway user ID and password. If you do not have a user ID, you can create one within the app. After signing in, you can access the app easily using a 6-digit PIN, fingerprint or facial recognition.

The app can be used to see your:

• tax code and National Insurance number
• income and benefits
• employment and income history in the previous 5 years
• Unique Taxpayer Reference (UTR) for self-assessment
• self-assessment tax you owe
• your Child Benefit
• your State Pension forecast
• gaps in National Insurance contributions

The app can also be used to complete a number of tasks that usually require the user to be logged on to a computer. This includes to:

• get an estimate of the tax you need to pay
• make a self-assessment payment
• make a Simple Assessment payment
• set a reminder to make a self-assessment payment
• access your Help to Save account
• using HMRC’s tax calculator to work out your take home pay after Income Tax and National Insurance deductions
• track forms and letters you have sent to HMRC
• claim a refund if you have paid too much tax
• ask HMRC’s digital assistant for help and information
• update your name and / or postal address
• save your National Insurance number to your digital wallet
• check if you can make a payment for gaps in your National Insurance contributions
• choose to be contacted by HMRC electronically, instead of by letter.