From April 2026, Making Tax Digital for Income Tax (MTD for IT) will become mandatory for many self-employed persons and landlords, marking a significant change in how they manage their tax affairs. The new regime is designed to modernise the tax system by requiring taxpayers to interact with HMRC through an online tax account, rather than relying solely on an annual self-assessment return.

Initially, MTD for IT will apply to individuals with qualifying income of more than £50,000 a year from self-employment and/or property. From 6 April 2027, the scope will widen to include those with income between £30,000 and £50,000. Alongside this, a new points-based penalty system will be introduced for the late filing and late payment of MTD for IT liabilities.

Under MTD for IT, affected taxpayers will need to keep digital records of their income and expenses using compatible software. Instead of reporting everything once a year, they will be required to send quarterly updates to HMRC, providing a summary of their business or property income and costs. These updates are not tax bills, but they are intended to give HMRC a clearer picture of income throughout the year. A final declaration will still be required after the end of the tax year, with any tax due payable by 31 January following the year end.

Qualifying income is a key concept under MTD for IT. It is broadly the total income earned in a tax year from self-employment and property income, including income from multiple trades or rental properties. Other sources of income reported on a tax return, such as employment income under PAYE, dividends, pensions or partnership income, does not count towards this threshold.

If you are unsure how MTD for IT will affect you, or would like any support preparing for the change, we would be happy to help.

If your business is planning a major UK investment, HMRC’s new advance tax certainty service could give you binding clarity on the tax position before you commit.

HMRC has recently published draft guidance on the new advance tax certainty service as part of the government’s Corporate Tax Roadmap at the Autumn Budget 2024, where the Chancellor set out plans for a new HMRC service to give major investment projects clarity on how tax law will apply in advance. As part of the Autumn Budget 2025 measures last November, it was confirmed that the new service is expected to open in July 2026.

Under the new advance tax certainty service, businesses investing at least £1 billion in the UK over the lifetime of a project can apply for a formal, binding position from HMRC on how various taxes will be applied to their specific circumstances. This applies to taxes such as Corporation Tax, VAT, Stamp Taxes, PAYE and the Construction Industry Scheme.

Unlike existing clearance routes, the advance tax certainty service is designed specifically for large and complex projects where uncertainty over tax outcomes could otherwise discourage investment. HMRC clearances issued through this service will bind the tax authority for up to five years subject to full initial disclosure of all material facts. The clearance may then be renewed for a further five years unless a material change in the law, or a court decision that clarifies its application, means that the prior clearance is no longer correct.

This service is intended to provide those investing significant amounts in the UK, confidence that the tax treatment of a project will not later be challenged.

The Insolvency Service data for England and Wales shows monthly company insolvencies remain high by historical standards, even though they move up and down month to month. For example, November 2025 recorded 1,866 registered company insolvencies, down on October 2025 and also below the same month a year earlier. The wider context matters, monthly totals through 2025 have generally been slightly higher than 2024, but lower than 2023, which saw a 30 year high in annual insolvencies.

New company formations: still strong, but down on the prior year

On the formations side, Companies House figures show incorporation volumes have softened. In the financial year ending 2025, there were 801,864 company incorporations, down 10% compared with the financial year ending 2024. At the same time, dissolutions rose, with 726,735 dissolutions in the financial year ending 2025, up 9.6% on the prior year.

Quarterly data shows how this can translate into net shrinkage in the register for periods of time. Between July and September 2025 there were 215,982 incorporations and 234,373 dissolutions, so dissolutions outpaced incorporations in that quarter.

A practical way to read this is that the “start-up engine” is still running, but not as hot as it was, while the “clean-up” of non-viable businesses has accelerated.

Why both trends can be true at the same time

ONS business demography data helps explain the apparent contradiction. On an enterprise basis (different from Companies House incorporations, but directionally helpful), business births edged up from 316,000 to 317,000 between 2023 and 2024, while business deaths fell from 310,000 to 280,000, producing the lowest death rate since 2016.

So, depending on which lens you use, you can see: (a) high company insolvency activity, (b) lower incorporations than the prior year and (c) relatively resilient enterprise births and improved enterprise death rates. Differences in definitions and timing matter, but the shared message is that the UK is in a reallocation phase: weaker balance sheets and marginal business models are being pushed out, while new ventures keep forming, often leaner, more specialised and sometimes set up to replace old entities.

Pre-tax year end planning is one of the most practical and controllable ways for UK businesses and higher rate taxpayers to reduce unnecessary tax exposure. Unlike long term restructuring, it focuses on decisions that can still be influenced before 5 April or, for companies, before the accounting year end. When done properly, it is not about aggressive schemes, it is about making sure allowances, reliefs and timing opportunities are not wasted.

Why timing matters

The UK tax system is sensitive to timing. Income, expenses, capital purchases and pension contributions can fall into one tax year or the next depending on when action is taken. Once the year end passes, many opportunities disappear completely.

For higher rate taxpayers, this can be particularly costly. Income drifting just over a threshold can trigger higher marginal rates, loss of allowances or reduced reliefs. Pre-year end planning allows income levels to be reviewed and steps taken to mitigate sharp jumps in tax, rather than reacting after the event.

Key benefits for businesses

For owner managed businesses, year-end planning often centres on profit extraction and investment decisions. Reviewing results before the year end allows directors to consider whether profits should be retained, extracted as salary or dividends or redirected into qualifying expenditure.

Capital allowances are a common example. If a business plans to invest in plant or equipment, bringing expenditure forward into the current year can accelerate tax relief and improve cash flow. Pension contributions made by the company can also be an efficient way to extract value, reducing corporation tax while building long term personal wealth.

Stock levels, bad debts and provisions also deserve attention. A timely review can ensure profits are not overstated simply because adjustments were overlooked.

Value for higher rate and additional rate taxpayers

Individuals paying tax at higher or additional rates face some of the steepest marginal tax charges in the system. Pre-tax year end planning can help smooth income and preserve reliefs.

Pension contributions are often central. Personal contributions can attract higher rate relief, while also reducing adjusted net income, which can help protect allowances that taper away at higher income levels. Charitable giving under Gift Aid can have a similar effect.

For those with investment income, reviewing disposals before the year end can allow better use of annual exemptions or losses, rather than triggering avoidable capital gains tax.

The new 40% First Year Allowance (FYA) for qualifying main-rate plant and machinery expenditure first announced at Autumn Budget 2025 has now come into force.

Effective from 1 January 2026, the new FYA applies to qualifying main-rate plant and machinery expenditure. It was also announced at the recent Autumn Budget 2025 that the main rate writing down allowances would be reduced to 14% (from 18%) from 1 April 2026 for Corporation Tax purposes and from 6 April 2026 for Income Tax purposes.

These changes mean that:

• Businesses can claim a 40% FYA on qualifying main-rate plant and machinery.
• The allowance applies to assets acquired for leasing, which did not qualify from full expensing.
• Unincorporated businesses, including sole traders and partnerships can also benefit from the FYA. These businesses did not benefit from full expensing.
• The allowance is permanent, providing long-term certainty for investment and capital planning.

The new FYA complements the existing full expensing regime, which remains in place for incorporated businesses. Full expensing allows companies to deduct 100% of the cost of qualifying plant and machinery from taxable profits in the year of acquisition, delivering tax savings of up to 25p for every £1 invested, in line with the current Corporation Tax rate.

Understanding how the new 40% FYA interacts with existing allowances, including full expensing and annual investment allowances, will be important when considering expenditure going forward.