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 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.

HMRC is currently contacting certain sole traders by email to reiterate the importance of adjusting business expenses for personal use.

The email explains:

• why personal use must be adjusted on your self-assessment tax return; and
• what you need to do if your business expenses cover business and personal use.

The email also includes links to GOV.UK for more detailed information on personal use adjustments and allowable expenses. This is a genuine email that HMRC recently sent (from 20 October 2025 up to and including 7 November 2025).

This is an important reminder for sole traders. In general, if sole traders use something for both business and personal reasons, they can only claim allowable expenses for the business costs.

However, there are simplified arrangements available to sole traders for claiming a fixed rate deduction for certain expenses where there is a mix of business and private use. The simplified expenses regime is not available to limited companies or business partnerships involving a limited company.

Simplified flat rates can be used for working from home and for the business costs of vehicles. This method saves having to calculate the proportion of personal and business use.

The current monthly flat rates are based on the amount of business use of the home:

• 25 to 50 hours worked per month can claim – £10
• 51 to 100 hours worked per month can claim – £18
• 101 or more hours worked per month can claim – £26

Under simplified expenses, there are the following flat rates per mile available. These rates can be used instead of working out the actual costs of buying and running your vehicle, e.g. insurance, repairs, servicing, fuel.

• Cars and goods vehicles first 10,000 miles – 45p
• Cars and goods vehicles after 10,000 miles – 25p
• Motorcycles – 24p

Whilst using the flat rates is not compulsory, once a decision is made to use the simplification for a specific vehicle this must continue to be used for a vehicle as long as that vehicle is used for business purposes.

We would be happy to help you ascertain whether using simplified expenses or claiming based on actual costs incurred is more beneficial for your business.

HMRC offers a helpful online tool that allows agents and taxpayers to check when they can expect a response to a query or request that they have made. The online tool is updated weekly with the latest information.

The full list of taxes the tool can currently be used for are as follows:

• Child Benefit
• Corporation Tax
• Construction Industry Scheme (CIS)
• Employers’ PAYE
• Income Tax
• National Insurance
• Self-assessment
• Tax credits
• VAT

Agents can also check how long it will take HMRC to:

• register you as an agent to use HMRC online services;
• process an application for authority to act on behalf of a client; and
• amend your agent details.

The online tool can be accessed at the following address, and you do not have to be logged in to receive an answer: https://www.tax.service.gov.uk/guidance/Check-when-you-can-expect-a-reply-from-HMRC/start/are-you-an-agent.

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.