May: Key Finance News

From Making Tax Digital now being live, to changes affecting directors’ loans, VAT deadlines and credit control, there are several developments worth keeping on your radar.

NOW LIVE: Making Tax Digital for Income Tax

Making Tax Digital (MTD) for Income Tax officially started from 6th April 2026. Under the new rules, self-employed individuals and landlords with income above £50,000 must:

  • Keep digital records
  • Use compatible software
  • Send updates to HMRC every quarter

The next phase is already approaching –

If your self-employment and/or property income exceeded £30,000 in the 2025/26 tax year, you’re expected to join MTD from 6th April 2027.

Now is a good time to review whether your bookkeeping systems are ready.

If you need any support, we’re here to help! Please get in touch here.

HMRC Are Asking for More Detail from Business Owners

HMRC are increasing the level of detail they collect from business owners, particularly company directors.

As part of a 12-week consultation open until 10th June 2026, HMRC are asking for feedback on proposals that would require more information to be included on future tax returns.

The proposals could mean directors and shareholders may need to provide details such as:

  • Companies they’re involved in
  • Dividend income received
  • Shareholdings
  • Money moving between companies and their owners, including loans and other payments

The aim is to improve transparency and help HMRC better understand how profits are taken from owner-managed businesses.

What this means for you:

  • There are no immediate changes, but it’s something to be aware of
  • Accurate and up-to-date record keeping will become even more important
  • Keep clear records of dividends, directors’ loans and money taken from the business

You can have your say and fill in the consultation form here.

We’ve also shared a simple breakdown of this on our Instagram, click here.

Directors’ Loans: Tax Charges Increased

If a company lends money to a shareholder or director and the loan isn’t repaid on time, HMRC can charge additional corporation tax.

From 6th April 2026, the tax rate on these outstanding loans increased from 33.75% to 35.75%.

In many cases, the charge can be reclaimed once the loan is repaid, however, generally, loans need to be cleared within nine months of the company year-end to avoid unnecessary tax costs.

This is a good reminder for directors to regularly review their loan accounts before company accounts and tax returns are submitted!

CIS Penalties Are Back

Construction businesses…

HMRC have tightened the Construction Industry Scheme (CIS) rules again from April 2026.

Contractors must now:

  • Submit monthly CIS returns every month, including nil returns, or
  • Notify HMRC in advance if no subcontractors will be paid

Late filing penalties have also returned, starting at £100.

HMRC have also introduced stronger powers where they believe payments are linked to fraud, including immediate removal of Gross Payment Status in serious cases.

AI Advice Is Causing VAT Filing Problems

HMRC have warned that some businesses are getting the wrong information from AI tools and online advice when it comes to VAT deadlines.

One area causing confusion is when VAT deadlines fall on weekends or bank holidays. HMRC have confirmed that deadlines still apply as normal, and late submissions or payments can still result in penalties.

In simple terms:

  • VAT returns still need to be filed on time
  • Payments still need to reach HMRC by the deadline
  • Weekends and bank holidays don’t extend the deadline

AI tools can be helpful for general information, but we recommend to always double-check important deadlines and get advice if you’re unsure. That’s why we’re here – contact us if you’d like to chat to a member of our team!

E-Invoicing Is Coming… But Many SMEs Aren’t Ready Yet

Government plans for E-invoicing to be mandatory for VAT invoices from 2029.

This simply means sending and receiving invoices in a format that links directly with your accounting software, rather than PDFs or paper. It will help businesses save time, reduce manual admin and cut down on errors.

However, HMRC research found that many SMEs are still using traditional methods such as PDFs and paper. Only a small number of businesses are currently fully using e-invoicing systems.

Although the changes are still a few years away, now is a good time to start checking whether your accounting software will be ready for future requirements.

Preparing early can make the transition much smoother and help improve day-to-day bookkeeping at the same time. Click here to chat to us!

Credit Control: Getting Paid on Time Matters

Many businesses struggle with cash flow simply because customers pay late.

Making sure invoices are paid on time can help reduce stress and keep money flowing through the business more smoothly.

A few simple habits can help:

  • Agree payment terms before starting work
  • Send invoices out as soon as possible
  • Follow up on late payments regularly
  • Keep track of unpaid invoices
  • Don’t ignore customers who suddenly start paying late

Even small payment delays can quickly add up, especially for growing businesses.

Having a simple and consistent process for chasing payments can make a big difference to cash flow without needing to increase sales.

Four Simple Ways to Improve Profit:

Improving profitability doesn’t always require major changes – small improvements in key areas can have a significant impact.

The four areas worth focusing on are:

  1. Getting more profitable customers
  2. Selling more to existing customers
  3. Reviewing pricing
  4. Reducing unnecessary costs and waste

One area many businesses overlook is unused subscriptions and software costs, which can quietly build up over time.

Starting a Business? Think Beyond Year One…

For newer businesses, early decisions can have a huge impact later.

Some of the most important areas to think about early include:

  • Cash flow forecasting
  • Systems and processes
  • Hiring and workplace culture
  • Understanding who your ideal customer is
  • Tracking a few key business metrics

Many businesses fail because they grow without building the structure needed to support that growth.

Cyber Security: Simple Steps Matter

Cyber security is becoming more important for all businesses, including small businesses.

The National Cyber Security Centre (NCSC) is encouraging people to move away from traditional passwords where possible and use passkeys instead, as they can offer better protection against scams and hacked accounts.

More businesses are also using AI tools to help spot security issues, but it’s still important to regularly check that systems are secure and up to date.

A few simple steps can make a big difference:

  • Use strong and secure logins
  • Keep software and devices updated
  • Make sure staff know how to spot scams
  • Back up important business data regularly

Even small improvements can help reduce the risk of fraud, data loss or business disruption.

File Your Tax Return Early?

HMRC reported record numbers of taxpayers filing Self-Assessment tax returns in April this year.

Filing early can:

  • Help with budgeting
  • Reduce last-minute stress
  • Allow more time to correct mistakes
  • Provide proof of income for mortgages or loans
  • Speed up tax refunds where due

Even though payment deadlines remain the same, many business owners find it easier knowing their tax position well in advance.

Need Help with Any of These Changes?

Whether you need support with:

  • Making Tax Digital
  • Director loan accounts
  • VAT compliance
  • Cash flow management
  • Business growth planning
  • Payroll or CIS
  • Tax returns

…we’re here to help!

Please feel free to get in touch with our team if you’d like advice tailored to your business.

MAIN TAX EVENTS HAPPENING IN JUNE: GET AHEAD

DATE

WHAT’S DUE

1 June

Corporation Tax for year to 31/08/2025, unless quarterly instalments apply

 

19 June

 

PAYE & NIC deductions, and CIS return and tax, for month to 05/06/2026 (due 22 June if you pay electronically)

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