August News & Tax
August 2026 - Monthly Round-up of Business and Tax News
Andy Burnham’s new government, a balancing act
VAT reduction, cap on public transport and business rates cut announced
Andy Burnham’s first days as Prime Minister have been marked by a flurry of announcements designed to show that his government intends to move quickly. Presenting himself as a leader focused on easing pressure on households and rebuilding trust in politics, Burnham has begun reshaping government while signalling the priorities that will define his administration.
His first major moves were aimed directly at the cost-of-living crisis, announcing a reduction in VAT on household energy bills, followed by a single bus fare policy across England that will be capped at £2 for a year from January 2027.
Mr Burnham described affordable public transport as an essential service and argued that no one should be excluded from opportunities because they cannot afford to travel.
The Prime Minister has also promised a 20% reduction in business rates for pubs, clubs and live music venues for 2027-28. This is in addition to the 15% relief for 2026-27 with bills being frozen in real terms for a further two years. The new 20% discount will not be available to the very largest live music venues. Further details will be set out at the Budget.
However, questions are already being raised about how these promises will be funded as the government plans to divert hundreds of millions of pounds from other budgets, including money previously earmarked for international climate finance projects.
The government has said that the business rates reduction will be paid by reviewing reliefs for businesses that are not considered to make a positive contribution to local communities, such as vape shops. Businesses that sell through online marketplaces but do not comply with their tax obligations will also be targeted. A consultation on how this may be achieved was published in June 2026.
Mr Burnham has also started to build his ministerial team, with the surprise announcement being the appointment of John Healey as Chancellor. The former defence secretary, who resigned from Sir Keir Starmer’s cabinet over spending plans, will be seen as an advocate for boosting defence spending. Companies such as BAE Systems and Babcock saw their share prices rise after his appointment.
Mr Healey is regarded as experienced and fiscally responsible.
The government insists that fiscal discipline remains a priority, but speculation continues about whether future spending plans will require higher taxes or additional borrowing.
Taken together, the first week of Burnham's government paints a picture of an administration trying to balance competing priorities, wanting to reduce living costs while maintaining fiscal credibility.
Deadline for first Making Tax Digital quarterly update fast approaching
Are you ready to file?
Sole traders and landlords that are required to use Making Tax Digital (MTD) to report their earnings are due to send their first quarterly update by 7 August 2026.
The quarterly update involves sending income and expenses for the first three months of the tax year to HMRC.
After an update is made, it is possible to see an estimated tax bill based on the figures provided. How accurate the estimate is will depend on earnings for the rest of the tax year, but it may help with budgeting for payments.
Quarterly updates do not replace the need to complete a tax return at the end of the year, and there is no change to the dates when tax payments need to be made.
If you have any questions about MTD or need help filing your quarterly update, please get in touch. We’re here to help!
Free, hands-on cyber consultancy available for SMEs
Can Cyber Essentials help make your business more secure from online threats?
Cyber Advisors are offering free 30-minute consultations to help small businesses get started with cybersecurity.
As smaller businesses become more frequently targeted, the National Cyber Security Centre (NCSC) is reiterating the need for them to be more robust in their approach to digital security. It’s aware that investing in cyber security can seem more like a costly distraction than a priority for smaller companies as they concentrate on keeping customers happy, managing cash flow and day-to-day business.
The NCSC points to the statistics. In 2025, 65% of medium and 46% of small organisations reported a cyber breach or attack. The problem is that Small to Medium-sized Enterprises (SMEs) see cybersecurity as too complicated, too expensive and don’t address the real-world risks that small businesses face.
Many Cyber Advisors are now offering a free 30-minute consultation for SMEs that are looking to get started with Cyber Essentials, the government's baseline for cybersecurity.
This no-strings-attached introductory consultation provides businesses with an opportunity to ask questions and get an explanation of how the five steps that make up Cyber Essentials can be applied to your organisation using practical, achievable implementations.
The National Cyber Security Centre (NCSC) introduced Cyber Advisors in 2023, a network of cybersecurity consultants who’ve been assured by the NCSC to work specifically with smaller organisations.
More information on the free consultation can be found here.
External examiners mark HMRC’s performance as ‘Poor’
Report sheds light on challenges facing HMRC and the impact on taxpayers
The latest annual report from the Charter Stakeholder Group remains highly critical of HMRC's service performance, with scores either stagnant or deteriorating across most standards. Alongside poor scores for responsiveness and ease of use, the report highlights overwhelmingly negative feedback on Making Tax Digital (MTD).
The Charter Stakeholder Group monitors HMRC's performance against the HMRC Charter, a set of service standards. The 2025-26 assessment was based on a survey of 719 taxpayers and agents who were asked to rate HMRC's performance against each standard on a scale of one to 10.
Of the seven charter standards assessed, only one recorded an improved score compared with 2025.
The poor score is a blow to the government that set out a plan to replace a paper-heavy agency with a ‘world-class’ digital-first organisation. Around £7 billion was committed to modernising HMRC’s old computer systems and infrastructure. This would reduce the headcount in customer contact functions and increase compliance team numbers to bring in more revenue. The technology would be able to respond to customers faster and more accurately, reduce the tax gap of about £59 billion and deter fraud.
Unfortunately, the latest report shows HMRC failing on all levels. Here are the key findings.
Being responsive
Being responsive was HMRC's lowest-scoring charter standard for the third year in a row, with an average score of 2.8 out of 10, down from 3.0 the previous year.
Tax agents were more critical than taxpayers generally, giving HMRC a score of 2.6. The respondents highlighted persistent postal delays, poor first-time resolution, limited helpline expertise, no effective case tracking or escalation and slow complaints handling.
There was a feeling that there was one rule for HMRC and another for taxpayers, with an imbalance between HMRC’s response times and the deadlines it imposes on taxpayers.
Making things easy
This category scored 3.25, making it HMRC's second-worst performing standard. Nearly two-thirds of respondents rated HMRC at three or below and more than a quarter gave a score of one.
Tax agents were particularly critical of HMRC's continued push towards online tools while their agent-dedicated phone line was staffed with people with insufficient technical knowledge and a lack of understanding of how agents work.
Getting things right
Getting things right scored 3.97, down from 4.1 in 2025. Almost one-fifth of all respondents gave a score of one. Respondents said HMRC staff often lacked sufficient training and expertise and that helpline services provided inconsistent guidance.
A recurring observation was that correcting HMRC errors often requires multiple contacts and lengthy delays.
Accountability
Nearly 82% of respondents felt HMRC were not sufficiently accountable for meeting the Charter requirements, noting that they would be more likely to address declining customer service if they were properly accountable under the Charter. HMRC face no penalties for failing to meet standards.
Digitalisation and transformation plans
Nearly 89% of respondents felt HMRC had not done enough to keep Charter standards central to its Transformation Roadmap and that digitalisation was being prioritised over fairness, accuracy and support.
Making Tax Digital
Probably unsurprising to anyone in business, the feedback on Making Tax Digital (MTD) was overwhelmingly negative. Respondents described it as, at best, poorly designed and generally not fit for purpose.
In complete contrast to HMRC’s ongoing trope, the common concerns included its extra cost and administration, software dependence, quarterly reporting burdens and a lack of confidence in HMRC's ability to cope with the demands of MTD.
The general feeling was that MTD was uncommercial, offered little practical value and failed to reflect or support the realities of small businesses and agents.
The other charter standards
Other charter standards scored slightly higher, although most ratings still fell slightly compared with the previous year. The scores were:
•Keeping your data secure: 6.86 (7.03 in 2025).
•Recognising that someone can represent you: 6.31 (6.01 in 2025).
•Mutual respect: 5.89 (5.98 in 2025).
•Treating you fairly: 5.25 (5.34 in 2025).
If you have any tax concerns, problems implementing MTD or dealing with HMRC, please get in contact. We’d be happy to help.
HMRC targets Electronic Sales Suppression
Proposed new software standards likely to make tax audits easier
The government is consulting on potential measures that target Electronic Sales Suppression (ESS). Proposals include the introduction of new software standards for Point of Sale systems.
In recent years, ESS has been the subject of government reports, consultations and new legislation, yet it remains a cause of concern for HMRC. ESS involves manipulating digital sales records to reduce income tax and evade tax.
HMRC have identified that certain individuals and businesses in Electronic Point of Sale (EPOS) and Mobile Point of Sale (MPOS) supply chains are developing or modifying POS systems to suppress sales to facilitate tax evasion.
EPOS and MPOS systems are particularly used by retail businesses to record sales and deal with other business transactions. HMRC believes that ESS is more prevalent in small retail, takeaway and hospitality businesses.
The government is proposing to introduce software standards that will consist of a set of uniform rules, protocols and compliance requirements that ensure every system records sales and financial data accurately, securely and in a way that cannot be easily manipulated or tampered with. No timeline for when this will be implemented has been provided yet.
According to the proposals, businesses in the small retail, takeaway and hospitality sectors will be mandated to use compliant EPOS/MPOS systems to record all sales. The intention is that specific information, such as QR codes, will be included on receipts that will make auditing easier. This could allow and HMRC officer to make an unannounced visit to check the integrity of the system and verify summary values on the report.
Businesses that use EPOS/MPOS systems will want to stay up to date with how these proposals develop over coming months. The consultation closes on 18 August 2026. Further details on the consultation and how to respond can be found here.
Mandatory Direct Debit proposed for VAT and PAYE payments
Businesses may face changes to how they pay tax
The government has published a consultation on proposals that will require most VAT-registered businesses and employers to pay VAT and PAYE liabilities by Direct Debit. The aim is to reduce late payment and simplify the payment process.
HMRC consider that automating the payment process by requiring Direct Debit could help businesses to reduce administrative work, minimise errors and avoid missing a payment deadline.
Paying by Direct Debit is already an option available for paying both VAT and PAYE, although most businesses currently pay using other electronic methods.
The government is therefore seeking views on:
·Why businesses that could use Direct Debit choose to pay by other electronic methods.
·The impacts of requiring payment by Direct Debit, including practical barriers such as cash flow management and process changes.
·The exceptions or alternative arrangements that may be needed.
HMRC are also considering what measures will be used to encourage uptake of Direct Debit and the sanctions for businesses that don’t comply. Proposals revolve around charging penalties where Direct Debit is not used, or by changing the current extended payment deadlines so that they will only apply to Direct Debit payments.
The consultation closes on 16 August 2026. Further details on the consultation and how to respond can be found here.
Tax
Welcome to the August 2026 edition of Tax E-News. We hope that you find this informative. Please contact us if you wish to discuss any matters in more detail.
QUESTIONS OVER FUTURE TAX CHANGES UNDER NEW PRIME MINISTER ANDY BURNHAM
Since becoming Prime Minister, Andy Burnham has made cost-of-living support a key focus. One headline measure announced this month is the planned removal of VAT on household electricity from October 2026, which the Government estimates could reduce average household bills by around £45 a year. Household electricity is currently subject to VAT at 5%.
At the same time, attention is turning towards how future tax policy might develop. Economists and commentators are already speculating about whether further tax reform could feature in the Autumn Budget.
For business owners, landlords and investors, the key message is not to react to headlines. Many of the most talked-about measures remain informal proposals or speculation, rather than law. Changes to capital gains tax, property taxation and other wealth-related taxes have all been widely discussed, but little has been formally confirmed at this stage.
History shows that major tax changes are often signalled well before implementation. That means now is a good time to review long-term plans, particularly if you are considering property sales, business disposals or succession planning.
Our recommended approach:
Avoid making rushed decisions based on speculation.
Review your current tax position.
Consider scenario planning ahead of the Autumn Budget.
Seek advice before implementing major transactions.
The coming months are likely to bring further tax announcements, making regular reviews of your business and personal plans more important than ever. If you’d like to discuss any of the above issues, please get in touch with us - we’d be happy to help.
HMRC’S 2026 TAX UPDATE
Prior to Andy Burnham’s appointment as Prime Minister and the appointment of John Healey as Chancellor, HMRC published a raft of consultations and policy announcements on 23 June 2026.
The wide-ranging package of consultations and policy announcements was aimed at making the tax system simpler, more digital and, in HMRC's words, fairer. While many of the proposals are still at consultation stage, they give us an indication of the government's direction of travel over the next few years.
ACCELERATED, MORE FREQUENT, TAX PAYMENTS
Perhaps the most significant proposal is a consultation on "Timely Payments" for Self Assessment taxpayers.
The government is exploring ways to collect more tax during the year rather than relying on large payments due each January and July. For taxpayers who have both PAYE income and Self Assessment income, the proposal could require more of their tax liability to be collected through PAYE from April 2029.
HMRC is also considering wider reforms to the Payments on Account regime for other Self Assessment taxpayers. These reforms would require taxpayers to pay all of their forecast tax liability during the tax year, with a balancing payment/repayment being due when their tax position is finalised on the 31 January following the end of the tax year.
For many sole traders and landlords, spreading payments throughout the year could help with budgeting and reduce the shock of large tax bills. However, it may also accelerate when tax is paid, affecting cash flow planning.
REVIEW OF BENCHMARK SCALE RATES
Employers should note that HMRC is reviewing its Benchmark Scale Rates (BSRs) and Overseas Scale Rates (OSRs).
These are the flat-rate allowances businesses can use to reimburse employees for meals, accommodation and travel expenses without checking every receipt. The government says the review will consider whether current rates still reflect actual costs and whether the system can be simplified.
For growing businesses with travelling staff, any simplification could reduce administrative work and improve consistency in expense claims.
ELECTRONIC INVOICING
HMRC's Tax Update included an important announcement about the future of electronic invoicing (e-invoicing) in the UK. The government confirmed that the ‘Peppol’ framework will be the core network used to support the UK's planned e-invoicing system.
Electronic invoicing is not simply emailing a PDF invoice. Instead, invoices are created in a standard digital format and sent directly between accounting systems. This reduces manual data entry, improves accuracy and can speed up payment processing. Peppol is an international framework that enables different accounting and finance systems to exchange invoice data securely and consistently.
The government is working towards a mandatory e-invoicing regime from 2029, primarily covering VAT invoices for business-to-business and business-to-government transactions. HMRC has confirmed that businesses will exchange invoices through software providers rather than through a central government platform.
For small businesses, now is not the time to panic. However, it is a good opportunity to review bookkeeping and invoicing systems. Businesses already using modern cloud accounting software are likely to find the transition easier than those relying on manual processes.
The full implementation roadmap is expected later in 2026.
PROPOSED CHANGE TO THE CGT HOLDOVER RELIEF CALCULATION
The government has published draft legislation to correct an anomaly in the Capital Gains Tax (CGT) holdover relief rules for gifts of business assets, which allow a capital gain on a gift to be deferred until the recipient disposes of the asset. The proposed change would amend the formula used to calculate relief on certain share transfers, helping ensure the relief operates as intended.
The measure is not yet law, but it could improve the tax position for some business owners transferring shares as part of succession planning, family ownership arrangements or business restructures.
If you are considering a transaction that may be affected, it may be worth discussing whether it can be delayed until the legislation is enacted. Waiting could result in a more favourable outcome, although professional advice should be sought before making any decisions.
MODERNISING HOW COMPANY PAYMENTS TO SHAREHOLDERS ARE TAXED
The government has also launched a consultation on modernising the rules that determine how some payments from companies to shareholders are taxed.
Many of these rules date back decades and have become increasingly complex. The review covers areas such as distributions, returns of capital, company reorganisations and interactions with the loans to participators rules.
For owner-managed businesses, this is unlikely to lead to immediate changes, but it signals potential reform of an area that affects dividends, company restructures and extraction of profits.
FURTHER DIGITAL COMPLIANCE AND ANTI-FRAUD MEASURES
Several consultations focus on tackling tax evasion and improving compliance.
These include proposals to extend VAT liability rules for online marketplaces, introduce software standards to combat electronic sales suppression systems, and create a new offence for making reckless untrue statements in direct tax matters.
For compliant businesses, these measures are largely aimed at creating a level playing field by targeting those who deliberately understate sales or avoid tax obligations.
WHAT HAPPENS NEXT?
Most of the measures announced on 23 June are consultations rather than immediate law changes. However, they provide an early warning of where tax administration is heading:
·Greater use of digital systems.
·More real-time tax reporting and payment.
·Increased focus on compliance and data.
·Simplification of some long-standing tax rules.
For now, the best approach is to keep good records, maintain robust bookkeeping systems and monitor consultations that could affect your business. Many of today's consultations have the potential to become tomorrow's tax rules.
To read the Tax Update, see here.
HMRC TARGETS SIDE HUSTLE INCOME
HMRC has launched a fresh summer campaign reminding people with "side hustles" that extra income may need to be reported for tax purposes. The announcement specifically highlights people earning income from wedding services, online selling, content creation, freelancing and similar activities.
The key figure remains the £1,000 trading allowance. If total income from side activities exceeds £1,000 during the tax year, there may be an obligation to register for Self Assessment and declare the income to HMRC.
This is particularly relevant because HMRC now receives increasing amounts of information from digital platforms. Data from marketplaces and gig economy platforms can be matched against tax returns, making it easier for HMRC to identify undeclared income.
Importantly, not everyone selling online has a tax problem. Selling unwanted personal possessions is generally not taxable. However, regularly buying or making goods to sell, or providing services for payment, is likely to be treated as trading.
If you have a side hustle, you should:
Review any additional income streams.
Check whether total trading income exceeds £1,000.
Register for Self Assessment if required.
Keep proper records from the outset rather than trying to reconstruct them later.
Early disclosure is almost always easier and cheaper than dealing with an HMRC enquiry.
DIARY OF MAIN TAX EVENTS
AUGUST/SEPTEMBER 2026
Date
What’s Due
1 August
Corporation Tax for year to 31/10/2025, unless quarterly instalments apply
7 August
Deadline for the 2026/27 first Quarterly Update, required for those already mandated into MTD for Income Tax
19 August
PAYE & NIC deductions, and CIS return and tax, for month to 05/08/2026 (due 22 August if you pay electronically)
1 September
Corporation Tax for year to 30/11/2025, unless quarterly instalments apply
19 September
PAYE & NIC deductions, and CIS return and tax, for month to 05/09/2026 (due 22 September if you pay electronically)
