August 2026

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. Tax update 2026: simplification, modernisation and fairness summary - GOV.UK

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 Requiring payment of VAT and PAYE return liabilities by Direct Debit - GOV.UK