If you feel there has been more change than usual this year, you are not alone. Tax, payroll, and employment law have all seen significant updates in 2026. Most of these changes arrived quietly, without major headlines, but each one can have a real impact on your business.
To help you avoid surprises, here is a clear summary of what has changed and why it matters for small business owners.
Making Tax Digital for Income Tax Is Now Live
From 6 April 2026, if you are a sole trader or landlord earning over £50,000, the old system of filing one annual Self-Assessment return no longer applies. You now need to keep digital records, submit quarterly updates to HMRC, and file a final declaration at the end of the year. There will be no penalties for late quarterly updates during this first year, but this is only a temporary grace period. HMRC is also using 2024/25 tax returns to decide who must comply, so some business owners are being included without realising it.
The income threshold for Making Tax Digital drops to £30,000 next April and £20,000 the following year. If your income is close to these levels or fluctuates, it is worth checking your status now, rather than waiting for a letter from HMRC.
Payroll Costs Have Increased
From April 2026, minimum wage rates rose across all age bands, and there were increases to statutory sick pay and family leave payments. These changes are part of routine annual increases, but this year they come on top of last year’s rise in employer National Insurance (NI) and a lower threshold for when employers start paying NI. The combined effect of these changes means the cost of employing staff has increased more since 2024 than in the previous five years combined. This is especially important for businesses employing younger staff or those near minimum wage.
Enforcement of minimum wage compliance is also changing. Responsibility is moving from HMRC to the new Fair Work Agency, which is expected to take a more active approach.
Dividend Tax Has Increased
From April 2026, dividend tax rates increased by two percentage points. The basic rate is now 10.75%, and the higher rate is 35.75%. The £500 dividend allowance remains unchanged. This increase is significant when combined with frozen income tax thresholds (until 2030-31). If you pay yourself a small salary and dividends, as many owner-managed businesses do, this approach is becoming less tax efficient each year. It may be time to review your current strategy rather than let it run unchanged.
Statutory Sick Pay Rules Are Different
From 6 April 2026, new rules under the Employment Rights Act 2025 have reformed Statutory Sick Pay (SSP). The three unpaid waiting days have been removed, so SSP is now payable from the first day of sickness. The lower earnings limit has also been scrapped, so employees no longer need to earn above a threshold to qualify. This means many more part-time, casual, and lower-paid workers are now entitled to SSP. If your workforce includes many in these categories, check your payroll setup now to avoid surprises when claims are made.
Director Identity Verification Is Required
Since 18 November 2025, every company director and person with significant control must verify their identity with Companies House. For directors appointed before that date, the deadline for verification depends on your company’s next confirmation statement. If any director fails to verify in time, Companies House will not accept your confirmation statement, which could put your company in breach of its filing obligations. Forward planning is essential.
Late Payment Rules Have More Enforcement
The Small Business Commissioner now has stronger powers to investigate large companies over their payment practices, fine persistent late payers, and check the accuracy of reported payment data. Large companies must now include payment performance in their annual reports, which boards and audit committees must review. While these changes may not resolve late payment issues overnight, they give businesses stronger grounds to challenge poor payment practices.
What Does This Mean for Your Business?
Individually, none of these changes is dramatic. Taken together, they represent a steady shift that can catch businesses off guard, not because of any mistakes, but because small changes add up if nobody is watching closely.
At Chorus, we monitor these developments, interpret what they mean for your business, and make sure you are prepared well in advance. If you want to discuss how these updates affect your business, contact the Chorus team. For more updates and advice, follow us throughout the year.
