New Tax Laws for UK Businesses in 2026: What SMEs Need to Know (and How to Prepare)

The 2026 tax year brings some of the most significant changes UK businesses have faced in decades. From the long-anticipated rollout of Making Tax Digital for Income Tax, to higher dividend tax rates and changes to capital gains and business rates, business owners will need to adapt quickly.

At Secure Business Finance, we work closely with small and medium-sized businesses across the UK. While we’re not tax advisers, we see first-hand how tax changes impact cash flow, working capital, and funding decisions. This guide explains what’s changing in 2026, who it affects, and, crucially, how business owners can plan ahead to stay financially resilient.

Making Tax Digital for Income Tax: A Major Shift from April 2026

The biggest change arrives on 6 April 2026, when Making Tax Digital (MTD) for Income Tax Self Assessment becomes mandatory for many self-employed individuals and landlords.

Described by the government as the most significant reform since Self Assessment was introduced in 1997, MTD replaces the traditional annual tax return with a digital, quarterly reporting system.

Who will be affected in 2026?

You will need to comply with MTD from April 2026 if you are:

• A sole trader or landlord
  
  

• With combined qualifying income (gross turnover from self-employment and/or property) of more than £50,000
  
  

What does this mean in practice?

Under MTD, businesses must:

• Keep digital records of all income and expenses (paper records will no longer be sufficient)
  
  

• Use HMRC-compatible software (spreadsheets alone are not enough unless linked via bridging software)
  
  

• Submit quarterly updates to HMRC
  
  

• File a final end-of-period declaration and pay any tax due by 31 January
  
  

The cash flow impact for SMEs

Quarterly reporting doesn’t necessarily mean paying tax four times a year- but it does mean greater visibility of liabilities. For many business owners, this will highlight tax bills earlier, putting pressure on cash flow if reserves aren’t in place.

This is where proactive planning matters. We’re already seeing clients explore:

• Cash flow forecasting facilities
  
  

• Flexible working capital solutions
  
  

• Short-term funding to smooth seasonal income or tax demands
  

Dividend Tax Rates Are Increasing in 2026

For directors of limited companies, the Autumn Budget 2025 confirmed higher dividend tax rates from the 2026–27 tax year:

• Basic rate: rising from 8.75% to 10.75%
  
  

• Higher rate: rising from 33.75% to 35.75%
  
  

• Additional rate: remains at 39.35%
  
  

While the increases may appear modest, they can significantly affect personal drawings and retained profits, particularly for owner-managed businesses that rely on dividends as part of their remuneration strategy.

From a finance perspective, higher dividend tax can influence:

• How much profit is left in the business
  
  

• Decisions around reinvestment versus extraction
  
  

• Demand for funding to support growth while preserving cash
  
  

Capital Gains Tax Changes for Business Asset Sales

Another key change in 2026 is the next phase of reforms to Business Asset Disposal Relief.

From 6 April 2026, the capital gains tax rate on qualifying business disposals will rise to 18%.

This affects:

• Business owners selling shares
  
  

• Sole traders or partners exiting a business
  
  

• The sale of qualifying business assets such as property, equipment, or vehicles
  
  

For business owners considering an exit, restructuring, or partial sale, this change could materially impact net proceeds. From our side, it often feeds into wider conversations around:

• Exit planning
  
  

• Management buyouts
  
  

• Funding structures to support succession or acquisition
  
  

Business Rates Changes from 2026

The Autumn Budget also confirmed updates to business rates:

• Retail, hospitality, and leisure properties with a rateable value of up to £500,000 will benefit from a 5p discount on the standard multiplier from the 2026–27 tax year
  
  

• All properties in England and Wales will move to new rateable values following the latest revaluation cycle
  
  

While some sectors may see relief, others could face higher costs. For asset-heavy businesses, this can affect affordability, profitability, and borrowing capacity—particularly where premises costs already form a large part of overheads.

Frequently Asked Questions

When does the 2026–27 tax year start?

The new tax year runs from 6 April 2026 to 5 April 2027.

Will Making Tax Digital apply to me in 2026?

Only if your qualifying income exceeds £50,000. If it’s over £30,000, MTD will apply from April 2027.

What other tax changes are on the horizon?

Announced but not yet implemented changes include:

• Increasing the Self Assessment reporting threshold from £1,000 to £3,000 (before August 2029)
  
  

• Further landlord tax reforms from April 2027
  
  

• A new ‘mansion tax’ on higher-value properties from April 2028
  
  

How Secure Business Finance Supports UK Businesses Through Change

Tax reforms don’t happen in isolation- they affect cash flow, funding requirements, and long-term planning. At Secure Business Finance, we help UK SMEs understand how regulatory changes impact their finances and connect them with the most suitable funding solutions for their circumstances.

Whether you’re preparing for Making Tax Digital, managing higher tax outflows, or planning for growth amid rising costs, our role is to ensure funding supports your strategy- not holds it back.

If you’d like to discuss how upcoming tax changes may affect your business cash flow or funding options, speak to Secure Business Finance today.