HMRC's Latest Tax Updates: What UK Businesses Need to Know

Tax rules and thresholds are rarely static—and HMRC has been especially busy over the past year. Whether you're a sole trader, limited company, or landlord, it's crucial to stay ahead of the curve. At Hazel House, we keep a close eye on HMRC announcements so you don’t have to. Our blog is usually updated within 7 days of any official HMRC changes to help you stay compliant and avoid unwanted surprises.

Here’s a summary of the most recent updates that could affect your business:

VAT Threshold Changes – What It Means for You

Effective April 2025, the VAT registration threshold has increased to £90,000 (previously £85,000). This change is designed to ease the burden on smaller businesses, especially those with fluctuating turnover near the old threshold.

What this means:

• If your taxable turnover is below £90,000 in a 12-month period, you’re no longer required to register for VAT. It is crucial to recognise that this is over a 12-month rolling period not over each financial year.

• You can still choose to register voluntarily, which might benefit businesses that incur a lot of VAT on purchases.

Not sure if deregistering makes sense for your business? We can help you weigh up the pros and cons.

Making Tax Digital (MTD) for ITSA – The Next Phase

MTD is expanding once again! From April 2026, sole traders and landlords earning over £50,000 annually from self-employment or property income will be required to follow Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).

This means:

• You’ll need to use compatible accounting software to maintain digital records.

• You must submit quarterly updates to HMRC instead of one annual tax return.

• An End of Period Statement (EOPS) and a Final Declaration will also be required annually.

If you're currently filing your tax return manually or via the HMRC portal, it’s time to prepare. We recommend talking to us about getting set up on Xero, FreeAgent, or QuickBooks to ensure you're MTD-ready.

R&D Tax Relief Reform – Simpler (and Safer?) Claims

In an effort to streamline the process and clamp down on fraud, HMRC has begun trialling a merged Research & Development (R&D) tax relief scheme. This is especially relevant for tech, manufacturing, or scientific businesses that invest in innovation.

Key changes include:

• A single, unified scheme for both SMEs and larger companies (in place of the separate SME and RDEC schemes).

• Increased scrutiny and additional compliance checks.

• A requirement to provide more detailed documentation when making a claim.

VAT Penalty Reform – A Points-Based System

A new penalty regime is now in place for VAT-registered businesses, and it's based on a points system similar to speeding fines.

Here’s how it works:

• Late submission of VAT returns earns you a penalty point.

• Once you hit a certain threshold (usually four points), a £200 penalty is applied.

• Each subsequent late return triggers another £200 fine.

• Late payments now also incur a two-part penalty system based on how overdue the payment is.

The goal is to be fairer and more consistent, but it also means repeat offenders face automatic and escalating fines.

Avoiding penalties is simpler than ever—with the right systems in place. We can help you set up reminders, automate filings and payments, and keep everything running smoothly.

Stay Ahead, Stay Compliant

These HMRC changes are part of a bigger push towards digitalisation and efficiency. While that’s great for long-term transparency, it does mean more admin and complexity in the short term—especially if you’re going at it alone.

At Hazel House, we specialise in helping small business owners and self-employed professionals adapt to change without the stress. Whether you need help choosing software, understanding new rules, or planning ahead, we’re here to support you.

Have you got questions about any of these updates? Fill out the contact form below —we’re always happy to help.