With dividend tax rates increasing from April 2026 and the Dividend Allowance remaining at only £500, planning how directors take income is becoming increasingly important.

• Dividend planning
• Mandatory e-invoicing
• Umbrella & IR35 reforms
• Renters’ Rights Bill
• New GDPR requirements
• Making Tax Digital
• Common compliance risks
• Financial planning tips

Dividend Planning — Why It Matters More This Year

Many owner-managed businesses continue to rely on dividends as a tax-efficient way of extracting profits, however the gap between salary and dividend taxation is narrowing.

Dividend tax rates for 2026/27

Dividend income above the £500 allowance is now taxed at:

For many directors, the increase means higher personal tax liabilities, reduced take-home income, and greater importance on timing dividend payments carefully.

Salary vs dividends — getting the balance right

For many limited company directors, a combination of a tax-efficient salary and planned dividend withdrawals continues to be the most effective strategy.

However, every situation is different and should take into account:

• Other personal income
• Pension contributions
• Student loans
• Child Benefit exposure
• Corporation Tax position

Pension contributions may be more valuable

With dividend tax rates rising, employer pension contributions are becoming increasingly attractive as a tax-efficient extraction method. These can reduce corporation tax, build long-term retirement savings, and potentially reduce higher-rate tax exposure.

An important reminder

Dividends can only legally be paid from available profits and should always be supported by up-to-date management accounts, dividend vouchers, and board minutes.

Planning early makes a difference

Leaving dividend planning until January often limits available options. Reviewing your strategy now allows better cash flow management, improved tax planning, and fewer surprises later in the tax year.

Mandatory E-Invoicing — UK Businesses Need to Prepare

The UK government is moving towards mandatory electronic invoicing, with proposals indicating wider implementation by 2029. Although this may seem some way off, businesses that prepare early are likely to benefit significantly.

What is e-invoicing?

E-invoicing involves sending and receiving invoices digitally in a standardised electronic format that can integrate directly into accounting software systems. This is very different from simply emailing PDF invoices.

Why this matters

The move aims to reduce VAT fraud and reporting errors, improve payment processing, increase efficiency for businesses, and support further digitalisation of the UK tax system.

Benefits for businesses

Businesses adopting digital systems early may benefit from faster invoicing and payments, improved cash flow visibility, reduced administration, and better integration with Making Tax Digital requirements.

What businesses should do now

• Review current invoicing systems
• Ensure accounting software is cloud compatible
• Begin reducing manual invoice processing
• Improve digital record keeping procedures

Umbrella Company & IR35 Reforms

Further reforms surrounding umbrella companies and off-payroll working continue to develop. These changes may affect contractors, freelancers, recruitment agencies, and businesses using temporary workers.

What is the concern?

The government is increasing scrutiny over PAYE compliance, worker rights, and tax avoidance within labour supply chains.

Potential risks

Businesses may face increased compliance obligations, greater responsibility for PAYE deductions, higher risk of HMRC investigations, and financial penalties for incorrect worker status treatment.

Contractors should review

• Existing contracts
• IR35 status assessments
• Umbrella company arrangements
• Payslip deductions and employment rights

Early review is strongly recommended as further reforms are expected.

Renters’ Rights Bill — What Landlords Need to Know

The proposed Renters’ Rights Bill represents one of the biggest changes to the private rental sector in recent years.

End of Section 21 notices

“No fault” evictions are expected to be abolished, meaning landlords will need specific legal grounds for possession.

Periodic tenancies

Most tenancies are expected to move to rolling periodic agreements rather than fixed-term contracts.

Increased tenant protections

The reforms are expected to include stronger rights for tenants, restrictions around rent increases, and greater property condition requirements.

Financial impact for landlords

Landlords are already facing higher mortgage costs, reduced tax reliefs, and increased compliance requirements. Now is a good time to review:

• Property profitability
• Ownership structures
• Long-term investment plans
• Record keeping and compliance systems

New GDPR Requirements — June 2026

Businesses should also be aware of updated data protection requirements expected from June 2026.

Areas receiving increased attention

The Information Commissioner’s Office (ICO) continues to focus heavily on cyber security procedures, customer data protection, staff training, data retention policies, and the use of third-party software providers.

Businesses should review

• Privacy policies
• Cookie policies
• Employee data procedures
• Password and access controls
• Data breach reporting procedures

Even smaller businesses are being targeted by cyber threats and data breaches. Failure to comply with GDPR obligations can lead to financial penalties, reputational damage, and loss of customer trust.

Making Tax Digital — Income Tax

Making Tax Digital for Income Tax has now officially begun for qualifying landlords and sole traders with income exceeding £50,000. Further thresholds are planned in future years: a £30,000 threshold from April 2027, and a £20,000 threshold expected from April 2028.

Quarterly reporting

Quarterly reporting of income and expenditure is required every 3 months of a tax year; this may be different to your business year end date. Each quarterly report will be a cumulative total of income and expenses for the tax year to date. This should avoid the need for the correction to previous updates where errors have been identified.

Finalisation statement

A finalisation statement is required as well as the quarterly reports. This is required at year end, which is replacing the current annual tax return. It will include any adjustments to quarterly reports and declarations of the amounts of any other income and claims for allowances and reliefs. This continues to have a deadline of 31 January.

When is qualifying income determined?

HMRC will look at the tax return that should have been submitted in the January before the tax year being considered:

• 2026/2027Qualifying income exceeds £50,000 on the 2024/25 tax return
• 2027/2028Qualifying income exceeds £30,000 on the 2025/26 tax return
• 2028/2029Qualifying income exceeds £20,000 on the 2026/27 tax return

Software

You are now required to use commercial software that is compatible with MTD IT. The software must be able to create, store and amend digital records of income and expenditure, submit quarterly updates to HMRC, and submit a finalisation statement at year end.

We support clients with this and offer software solutions that we already use successfully within our practice.

If you are managing this yourself, it is important to check with the software provider that the product fully meets your requirements. Remember, the finalisation statement includes other income sources and personal tax information — not just business income and expenses. Some software packages complete the full MTD process, while others only handle certain parts of it, so choosing the correct system remains essential.

Information required by HMRC

Each quarterly update needs to be submitted to HMRC by the 7th of the month following the end of the relevant quarter. It must include the period start and end date as well as all income and expenditure that falls within the period dates.

• Q17 August 2026
• Q27 November 2026
• Q37 February 2027
• Q47 May 2027
• Final declaration31 January 2028

Reporting categories

Landlords

Under the new MTD you are expected to keep your own digital records (even if your property is owned jointly) and submit quarterly updates online to HMRC. If your property is jointly owned, you must include your share of gross property income as qualifying income.

Penalties

Moving into MTD, we also move into a new regime for late filing and late payments. Late filing of quarterly updates or the MTD tax return won’t trigger an automatic financial penalty. Instead, you will receive a penalty point, with a £200 penalty being imposed when a certain threshold is reached. Points will also expire after two years if the threshold is not reached, or can be reset after a period of good behaviour if the threshold is reached.

Late payment penalties will also change under MTD, with penalties kicking in at 15 days, then becoming more severe from 30 days onwards.

Common Compliance Risks We’re Seeing

Several common issues continue appearing across businesses:

• Falling behind on bookkeeping
• Mixing personal and business spending
• Poor dividend documentation
• Missing VAT registration thresholds
• Inadequate payroll checks
• Weak cyber security procedures

Financial Planning Tips for 2026/27

A few practical steps now can make a major difference later in the year:

• Review profit forecasts regularly
• Monitor cash flow monthly
• Plan tax liabilities in advance
• Keep bookkeeping up to date
• Review pension contribution opportunities
• Ensure software remains compliant with MTD requirements

Good planning reduces stress, improves cash flow and helps avoid unexpected tax bills.

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