What business owners must know about what’s happening in 2026

As the Christmas decorations come down and the gyms start to fill up, these aren’t the only changes we’re going to see this year. 

For directors and business owners, the financial landscape in 2026 is going to change in various ways that will affect your business from how you account for your daily operations up to and including the tax you pay when you finally exit your business. 

Understanding these financial shifts now will be the difference between a smooth transition this year and a costly surprise!

The costs of exiting a business are rising

If you’re planning on selling your business this year or exiting via ownership transition then the clock is definitely ticking. 

From April 6th 2026, the tax rate for disposals for qualifying for Business Asset Disposal Relief (BADR) rises from 14% to 18%.

While the lifetime limit remains at £1 million, the financial impact of this 4% rise can be substantial. 14% of £1 million gained is a £140,000 charge. The same transaction after April 6th would be £180,000 – the difference a day makes? In this case, £40,000.

If this change could affect you and your plans you can take swift action now including:-

  • Review your exit timelines: completing a sale or members’ voluntary liquidation before April can secure the lower 14% rate.
  • Check eligibility: To benefit from BADR and other advantages, certain conditions have to be met including a minimum ownership period of two years and conditions. 
  • Model the impact: Working with an insolvency practitioner and your account to understand what your exact tax position will be and whether accelerating a sale is financially viable. A voluntary liquidation might make more financial sense.

A new era for Financial Reporting (FRS 102)

Starting in January, the new FRS 102 accounting standard is undergoing its most significant update in years. These changes aim to align UK reporting with global standards and provide more transparency for lenders and investors. 

Two of the main changes that stand out include:

  • Revenue Recognition: Instead of recording income when “risks and rewards” pass, it must now be recorded when the customer receives value. This could significantly shift the timing of when a business reports income. 
  • Leases on the Balance Sheet: Most operating leases (like office space or vehicles) will no longer sit purely as expenses; they will appear on balance sheets as assets and liabilities. This will change how your business looks to creditors and could affect EBITDA figures. 

Your accountant will have all the information you need should you wish to discuss further what these changes mean but two tasks that should be considered include auditing your active leases to calculate what new balance sheet figures will be and reviewing customer contracts to understand how value is delivered to determine if revenue recognition timing needs to change.

Tax Digitalisation and Governance

2026 will see the push towards transparency and digital-first compliance continuing to accelerate.

  • Making Tax Digital (MTD): From April this year, individuals with personal trading or rental income of £50,000 or over must comply with MTD for Income Tax. While this may not affect incorporated SMEs directly, it could impact many of their owners and directors personally.
  • Companies House Reforms: There will be more structured filing requirements and the introduction of mandatory identity verification for directors.
  • Late Payment Rules: New regulations aim to reduce maximum payment terms from 60 to 45 days, providing more predictable cash flow for SMEs.

Incentives for Growth and Talent

This year is not all tightening belts; there are several opportunities for scaling businesses.

  • EMI Expansion: From April 2026, the Enterprise Management Incentive (EMI) scheme will be available to larger companies with the asset limit rising to £120 million and the employee limit doubling to 500.
  • EIS and VCT Limits: Investment limits for these schemes are set to increase, potentially opening up more funding for “knowledge-intensive” companies.
  • Capital Allowances: A new 40% first-year allowance for plant and machinery will be introduced in January, though the general writing-down allowance will drop from 18% to 14% in April.

There will be some unexpected changes in 2026 for sure and directors and business owners, supported by their accountants and other professionals will have to manage them as best they can. 

But of the challenges we know are coming for sure, the time to prepare for them is now, if you haven’t already. 

Whether you want to discuss your existing options or if a Members’ Voluntary Liquidation suddenly looks like a more appealing option than a business sale, get in touch with us.

We offer a free initial consultation for any director who wants to explore their options in more detail, including considering decisions they might not have considered depending on their aims and objectives. 

2026 could certainly be a landmark year, especially if you take action now.