News for Accountants - January 2026 - Business Rescue Experts

We hope you’ve had a productive and positive year and are looking forward to a nice break.

Over the past month there’s been plenty of news for accountants that you might have missed so we’ve gathered together in one place.

You can also catch up on all the other business and insolvency news stories from the week right here.

We also have our Accounts Hub so you’ll be able to access the most important and timely insolvency information whenever you need it.

We’re always keen to hear what you think so please email us at ask@businessrescueexpert.co.uk because we really want to write what you really want to read!

The coming Accounting Changes in 2026

The “quiet” period for accountants in the UK (if there is such a time!) is officially over.

2026 brings a concentrated storm of regulatory mandates for the profession from a balance sheet “balloon” of FRS 102 to the countdown to MTD for Income Tax.

Many accountants use January as a time for self-assessment and training but the narrative has definitely shifted this year. This isn’t just a busy season – it’s the implementation of the most significant overhaul of UK financial reporting since FRS 102 itself was introduced.

So what will this mean for you, your business and your clients?

FRS 102 Section 20: The Death of Off-Balance Sheet Financing

The grace period is over and as of January 1st 2026, the long-debated amendments to Section 20 of FRS 102 have taken flight. By aligning more closely with IFRS 16, the FRC has effectively ended the era of the operating lease for lessees.

While this sounds straightforward to the uninitiated, practitioners will know this is the equivalent of a balance sheet “balloon”. For almost every lease, except those under 12 months or involving low-value assets, must now be recognised as a “right-of-use” (ROU) asset and corresponding lease liability.

The real danger isn’t from a journal entry but a covenant breach. Many existing loan agreements are pinned to “frozen GAAP” clauses but many more are not. As these leases move onto balance sheets, gearing ratios will naturally spike. Simultaneously, the shift from a simple rental expense to a combination of depreciation and interest will artificially inflate EBITDA.

And while an inflated EBITDA sounds positive, it can be a double-edged sword for businesses with earn-out agreements or performance-related bonuses. You should be working with your client’s lenders to “pre-calculate” the 2026 impact already because you need to stress that “the business hasn’t changed but the ruler we use to measure it has.”

2) MTD for Income Tax: The £50,000 Threshold Reality

We are within the final 90-days towards the April 6th 2026 mandate for MTD for Income Tax. The first wave targets sole traders and landlords with gross income exceeding £50,000.

According to HMRC’s own impact assessments, this will affect approximately 780,000 taxpayers. Although what concerns many accountants isn’t the software, it’s the data quality. Moving a client from an annual “shoebox” of receipts to quarterly digital updates is going to be a huge cultural lift.

HMRC has signaled a lighter-touch approach to penalties for the first year of quarterly updates but as many have seen with MTD for VAT, these “soft landings” turn into hard landings when their final year-end declaration is due. The firms that will struggle are those trying to keep their old manual workflows while adding digital filing on top.

The winners will be companies and accountants that use this as a catalyst to move their clients onto cloud-based, real-time bookkeeping that turns compliance chores into year-round advisory touchpoints.

The cumulative effect of these changes will be seen in the professionalisation of the SME sector. FRS 102 brings transparency that investors and banks have long demanded while MTD provides the data frequency required for genuine business coaching.

For accountants, the value-add has never been more obvious, nor has the penalty for standing still.

Only tax advisers will need to register with HMRC in 2026

From May 2026, only tax advisers who interact with HMRC for clients will need to sign up to the new tax adviser register and meet HMRC’s minimum registration standards.

Any firms or sole practitioners who interact with HMRC in the course of their client work will be required to sign up to the new register of tax advisers from next year, with the threat of penalties of up to £5,000 for non-compliance although there will be a three-month transition period.

HMRC estimates that there are around 85,000 tax agent businesses in the UK including partnerships and sole traders which could be affected by the new registration requirements.

While the register is for firms, HMRC will have the powers to spot check individuals to make sure they’re complying with their minimum registration standards.

HMRC has stressed that: “it is firms (the legal entity) that must register rather than individuals, but as part of the registration process HMRC will also apply checks to a limited number of relevant individuals operating within these firms. A relevant individual is a senior person with genuine control of the tax advice given by the firm – generally directors, partners and individuals in equivalent roles.

“Most employees will not be subject to checks and the new registration system will make these checks as quick and easy as possible.”

Further details on timelines and transition arrangements for specific tax adviser groups will be communicated in advance.

There will be some exceptions for firms with agents only handling VAT and customs duties not required to register, while firms only providing accounting and payroll software to clients will not need to register with HMRC if their only dealing with HMRC is as a result of the software data downloads and data exchanges.

On the penalty front, contravention of the rules of the register could result in an individual penalty of £5,000 as set out in section 231 of Finance (No.2) Bill), rising to £10,000 if the adviser has broken the rules four times in the course of the previous two years, depending on the nature of the breach. There will also be a suspension of regime in place for firms that breach the register rules.

Six month delay to ID verification for firms filing for clients

The mandatory requirement for accountancy firms filing accounts for client companies to complete ID verification has been delayed for six months.

Companies House has revised the implementation timetable to push back the current April 2026 identify verification requirements to register as an authorised corporate service provider (ACSP) to November.

The requirements are a key part of the new transparency rules in the Economic Crime and Corporate Transparency Act 2023 (ECCTA).

This is the only significant change to the planned timetable with requirements for directors to complete ID verification still in force, depending on confirmation filing dates and a requirement for new companies registering.

A green tick system is in operation on the Companies House register, which identifies whether a director has registered as required, while those failing to register by their individualised deadline are labelled as being overdue.

AI already causing costly mistakes for your clients

Something we’ll be hearing a lot more about in 2026 and beyond are the many mistakes that AI can make and how they come with a cost within businesses.

Half of accountants and bookkeepers in the UK have said that their clients have suffered real financial losses due to “AI slop” that has caused avoidable mistakes in the books.

Research by Dext found that nearly a third (31%) of accountants and bookkeepers find client mistakes on a weekly basis caused by misleading or false AI-generated financial or tax advice. This follows research from October 2025 that revealed that two-thirds of businesses consulted public AI chatbots for advice before consulting their accountants!

The most common errors reported included incorrect interpretation of business expenses (46%), incorrect VAT claims or charges (41%), flawed personal tax planning (35%), payroll errors (34%) and incorrect business tax planning advice (34%).

30% of respondents said that as risks intensify in 2026 as more businesses rely on AI without professional oversight that they are at a higher risk of insolvency or business failure as a result.

HMRC are seeking to increase enforcement actions with up to 5,000 new compliance officers by 2029/30 with recruitment beginning this year.

With increasing AI mistakes leading to inappropriate or fraudulent claims, rising fines and penalties and greater HMRC scrutiny due to incorrect or late filings, these errors will also cost businesses more in billable hours as accountants have to spend time finding and correcting these mistakes.

As a result, more than 90% of those surveyed believed that public AI tools should be regulated or restricted when it came to providing financial or tax-related advice.

Hear, hear.

PRCT issues guidance on ethical use of AI in tax work

Almost in answer to the concerns raised by the research, leading tax and accountancy bodies have now issued guidance on how to work with AI stressing the importance of client transparency and disclosure on usage.

The Ethical Use of Artificial Intelligence Tools guidance has been produced by the seven professional bodies behind the Professional Conduct in Relation to Taxation (PCRT). These are the AAT, ACCA, ATT, CIOT, ICAEW, ICAS and STEP.

The guidance focuses on the core principles of the PCRT in the context of AI ethics – integrity, objectivity, professional competence and due care, confidentiality and professional behaviour, explaining the issues to consider when using AI along with the ethical risks and possible safeguards.

Frank Haskew, chair of the PCRT group, said: “The development of AI tools continues to move at pace and the application of these tools when undertaking tax work is also increasing.

“The PCRT bodies are aware that members may be unsure on how to apply the ethical principles when using AI tools and the newly published topical guidance material is designed to assist members in applying these principles.”

Accounting rules for Charities has changed

If you work with charities, be aware that accounting rules have been updated to reflect new revenue recognition and lease reporting requirements under Charities Statement of Recommended Practice (SORP) 2026 and new income tiers.

The Charity Commission has updated guidance to reflect the introduction of Charities SORP 2026 which applies to accounting years starting on or after January 1st 2026.

The new requirements are split between three tiers based on the charity’s level of income.

They are:-

Tier 1 – charities with income up to £500,000
Tier 2 – charities with income between £500,001 to £15 million
Tier 3 – charities with income above £15 million

Other changes to the rules were made to ensure consistency with FRS 102 and in response to stakeholder feedback. The most significant changes include income reporting under new five-step revenue recognition requirements, overhaul of lease accounting and revisions to the statement of cash flows. There are also amendments to accounting for social investments and heritage assets.

On cash flows, to help smaller charities, the requirement in the previous SORP for charities with income over £500,000 to produce a cash flow statement has been changed. The SORP increases the income threshold to £15 million under the tier 3 requirement.

The Charity Commission said: “This means that only charities in tier 3 are required by SORP to produce a statement of cashflows. However, charities in tiers 1 and 2 are required by FRS 102 to prepare a statement of cash flows where they do not meet the definition of a small entity under FRS 102.”

All charities must use the SORP to prepare their accounts unless the trustees have opted to prepare receipts and payments accounts and their charity is a non-company charity with an income of £250,000 or less in the reporting period.

Employment Rights Act Timelines

New legislation updating employment rights became law on December 18th 2025 with the removal of rules around minimum service levels for strikes, with additional changes coming into effect in 2026 and 2027.

The Employment Rights Act has brought in changes across 28 different areas of employment law phased in across the next two years. The first set of key measures will be coming into effect from April 2026.

The following are the key dates and what will legally change:-

February 2026

Protections against dismissal for taking industrial action. Removing the current 12-week limit for claiming unfair dismissal.
Simplifying industrial action notices and industrial action ballot notices. This includes reducing the amount of notice needed from 14-days to 10 and increasing the length of time industrial action mandates remain valid to 12 months from six.
Repeal of the Strikes (Minimum Service Levels) Act 2023.
Repeal of the majority of the Trade Union Act 2016 (some provisions will be repealed via commencement order at a later date).
Removing the 10-year ballot requirement for trade union political funds.

April 2026

Statutory Sick Pay – to be paid from the first day of illness and the Lower Earnings Limit is removed.
‘Day 1’ Paternity Leave and Unpaid Parental Leave.
Restriction on taking paternity leave after shared parental leave is removed.
Whistleblowing protections expanded to include sexual harassment disclosures.
Establishment of the Fair Work Agency – bringing together existing enforcement bodies and taking on enforcement duties of other employment rights, including holiday pay and statutory sick pay.
Collective redundancy protective award – doubling the maximum period of the protective award from 90 days’ pay to 180 days’ pay.
Simplifying trade union recognition process and enabling electronic voting.

October 2026

The detail of how many of these changes will be implemented will be subject to further consultation:-

Fire and rehire measures – preventing employers from rehiring staff on more unfavourable terms.
Requirement for employers to take “all reasonable steps” to prevent sexual harassment of their employees.
Employers are now liable for the harassment of their employees by third parties (i.e. customers or clients) unless they have taken “all reasonable steps” to prevent it happening.
Tightening rules around tipping – employers must consult before creating a tipping policy and policies must be reviewed every three years.
New duty on employers to inform workers of their right to join a trade union.
Strengthen trade unions’ right of access.
New rights and protections for trade union representatives.
Employment tribunal time limits to increase to six months for all claims – currently it is three months.
Extending protections against detriments for taking industrial action.
New measures for public sector outsourcing to avoid different terms and conditions for ex-public sector employees and private sector employees.
Introduction of new Adult Social Care Negotiating Body.

December 2026

New mandatory charter for seafarers with higher standards required on: health and safety, pay, job security and rest breaks.

2027