March 2026 Newsletter

As we approach the end of the 2025/26 tax year and prepare for the start of 2026/27 on 6 April, March is a critical planning month for business owners, landlords and individuals.

Alongside the Spring Budget due to be delivered on 3 March, several structural changes to tax administration and employment costs are coming into effect. Digital reporting, increased HMRC enforcement activity and rising wage costs mean preparation is essential.

In this edition, we cover Making Tax Digital, new digital reporting rules for online sellers, increased HMRC compliance activity, VAT threshold behaviour, wage increases from April and employment law reforms.

Spring Budget 2026: Key Themes and Direction

The Spring Budget is due to be delivered on 3 March 2026. While full analysis will follow once draft legislation and technical notes are published, early commentary suggests the Government will continue to balance public spending commitments with fiscal restraint.

Areas expected to remain under scrutiny include business taxation, employment costs, compliance powers and targeted reliefs. With tax thresholds still frozen and public finances under pressure, careful planning remains key for business owners and individuals alike.

We will provide further commentary if technical measures emerge that directly affect our clients. If you would like an early discussion about how potential changes may affect you, please contact our team.

Making Tax Digital for Income Tax Begins in April 2026

From 6 April 2026, sole traders and landlords with a combined gross income above £50,000 will be required to comply with Making Tax Digital for Income Tax. The threshold reduces to £30,000 from April 2027.

Under the new regime, affected individuals must:

• Maintain digital accounting records
• Use HMRC recognised MTD compatible software
• Submit four quarterly updates
• Submit a final declaration after the tax year end

The Government has confirmed the rollout and thresholds on GOV.UK, reinforcing that this represents a structural change in how income tax is reported rather than a minor administrative tweak.

This is the most significant reform to the Self Assessment system since the introduction of online filing. While quarterly updates are reporting submissions rather than payment deadlines, they require ongoing record-keeping discipline and suitable software.

We have published a detailed guide explaining what this means, who is affected and how to prepare. You can read the full article here.

Early preparation is critical. Delaying software selection and process changes until late 2026 is likely to increase costs and create unnecessary disruption.

HMRC Expands Data Driven Compliance Activity

It has recently been reported that HMRC collected an additional £16 billion from large businesses in 2024/25 through a more hands-on and data-driven compliance approach.

The National Audit Office found that HMRC has intensified its engagement with large corporates, using analytics and targeted enquiries to close the tax gap.

While the headline figure relates to large enterprises, the broader message is clear. HMRC is investing heavily in digital systems, data matching and proactive compliance activity.

As digital reporting increases, including under MTD, HMRC’s ability to cross-reference information in real time will continue to grow.

Accurate digital records are no longer simply best practice. They are a core element of risk management.

Online Sellers Face Greater Transparency Under Digital Platform Rules

From January 2026, online marketplaces have been required to collect and report seller data to HMRC under new digital platform reporting rules.

Coverage from professional advisory firms has highlighted that platforms must now share details of seller income, transactions and identifying information directly with tax authorities.

This applies to income generated via online marketplaces, short-term property letting platforms and certain digital services platforms.

For individuals with secondary or side income streams, this significantly reduces the likelihood that undeclared income will go unnoticed.

If you generate income through online platforms, it is essential to ensure that all activity is properly reflected in your tax return.

HMRC Whistleblower Reward Scheme to Launch in April

From April 2026, HMRC’s strengthened whistleblower reward scheme is expected to take effect. Under the scheme, individuals who provide actionable intelligence leading to the recovery of significant unpaid tax may receive between 15% and 30% of the amount recovered, where at least £1.5 million is involved.

While this is primarily targeted at serious tax fraud and large-scale evasion, it reflects a wider policy direction towards incentivised reporting and stronger enforcement tools.

Combined with enhanced data analytics and digital reporting, HMRC’s compliance capabilities continue to expand.

VAT Threshold Pressures and Growth Decisions

Recent analysis suggests that some small businesses are deliberately limiting turnover growth in order to remain below the £90,000 VAT registration threshold.

While avoiding VAT registration may reduce administrative burden in the short term, artificially restricting growth can limit commercial opportunities and distort pricing decisions.

For some businesses, voluntary VAT registration may actually strengthen credibility, enable recovery of input VAT and support expansion plans.

The right decision depends on your customer profile, margin structure and long term growth objectives. It should form part of strategic planning rather than reactive threshold management.

National Living Wage and Minimum Wage Increases from April 2026

From 1 April 2026, significant increases to statutory wage rates take effect:

• National Living Wage for those aged 21 and over rises to £12.71 per hour
• National Minimum Wage for 18 to 20 year olds increases to £10.85 per hour
• Rates for 16 to 17 year olds and apprentices rise to £8 per hour

These increases follow previous rises in employer National Insurance contributions and continue to put upward pressure on payroll costs.

Employers should review:

• Payroll budgets
• Staffing structures
• Pricing models
• Cash flow forecasts

For labour-intensive businesses, even modest hourly increases can have material annual cost implications.

Additional Technical Tax Changes Taking Effect from April 2026

Alongside Making Tax Digital for Income Tax, a number of other technical tax changes take effect from April 2026.

Recent professional commentary from the ICAEW has highlighted developments, including:

• Adjustments to capital allowances and certain investment incentives
• Technical updates within the Construction Industry Scheme
• A VAT relief for goods donated to charity
• Continued refinements to digital tax administration processes

While some of these changes are sector-specific, they reinforce a broader theme. The 2026/27 tax year is not defined by a single reform, but by ongoing incremental tightening of compliance rules and digital reporting requirements.

For businesses investing in plant and machinery, operating within the Construction Industry Scheme, or making charitable donations of stock, it is worth reviewing the details of these updates before 6 April to ensure opportunities are not missed and compliance obligations are understood.

Further details can be found in the ICAEW guidance.

Ongoing Debate Around Inheritance Tax Relief for Agricultural Assets

Proposed changes to inheritance tax relief for agricultural property continue to attract national attention and industry debate.

The reforms would apply a 20% inheritance tax charge to certain agricultural asset values above specified thresholds, with exemptions and reliefs still available in defined circumstances.

While much public discussion has focused on the protests from farming groups, the underlying issue is broader. Changes to Agricultural Property Relief and related reliefs could affect long-term succession planning for:

• Farming families
• Landowners
• Family-run rural businesses
• Estates holding agricultural assets

Even for clients outside the agricultural sector, the debate signals continued scrutiny of inheritance tax reliefs more broadly.

Where significant property or business assets are involved, early succession and estate planning remain essential.

Diary of Main Tax Events

March / April 2026

Preparing for the 2026/27 Tax Year

As we approach the new tax year, the pace of change across tax administration and compliance continues to increase. Digital reporting, expanded HMRC data powers and rising employment costs all underline the importance of keeping financial information accurate and up to date.

Making Tax Digital is not simply a compliance exercise. For many businesses and landlords, it represents a shift towards more regular financial visibility and structured record keeping.

The consistent theme across these developments is clear. The UK tax system is becoming more digital, more data-driven and more closely monitored.

At Mercian Accountants, we are committed to helping our clients navigate these changes with clarity and confidence. If you would like support reviewing your position ahead of April or understanding how any of the issues covered in this newsletter affect you, please contact our team.

N.B. This document is for information only and does not constitute tax advice.

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