Changes to Taxes in the UK
- Katarzyna Barrington
- Aug 7
- 7 min read
HMRC, the UK's tax authority, has released a new plan showing how it will change and improve its services over the next few years. The goal is to make taxes easier, faster, and more digital, especially for small business owners and self-employed people.
This new transformation roadmap outlines how HMRC aims to free up your time by reducing tax administration, enhancing digital tools, and leveraging technology, such as AI, to support filing and reporting. The aim is that by 2030, 90% of customer interactions with HMRC will be digital.
Below, we've explained the most essential changes in simple terms—so you know what's coming and how to prepare.
1. No Making Tax Digital for Corporation Tax
If you run a limited company, you don't need to worry about Making Tax Digital (MTD) for corporation tax—HMRC has confirmed it's not happening (at least for now). Instead, they're improving their own systems to check corporation tax returns more efficiently.
But if you're VAT-registered or a sole trader, MTD still applies to you:
MTD for VAT is already in place
MTD for Income Tax starts in April 2026
If your income is over £20,000, you'll need to follow MTD rules by 2028
HMRC is also looking at how to include people earning less than £20,000
What to do: If you're self-employed or rent out property, now is a good time to start using digital accounting software that's compatible with MTD.
Positive Impact:
Reduces pressure on small, limited companies to adjust to more digital rules.
Allows companies more time to prepare for future changes.
HMRC is focusing instead on improving its own systems, which could mean faster processing and fewer errors.
Negative Impact:
Companies may still face confusing or outdated processes since MTD won't apply.
Missed opportunity to simplify digital filing for corporation tax, like it has for VAT and income tax.
Larger companies that are ready for MTD may feel that their investment in tools is underutilised.
2. E-invoicing and Pre-Filled Tax Forms Referring to the Changes to Taxes in the UK
HMRC aims to save you time by automating certain aspects of the tax return process. This includes:
More use of e-invoicing, so your sales and expenses are recorded automatically
Pre-filled tax returns, which means HMRC will start adding specific information for you
Helpful "nudges" to remind you about upcoming deadlines or missing info
Auto-registering some people for Self Assessment based on their income
What to do: Start keeping digital records now. You can use free or paid software to track income and expenses, which makes it easier when HMRC starts using these tools.
Positive Impact:
Saves time by reducing manual data entry.
Less risk of errors or forgetting to declare income.
Helpful for beginners or people with limited accounting experience.
Negative Impact:
It may feel intrusive if HMRC uses third-party data to pre-fill your return.
It could create confusion if the pre-filled data is wrong or incomplete.
Some small businesses may need to upgrade their systems to utilise e-invoicing tools, which can be costly.
3. Government Gateway Is Being Replaced
From 2026 to 2027, the old Government Gateway login will be replaced with a new system called GOV.UK One Login.
This new system will:
Be more secure
Let you sign in to all government services with one login
Include a "wallet" feature so you can store things like tax documents on your phone
What to do: Nothing yet. Be prepared to switch to the new login system when HMRC sends more information.
Positive Impact:
One simple, secure login for all government services.
Easier to manage tax, benefits, and other records in one place.
The wallet feature makes it convenient to store documents.
Negative Impact:
The transition period (2026–2027) might cause confusion or login issues.
Older or less tech-savvy users may struggle with setup or multi-factor authentication.
Businesses with multiple users may experience delays in accessing or verifying their IDs.
4. AI Assistants and Tax Training for Small Businesses
Between 2025 and 2026, HMRC will:
Offer training packages for small businesses to learn about tax in a simple way
Introduce AI-powered digital assistants that can answer common questions
Develop better customer service systems to give you personalised support
What to do: Look out for training events, online tools, or chat services from HMRC starting in 2025.
Positive Impact:
Better, simpler learning tools for small business owners.
AI assistants can instantly answer tax questions, reducing wait times.
More personalised support, especially if you can't afford an accountant.
Negative Impact:
AI chatbots may provide generic or unclear responses in complex cases.
Reduced access to human help for people who prefer speaking to someone.
Not all users will trust or feel confident using AI tools.
5. New Reporting System for Side Hustles
If you have a side hustle or earn a bit of extra income (for example, from selling on Etsy or driving for Uber), there's a new system coming just for you.
From 2029, the tax-free threshold for side income will rise from £1,000 to £3,000. A new digital reporting tool will enable individuals to report their earnings quickly and easily.
What to do: Track your side income now. If you earn under £1,000, you may not need to report it. If you're close to or over that, prepare for digital reporting in the future.
Positive Impact:
An easier and more precise way to report small amounts of income.
Less paperwork for people earning under £3,000.
Recognises modern income streams, such as gig work and online selling.
Negative Impact:
Still a burden for people with small or inconsistent incomes who may now need to interact with HMRC more often.
Some may worry about being tracked or penalised for informal side jobs.
The threshold increase may create confusion about who needs to report and who doesn't.
6. Action Against Fraudulent Umbrella Companies
If you work through an umbrella company or employ staff through one, new rules are being introduced to prevent fraud and tax avoidance. Draft laws are expected to be released in July 2025 and will take effect in April 2026.
What to do: Ensure that any umbrella company you use is compliant. Ask them about their tax practices and check their reputation.
Positive Impact:
Protects workers from being scammed or misused by dishonest umbrella companies.
Encourages fairness in the contractor and gig economy.
Promotes trust in the payroll and recruitment industry.
Negative Impact:
Legitimate umbrella companies may face extra paperwork or scrutiny.
Honest businesses might get caught in tighter regulations.
Some contractors may lose flexibility or income options as the rules tighten.
Other Helpful Updates in the Roadmap
Here are a few more changes HMRC is working on:
Late payment penalties now come with higher interest charges (since April 2025)
Encourages timely payment and improves cash flow for HMRC.
Increases pressure on those already struggling financially.
The new online PAYE service is being rolled out in 2025–2026
SMS confirmations for appeals and complaints
Improves communication and transparency.
Might miss important updates if phone numbers or contact details are not up to date.
You can now add your National Insurance number to your phone wallet
Easier to access personal info and plan ahead.
Relies on people using smartphones and staying digitally engaged.
A new tool lets you check your State Pension forecast
Inheritance tax services will be fully digital by 2027–2028
Speeds up estate administration.
It may be overwhelming for bereaved families unfamiliar with online systems.
Tax refunds will be sent straight to your bank account
Reduces waiting times and postal delays.
There is a risk of fraud or misdirected payments if account details are incorrect.
Self-assessment forms will include more pre-filled data, like child benefit claims
What to do: Keep checking the GOV.UK for new services as they become available. Make sure your contact details are up to date in your HMRC account.
How to Prepare Now
Even though many of these changes are still a few years away, there are simple steps you can take now to make the most of what's coming:
Start keeping digital records of your income and expenses
Use accounting software that works with Making Tax Digital
Get used to online tax tools on the HMRC website
Follow updates from HMRC or speak to a tax adviser if you're unsure
Keep your login details and documents safe
These changes are designed to save time, reduce errors, and help you focus more on growing your business rather than spending time on paperwork.
Final Thoughts
HMRC's roadmap shows a clear shift toward digital services, automation, and improved support for small businesses. The aim is to make tax simpler and quicker for everyone.
If you're self-employed, run a small business, or earn money from a side hustle, it's a good idea to start preparing now. Keeping good records, staying informed, and using the right tools will help you stay ahead of the changes and avoid future stress.
If you need help understanding how these changes might affect your business, KJB International Aid is here to support you with resources, guidance, and referrals to trusted advisers.
Overall Positives:
Saves time
Reduces paperwork
Offers better access to services
Encourages digital inclusion
Overall Challenges:
Assumes everyone is digitally confident
Risk of mistakes during transition
Some tools may feel impersonal or hard to use without support
Who benefits most?
Tech-savvy small business owners
Startups already using digital accounting tools
Freelancers managing multiple income sources
Who may struggle?
Older users or those without good digital access
Businesses with limited admin help
People who aren't confident dealing with taxes on their own
Post Disclaimer
This article is for general information only and does not constitute legal, tax, or financial advice. Always consult with a qualified professional for advice specific to your situation.
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