1st Formations, the UK’s leading company formation agent, has helped form over 1 million companies and supported thousands of entrepreneurs in growing their businesses. Graeme Donnelly, CEO and founder of 1st Formations, comments on the key tax changes businesses should be aware of ahead of the new financial year on 1 April 2026.
“While the Spring Statement on 3 March 2026 did not introduce any new taxes, reliefs or incentives for small and medium-sized businesses (SMEs), key tax changes taking effect from 1 April 2026 will significantly impact small businesses, particularly regarding compliance and investment rules.
“One of the most significant updates is the increase in penalties for the late filing of corporation tax returns. For corporation tax returns with a filing date on or after 1 April 2026, penalties will double: £200 for initial late filings, and £400 for those over three months late. Repeated failures could incur penalties up to £2,000.
“Changes are also being introduced to encourage investment into smaller businesses. From 6 April 2026, the Enterprise Investment Scheme and Venture Capital Trust scheme will see increased limits, allowing companies to raise more capital and expanding eligibility thresholds for qualifying businesses.
“Other reforms aim to simplify compliance with the corporate interest restriction rules. Starting with accounting periods ending on or after 31 March 2026, reforms will adjust how reporting companies are appointed and how interest restriction returns are filed, reducing administrative burdens for groups.
“Updates to international tax rules are also due to take effect for accounting periods beginning on or after 1 January 2026. These include amendments to transfer pricing rules, aligning the definition of permanent establishment with the OECD model convention and replacing the diverted profits tax with a new charging provision for unassessed transfer pricing profits.
“Separately, a new HMRC service for advance clearance for major investment projects is expected to launch in July 2026, alongside a planned targeted advance assurance service for smaller companies claiming research and development (R&D) relief.
“The rollout of the Making Tax Digital programme continues, and from 6 April 2026, sole traders and landlords with incomes over £50,000 must maintain digital records and submit quarterly updates to HMRC using compatible software.
“The reform is intended to modernise the tax system and improve accuracy, but it will also increase reporting requirements for many taxpayers.
“While the main and small profits rates of corporation tax will remain at 25% and 19% respectively, the tax charge on loans made to participators by close companies will increase from 33.75% to 35.75% for loans made on or after 6 April 2026.
“Taken together, these changes underscore the need to review tax compliance processes and plan before the new financial year. Businesses must prepare their internal systems for stricter filing deadlines and increased digital reporting, while also considering how updated investment schemes and new HMRC services can support future growth.
“Reviewing tax strategies early and seeking professional advice will help companies remain compliant while also ensuring they take advantage of available incentives as the new rules come into force.”
