Tax Update September 2026

Making Tax Digital (MTD) for Income Tax has now completed its first quarterly reporting cycle, with more than 436,000 sole traders and landlords successfully submitting their first quarterly update. HMRC has confirmed that from September 2026 it will begin contacting and automatically signing up taxpayers who should already be within the MTD regime but have not yet registered.

Currently, MTD applies to self-employed individuals and landlords with combined qualifying income above £50,000. Those affected should ensure that they are maintaining digital records and using compatible software to submit quarterly updates.

If you have not yet registered and believe the rules apply to you, it is worth acting sooner rather than waiting to hear from HMRC. Registering voluntarily allows you to verify your records and software arrangements before HMRC intervenes.

Our recommendation:

• Check whether your income exceeds the MTD threshold.
• Ensure your bookkeeping records are fully digital.
• Review whether your software is MTD-compatible.
• Seek advice if you are unsure whether MTD applies to you.

Although mandatory payrolling of Benefits in Kind (BiKs) does not start until April 2027, HMRC and industry advisers are encouraging employers to begin preparations now. The first phase will cover company cars, company car fuel, vans, van fuel and private medical benefits.

The move will shift reporting away from annual P11Ds and into real-time payroll reporting. Employees will pay the tax on these benefits as they receive them, rather than through later tax code adjustments.

For employers, this means payroll systems and internal processes need to be ready to handle changes in benefit values, joiners and leavers, and real-time reporting requirements.

Actions to consider now:

• Review all benefits currently reported on P11Ds.
• Speak to your payroll software provider about readiness.
• Consider how benefit changes will be managed throughout the year.
• Develop an employee communication plan ahead of implementation.

Early preparation should help ensure a smooth transition when the new regime becomes mandatory.

HMRC has published new guidance aimed at agency workers, contractors, temporary workers and individuals working through umbrella companies, warning them about payslip fraud.

Payslip fraud can occur when workers receive payslips showing deductions that do not accurately reflect the tax and National Insurance being paid to HMRC. Workers may unknowingly become involved in arrangements that produce artificially higher take-home pay, only to face problems later when HMRC investigates.

The guidance encourages workers to review payslips carefully and be cautious of arrangements that appear too good to be true.

Warning signs may include:

• Unexpectedly high take-home pay.
• Payslip deductions that appear unclear or inconsistent.
• Payment structures that seem unnecessarily complicated.
• Reluctance from employers or intermediaries to explain deductions.

Anyone concerned about their payroll arrangements should seek professional advice promptly.

HMRC has published updated Advisory Fuel Rates effective from 1 September 2026. These rates are used where employers reimburse employees for business mileage in company cars or require repayment of fuel used for private journeys.

Employers using the advisory rates should review reimbursement policies to ensure the correct rates are being applied. Using HMRC’s published rates can help minimise disputes and reduce administrative burdens when calculating fuel reimbursements.

If your organisation operates company vehicles, now may be a good time to review mileage and fuel policies alongside your wider fleet management arrangements.

The Government’s wider tax modernisation programme continues to develop following HMRC’s 2026 consultation package. Proposals under consideration include more frequent tax payments for Self-Assessment taxpayers, increased use of digital services and wider simplification measures aimed at making the tax system easier to administer.

While many proposals remain under consultation, they provide a clear indication that HMRC wishes to move towards real-time reporting and payment systems across a growing number of taxes. Businesses and individuals should expect continued digital transformation over the coming years.

• Wednesday 28^th October – AUTUMN BUDGET
• Thursday 5^th November – Next Bank of England meeting.
• Saturday 7^th November – Deadline for the 2026/27 first Quarterly Update, required for those already mandated into MTD for Income Tax – for more information on how Folkes Worton can assist you with the new MTD for Income Tax requirements – CLICK HERE

Folkes Worton LLP Chartered Accountants
Accounting for the Future