Tax Update 2026, Five Developments Businesses Should Understand
Overview
On 23rd June 2026, the government published Tax Update 2026, a wide-ranging package covering tax administration, compliance and customs. This guide explains five developments that may matter to small businesses, landlords and people completing Self Assessment returns.
They are not all new rules already in force. Some are consultation proposals, others are announced future changes, and some build on powers HMRC already has.
Position checked on 13th October 2026: the Direct Debit, lower-value debt recovery, reckless-statements and Timely Payments consultations have closed. Their official pages say HMRC is analysing feedback. Businesses should continue meeting their existing obligations while monitoring further announcements.
1. Proposals to require VAT and PAYE payment by Direct Debit
The government has consulted on making Direct Debit the required payment method for VAT and PAYE return liabilities, subject to appropriate exceptions.
Direct Debit is already available. The proposed change concerns requiring its use, rather than introducing automatic tax payment for the first time.
The consultation considers practical barriers, exceptions and possible enforcement arrangements. It does not establish a new universal penalty simply for a failed Direct Debit. However, unpaid tax can already attract interest and applicable late-payment penalties.
What to do: keep reliable VAT and payroll records, forecast liabilities and monitor actual collection dates. Ensure payment arrangements are correctly set up and contact HMRC promptly if you cannot pay.
2. Proposed instalment recovery of lower-value tax debts
HMRC already has powers to recover qualifying tax debts directly from bank and building society accounts. Direct Recovery of Debts was introduced in 2015 and includes safeguards.
The new consultation proposes extending recovery arrangements so lower-value debts could be collected through direct monthly deductions. It targets customers who persistently fail to engage with HMRC, rather than giving HMRC unrestricted access to every taxpayer's account.
The proposed design considers affordability, notice, opportunities to respond and protection for people needing additional support. Final details remain subject to the policy process.
What to do: do not ignore HMRC debt letters. Check the amount owed, raise genuine disputes promptly and discuss a payment arrangement if you cannot pay in full. A Time to Pay arrangement may be available, subject to HMRC agreement.
3. Proposed criminal offence for reckless untrue statements in direct tax
The government has consulted on a criminal offence for making reckless untrue statements or declarations in direct tax matters. It aims to address a gap between direct tax and existing indirect tax offences.
Recklessness is not the same as an ordinary mistake or carelessness. Under the consultation's proposed approach, the person would need to be aware of a risk that their statement was untrue and unreasonably proceed despite that risk. It would not be enough that they merely ought to have known better.
Deliberate tax fraud is already subject to criminal law. Careless errors can also have consequences under existing civil penalty rules, even when they do not meet the proposed criminal test.
What to do: retain supporting records, investigate inconsistencies and resolve known uncertainties before submitting tax information. Seek advice where the position is unclear. The proposal is not a new general requirement for every return to be prepared by an accountant.
4. More timely Self Assessment payments through PAYE
The government has announced a direction of travel towards collecting more forecast Self Assessment liabilities through PAYE from April 2029 for taxpayers with sufficient PAYE income.
The Timely Payments consultation considers how collection each pay period could work, including forecasting, safeguards and the transition. It also explores possible changes to payments on account for other Self Assessment taxpayers.
This may be relevant to employees with self-employed income, landlords and company directors with personal tax liabilities. Having some PAYE income does not, on its own, establish exactly how an individual will be affected.
Currently, payments on account, where required, are normally due on 31st January and 31st July, with a balancing payment due on 31st January. A universal compulsory monthly-payment system is not established by this consultation.
What to do: review your income sources and tax reserves. Model possible cash-flow changes once the final arrangements are published, rather than assuming your current payment dates have already changed.
5. E-invoicing and Peppol
The government has announced mandatory e-invoicing for all VAT invoices from 2029. In June 2026, it confirmed Peppol as the core interoperability network for the UK's future e-invoicing framework.
An e-invoice is issued, transmitted and received in a structured format that allows automatic processing. Simply emailing a PDF does not necessarily meet that definition.
Further implementation detail remains important. The official consultation response says an implementation roadmap is planned for Budget 2026. Existing public-sector or customer requirements may already apply to some businesses.
Do not assume that Peppol means every invoice will automatically be reported directly to HMRC, or that your current software subscription will meet all future requirements.
What to do: ask your software provider about structured invoicing, Peppol support, expected costs and implementation plans. Avoid buying a new system solely on the basis of unconfirmed technical requirements.
Practical steps now
Keep bookkeeping, payroll and VAT records accurate and up to date.
Maintain a tax calendar and forecast cash needed for payment and collection dates.
Respond to HMRC correspondence and address arrears early.
Check uncertain tax information before filing and retain evidence of your decisions.
Review software plans without assuming a particular brand guarantees compliance.
Revisit these developments when consultation responses and implementation details are published.
Frequently asked questions
Are all five changes already law?
No. They have different statuses. Some are proposals, others are announced future changes, and some concern extensions of existing powers. The June tax package should not be treated as a single set of rules taking effect immediately.
Can HMRC already recover money from a bank account?
Yes, where the legal conditions for existing debt-recovery powers are met. The lower-value debt consultation concerns proposed changes to instalment recovery, with safeguards. This is separate from voluntarily setting up a Direct Debit to pay current liabilities.
Would a careless tax-return error become a criminal offence?
Not merely because it was careless under the proposed recklessness offence. The consultation requires awareness of a risk and unreasonable conduct despite that awareness. Existing civil penalties and other criminal offences remain separate issues.
Will everyone with employment income and a Self Assessment return be affected in April 2029?
The announced policy concerns taxpayers with sufficient PAYE income. The final design, safeguards and individual circumstances will determine the practical effect. Do not assume that existing payment dates have already changed.
Must I sign up to Peppol now?
The announced general VAT-invoice mandate is for 2029, with further detail to follow. Check any requirements that already apply to your customers or sector and ask your software provider about readiness.
How can 360 Accounts help?
360 Accounts & Bookkeeping can help you review tax-payment planning, maintain reliable records and understand which developments are relevant to your circumstances. Contact us for advice before changing your payment arrangements or accounting systems.