Tax, business and sector updates that matter now. For UK business owners, directors, contractors, landlords and international traders.
The useful question this month is not only “what changed?” It is “what changes in my numbers because of it?” Everything below is written to answer the second one.
August in one minute
- HMRC: digital records and compliance activity are accelerating. Know your tax position before the deadline, not after it.
- Margins: more firms reported falling turnover than rising turnover in July. Revenue alone is not enough.
- Rates: inflation rose to 2.9% and three MPC members wanted a rise. Do not budget on cheap money arriving quickly.
- Directors: Companies House is moving to GOV.UK One Login. Shared office logins need attention now.
- October: employment, electricity VAT and residential development rules all change from 1 October.
- Sectors: construction pipeline, import duty suspensions and landlord compliance each deserve a closer look.
HMRC is changing the rhythm of tax
August gave us a clearer picture of where UK tax administration is heading. The important point is not one announcement in isolation. It is the direction created when several announcements are read together.
| The number | What it is |
|---|---|
| 436,000+ | sole traders and landlords who sent their first MTD quarterly update |
| 62% | share of the estimated tax gap attributed to small businesses |
| £8.3bn | HMRC compliance yield reported for Q1 2026/27 |
Making Tax Digital for Income Tax became mandatory from April 2026 for sole traders and landlords with qualifying income above £50,000. The first quarterly update was due on 7 August. HMRC says it will begin signing people up from September where it believes they are in scope but have not yet registered.
At the same time, HMRC reported a £59.2 billion estimated tax gap for 2024/25. Small businesses represented 62% of that gap. The largest behavioural cause was failure to take reasonable care at 35%, followed by ordinary error at 16%. HMRC also reported £8.3 billion of compliance yield in the first quarter of 2026/27, and more than 2,400 new compliance colleagues since Autumn Budget 2024.
There is another signal worth watching. A government consultation that closed on 16 August explored requiring most VAT and PAYE return liabilities to be paid by Direct Debit. That is a proposal, not current law. Read alongside MTD, digital records and the extra compliance capacity, it points to a tax system that is becoming more frequent, more automated and less forgiving of weak records.
Our view: the advantage is no longer paying less by being clever at the deadline. It is knowing the liability early, having the evidence ready, and keeping tax cash separate from operating cash.
Action: every month, estimate the next VAT, PAYE, Corporation Tax or Income Tax liability and compare it with the cash you have ring-fenced for it.
That makes up-to-date bookkeeping, accurate VAT returns and forward tax planning more valuable than they were a year ago.
Your sales can rise while your business gets weaker
The latest ONS business survey is a useful reminder that headline turnover does not tell you whether a business is actually getting healthier. In July, 15% of trading businesses reported higher turnover than the previous month, while 22% reported lower turnover. In August, economic uncertainty remained the most commonly reported challenge affecting turnover. Among businesses with 10 or more employees, labour cost was the most reported challenge, at 35%.
Revenue is activity. Margin is economics. Cash is survival.
The arithmetic makes the point. A business doing £600,000 of sales at a 35% gross margin produces £210,000 of gross profit. If sales rise 15% to £690,000 but gross margin falls to 30%, gross profit falls to £207,000. The company is bigger and slightly worse off.
Five numbers worth checking every month
| Signal | What it tells you |
|---|---|
| Gross margin % | Whether higher sales are actually creating more gross profit. |
| Net margin % | Whether overhead, finance and payroll are swallowing the gain. |
| Debtor days | How long customers are using your cash before paying you. |
| Payroll / turnover | Whether labour cost is rising faster than revenue. |
| Cash after tax provision | What is truly available once money owed to HMRC is allowed for. |
Our view: if turnover is rising while margin, cash conversion or debtor days deteriorate, growth is hiding a problem rather than solving it.
Action: compare your current gross margin, debtor days and payroll-to-turnover ratio with the same period last year. Do not wait for year-end accounts to discover the change.
This is why annual accounts should do more than confirm turnover. Comparatives, margin movement and cash conversion are what tell you whether growth created value.
Do not build the plan around cheaper money arriving quickly
CPI inflation rose to 2.9% in the 12 months to July, up from 2.6% in June. Bank Rate is 3.75%. At the Bank of England meeting ending 29 July, six MPC members voted to hold and three preferred an increase to 4%. The next decision is due on 17 September.
That does not mean rates will rise in September. It does mean a property purchase, a stock-finance decision or a refinancing plan should not depend on cheaper borrowing arriving soon.
Stress test, do not guess
For any material borrowing or refinancing due in the next 12 months, run the cash flow three ways: at the current rate, at current rate plus one percentage point, and at current rate plus two.
Action: if the deal stops working after a modest rate move, the problem is not your rate forecast. It is the lack of margin for error.
Companies House: access is becoming individual, not shared
On 20 August, Companies House announced that GOV.UK One Login will become the main sign-in route for the Find and update company information service. Existing users can continue with their current details for now, but new users will need One Login.
The part businesses should not ignore is shared access. A GOV.UK One Login belongs to an individual. Companies House warns that sharing an account once it is linked can trigger security controls and lock users out.
| Term | What it means |
|---|---|
| GOV.UK One Login | Individual sign-in for supported government services. |
| Identity verification | Proof of identity for Companies House requirements. |
| Personal code | Connects a verified identity to appointments and filings. |
Action: if several directors, employees or advisers still share one Companies House account, decide who actually needs access and start separating the sign-ins before it becomes urgent.
October is already close: three changes to prepare for
Three dated changes land in October. None of them needs a large project, but each needs a decision before the date rather than after it.
| Date | Change | Why it matters |
|---|---|---|
| 1 Oct | Employment Tribunal time limits | For many claims the normal time limit rises from three months to six. Record retention matters more. |
| 1 Oct | Electricity VAT | Domestic electricity moves to 0% VAT for the rest of 2026/27. Some qualifying small businesses, charities and care homes already on the reduced rate are expected to benefit too. |
| 30 Oct | Harassment prevention duty | Employers will need to take “all reasonable steps” to prevent sexual harassment. Review training, reporting and evidence of action. |
One cost is not stepping up in September. The temporary 5p-per-litre Fuel Duty cut has been extended through 31 December 2026, so the planned 1 September increase will not go ahead. That matters most to fleets, construction, logistics and delivery-heavy businesses.
Employers should also make sure their payroll and PAYE records are clean enough to support the employment and benefits changes arriving over the next year. Reconstructing that evidence later is the expensive route.
Sector watch
The general picture matters to everyone. These are the August signals we think deserve an extra look if you operate in construction, import and export, or property.
Construction: today’s workload can hide tomorrow’s gap
Construction output grew 0.3% in Q2 2026 compared with Q1. That looks steady. The forward-looking number is less comfortable: total new orders fell 11.8%, a £1.232 billion quarterly decline, driven mainly by private commercial and public other new work.
This is not a prediction that every contractor will slow down. It is a reason to separate the work you are doing now from the work contracted for the next three to six months. A full diary today can hide a weaker pipeline later.
Watch four numbers together: contracted pipeline, gross margin by project, debtor days, and retentions outstanding. If one of those deteriorates, investigate it before turnover falls. Cash stress usually shows up long before the year-end accounts tell the story.
There is also a hard date approaching for residential development in England. The Building Safety Levy comes into effect on 1 October 2026 for relevant building control applications involving new dwellings or purpose-built student accommodation, subject to exemptions. Applications submitted before that date are generally outside the levy unless the rules bring them back into scope after resubmission.
For contractors, strong project controls need to sit alongside correct CIS accounting and VAT and Domestic Reverse Charge treatment. If you want a refresher on the basics, our free CIS contractor tax guide is available online.
Import and export: the tariff rate is only useful if the classification is right
A new set of UK import duty suspensions took effect on 5 August 2026 and is expected to remain in place until 31 December 2028. A suspension can reduce or remove duty on qualifying goods. The opportunity is real, but only where the product, commodity code and conditions actually match.
There is a wider cost backdrop too. In the ONS business survey published on 6 August, 29% of businesses with 10 or more employees said they were concerned about international conflict affecting supply chains over the next year, and 20% were concerned about shipping disruption.
Our view: do not review tariffs in isolation. Review the landed economics of the product.
Action: take the products representing your highest annual import value and check the lot: commodity code, duty rate, any suspension or relief, origin, freight, FX, import VAT and PVA treatment, clearance costs, and the actual gross margin that survives all of it.
If border costs are material to your margins, our import and export accounting support can review the treatment. Import VAT and PVA treatment should be checked separately from customs duty, so the true landed cost is not distorted.
Property: rising compliance means the investment test has to get better
For landlords already within Making Tax Digital, the first quarterly update deadline passed on 7 August. There is also a legal milestone this month in England: 31 July was the last date on which certain pre-1 May Section 21 notices could be used to begin a possession claim. From August, landlords who did not start proceedings in time must use the current possession framework.
The accounting question is wider than compliance. With finance costs, repairs, agents, insurance, voids, tax and regulatory costs all competing for the same rent, a property can be cash-positive every month and still produce a weak return on the equity tied up in it.
A better property question: instead of asking only what rent you are getting, ask what annual cash return you are getting on the equity you have tied up, after finance, operating costs and tax.
Action: review each property separately. Portfolio averages can hide one asset that is quietly consuming capital.
For investors, good property accounting should show the return after finance and operating costs, and tax planning should come before a sale, ownership change or restructuring rather than after it.
Dates we are watching
Two months of fixed points, in one place.
| Date | What to watch |
|---|---|
| 3 Sep | ONS Business Insights |
| 11 Sep | ONS construction output |
| 16 Sep | UK inflation |
| 17 Sep | Bank of England rate decision |
| 1 Oct | Employment Tribunal time limit, electricity VAT, Building Safety Levy |
| 30 Oct | Stronger employer harassment-prevention duty |
The 15-minute month-end check
A newsletter is only useful if something changes after you read it. Before September gets busy, run this.
- Reconcile the bank and make sure the bookkeeping is genuinely current.
- Estimate tax due over the next 90 days and ring-fence it from operating cash. Use tax planning before a major transaction, not after it.
- Review aged receivables and chase anything that has drifted beyond normal terms.
- Compare gross margin and payroll-to-turnover with the same period last year.
- Flag any decision involving property structure, imports, large purchases, finance, CIS or VAT before committing to it.
The cheapest time to ask your accountant is usually before the transaction, not after it.
Talk to us before the decision becomes expensive
Book a free consultation, explore our services, or read more Dali & Co resources.
General information only, not personal tax, investment or legal advice. Rules depend on the facts and the structure of a transaction, so take advice before acting on a material decision. Official sources are linked in the relevant text.